Adobe Inc. (NASDAQ:ADBE) Q4 2023 Earnings Call Transcript

Adobe Inc. (NASDAQ:ADBE) Q4 2023 Earnings Call Transcript December 13, 2023

Adobe Inc. beats earnings expectations. Reported EPS is $3.95, expectations were $3.83.

Operator: Good day, and welcome to the Q4 and FY 2023 Adobe Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Jonathan Vaas, VP of Investor Relations. Please go ahead.

Jonathan Vaas: Good afternoon and thank you for joining us. With me on the call today are, Shantanu Narayen, Adobe’s Chair and CEO; David Wadhwani, President of Digital Media; and now Anil Chakravarthy, President of Digital Experience; and Dan Durn, Executive Vice-President and CFO. On this call, which is being recorded, we will discuss Adobe’s fourth quarter and fiscal year 2023 financial results. You can find our press release as well as PDF of our prepared remarks and financial results on Adobe’s Investor Relations website. The information discussed on this call, including our financial targets and product plans is as of today, December 13th, and contains forward-looking statements that involve risk uncertainty and assumptions.

Actual results may differ materially from those set forth in these statements. For more information on those risks, please review today’s earnings release and Adobe’s SEC filings. On this call, we will discuss GAAP and non-GAAP financial measures. Our reported results include GAAP growth rates as well as constant currency rates. During this presentation, Adobe’s executives will refer to constant-currency revenue growth rates unless otherwise stated. Reconciliations between the two are available in our earnings release and on Adobe’s IR website. I will now turn the call over to Shantanu.

Shantanu Narayen: Thanks, Jonathan. Good afternoon, and thank you for joining us. Q4 was our first-ever $5 billion quarter, a new record for the company. Adobe achieved revenue of $5.05 billion, representing 13% year-over-year growth. GAAP earnings per share for the quarter was $3.23 and non-GAAP earnings per share was $4.27, representing 28% and 19% year-over-year growth, respectively. Q4 was the culmination of another record year for Adobe, achieving $19.41 billion in revenue, which represents 13% annual growth. GAAP earnings per share in fiscal 2023 was $11.82 and non-GAAP earnings per share was $16.07, both representing 17% year-over-year growth. We exited the year with $17.22 billion in RPO. Our strong performance reflects the mission-critical role our products play in a digital-first world, incredible product innovation and exceptional execution.

Adobe Creative Cloud, Document Cloud, and Experience Cloud have become the foundation of digital experiences, starting with the moment of inspiration to the creation and development of content and media to the personalized delivery and activation across every channel. Adobe’s mission of changing the world through personalized digital experiences and our delivery of foundational technology platforms, set us up for the next decade of growth. We take pride in being one of the most inventive, diversified, and profitable software companies in the world. We believe that every massive technology shift offers generational opportunities to deliver new products and solutions to an ever-expanding set of customers. AI and generative AI is one such opportunity and we’ve articulated, how we intend to invest and differentiate across, data, models, and interfaces.

We have delivered against this strategy and I’m pleased that a number of our groundbreaking innovations, including our Firefly models and integrations across Creative Cloud, Liquid Mode and integrations across Document Cloud and AI services in our real-time Customer Data Platform and integrations in Experience Cloud, are now seeing tremendous usage by customers. We remain excited about the strategic opportunity with Figma, to jointly advance product design, accelerate collaborative creativity on the web, and redefine the future of creativity and productivity. We continue to engage with the European Commission, the Competition and Markets Authority in the UK, and the US Department of Justice, as they conduct their regulatory reviews. The EC has provided a preliminary statement of objections and the CMA has issued provisional findings of competition concerns.

We strongly disagree with these findings and are responding to the respective regulators. As per the current timelines, the EC’s decision deadline is February 5th and the CMA’s is February 25th, while the DOJ does not have a formal timeline to decide whether to bring a complaint, we expect a decision soon. I’ll now turn it over to David to discuss the momentum in our Digital Media business.

David Wadhwani: Thanks, Shantanu. Hello, everyone. In Q4, we achieved net new Digital Media ARR of $569 million and revenue of $3.72 billion, which grew 14% year-over-year, fueled by innovation in both our Creative and Document businesses. Starting with Creative Cloud, global demand for content is accelerating and continues to be a tailwind for the business. Creative Cloud remains the creativity platform of choice for creators across imaging photography, design, video, web, animation, and 3D. Our rapid pace of product and AI model innovation is empowering a wide and growing base of individuals, students, creative professionals, small-business owners, and enterprises to create and monetize amazing content more quickly and easily than ever before.

We were thrilled to come together in person with thousands of creators at Adobe MAX in Los Angeles. And at our MAX event in Tokyo with millions more from our community engaging with us online. We reached a record 300 million social interactions in the month following MAX. Q4 was a record quarter for Creative Cloud, achieving $3 billion in revenue, which grew 14% year-over-year. Net new Creative Cloud ARR was $398 million. Business highlights include strong digital traffic, resulting from product innovation, social engagement, and our continued product-led growth efforts which drove record new commercial subscriptions in the quarter. The general availability of our generative AI Firefly models and their integrations across Creative Cloud drove tremendous customer excitement with over 4.5 billion generations since launch in March.

The release of three new Firefly models, Firefly Image two model, Firefly Vector model, and Firefly Design model, offering highly differentiated levels of control with Effects, Photo Settings, and Generative Match. We also introduced Generative Credits as part of our Creative Cloud subscription plans. The general availability of Photoshop Generative Fill and Generative Expand which are seeing record adoption, they’re already among the most used features in the product. Advances in Adobe Illustrator with the introduction of Text to Vector beta enabling users to generate icons, scenes, subjects, patterns, gradients. Adobe Premiere Pro advances include a significant performance improvement in the timeline for faster and smoother editing, new color preferences, and improved tone mapping.

Premiere Pro is now natively integrated with Frame.io offering faster content sharing and collaboration. The combination of Adobe Express and Firefly is enabling everyone from Creative Pros to beginners to quickly move from ideation to task-based workflows in Express dramatically expanding our reach and widening our top-of-funnel. The family of generative capabilities across Express including Text to Image, Text Effects, Text to Template, and Generative Fill are driving adoption of Express and making it even faster and more fun for users of all skill levels. Express now comes pre-installed on all new Chromebooks, making it accessible to students, educators, and anyone using Chrome OS. Continued strength in Adobe Stock which had its best year ever driven by accelerating demand for high-quality image, vector, video, and 3D content.

Creative Cloud, Express, and Firefly integrations with Adobe GenStudio enabling ideation, creation, and stakeholder collaboration as part of their overall content supply chain. Strong mid-market and enterprise adoption driven by up-sell to Creative Cloud offerings with Firefly. Key customer wins include Cyber Agent, Deloitte, Discovery Communications, Nexstar Media, Pepsi, Publicis, and the United Nations. We are thrilled with the momentum we’re seeing in the Creative business following a year of unprecedented innovation. Customer excitement around Firefly integrations across our applications has been great to see with community engagement, social interactions, and creative marketing campaigns, driving organic brand search volume, traffic, and record demand.

While we started rolling out new Creative Cloud pricing in select geographies in November, the primary driver of growth continues to be new paid subscriptions across our routes-to-market. We are excited to build on this momentum as we enter FY ’24. Now turning to Document Cloud, digital documents are essential enablers of our personal and professional lives. Document Cloud is a leader in digital documents powering all common document actions including editing, sharing, reviewing, scanning, and signing. Document Cloud innovations are advancing accessibility, comprehension, productivity, automation, and security in document workflows across web, desktop, and mobile. In Q4, we achieved Document Cloud revenue of $721 million, growing 17% year-over-year.

We added a record $171 million of net new Document Cloud ARR with ending ARR growing 23% year-over-year in constant currency. Business highlights include Acrobat Web growth, which continues to be an incredible source of customer acquisition, with monthly active users up over 70% year-over-year. The surge in usage of link sharing for stakeholder collaboration around PDF files, which increased 400% year-over-year, creating a viral growth loop, that is bringing tens of millions of users into the Acrobat ecosystem. This is a great example of how we are scaling our PLG motions. Strong demand for Acrobat on mobile with MAU surpassing 100 million users in Q4. Liquid Mode has now served over one billion files to customers demonstrating how indispensable this technology has become on mobile devices.

Adobe Acrobat to Express workflows making it even easier to import, edit, and enhance documents to create visually stunning PDFs. Key enterprise customer wins include Alshaya, Bank of America, Department of Veterans Affairs, Mastercard, State Farm Auto Insurance, and Volkswagen. Much like the Creative business, we expect generative AI to deliver additional value and attract new customers to Document Cloud. Acrobat’s generative AI capabilities, which will enable new creation, comprehension and collaboration functionality have already been rolled out in a private beta. We expect to release this in a public beta in the coming months. It’s been an extraordinary year for the Digital Media business with the introduction of hundreds of transformative innovations that are reshaping the future of creativity, productivity, and digital experiences.

Capping this year’s many accolades, TIME magazine recognized Adobe Liquid Mode, Photoshop Generative Fill, and Generative Expand, among the best inventions of 2023. I’ll now pass it to Anil.

Anil Chakravarthy: Thanks, David. Hello, everyone. Digital experiences are indispensable for every business in every category, enabling companies of all sizes to engage and transact with customers around the world. Adobe’s Holiday Shopping Report, which analyzes trillions of data points, found that both Black Friday and Cyber Monday sales hit record highs of $9.8 billion and $12.4 billion, respectively, jumping 7.5% and 9.6% from last year. We predicted that holiday 2023 spend will exceed $221 billion in the US alone. Adobe Experience Cloud is optimally positioned to capitalize on this massive global opportunity. Companies across B2C and B2B are turning to Adobe Experience Cloud as the platform to accelerate experience-led growth.

Our leading solutions spanning data insights and audiences, content, and commerce, customer journeys, and marketing workflow, empower businesses to drive customer demand, engagement, and growth while simultaneously delivering productivity gains. Our comprehensive set of applications, including Real-Time CDP are built natively on our highly differentiated Adobe Experience Platform, providing companies with a unified profile of each of their customers to deliver personalized, real-time experiences at scale. Generative AI accelerates our pace of innovation across the Experience Cloud portfolio enabling us to build on our capabilities to deliver personalized digital experiences. Our efforts are focused in three areas: one, augmenting our applications with an AI Assistant that significantly enhances productivity for current users, and provides an intuitive conversational interface to enable many more knowledge workers to use our products; two, reimagining existing Experience Cloud applications, like we did with Adobe Experience Manager; and three, developing entirely new solutions built for the age of generative AI, like Adobe GenStudio.

In Q4, we continue to drive strong growth in the Experience Cloud business across our enterprise and mid-market customers achieving $1.27 billion in revenue. Subscription revenue was $1.12 billion, representing 12% year-over-year growth. Business highlights include, strong momentum with Adobe Experience Platform and native applications inclusive of Real-Time CDP, Adobe Journey Optimizer, and Customer Journey Analytics. AEP had its first $100 million quarter of net-new business in Q4 and exited the year with a greater than $700 million annualized book of business. Release of Adobe GenStudio, an end-to-end solution that brings together best-in-class applications across Creative Cloud, Express, and Experience Cloud with Firefly generative AI at the core to help brands meet the rising demand for content.

GenStudio provides a comprehensive offering spanning content ideation, creation, production, and activation. We’re seeing tremendous interest in GenStudio from brands like Henkel, Pepsi, and Verizon and agencies like Publicis, Omnicom, and Havas as they look to accelerate and optimize their content supply chains. Reimagined customer experiences with the all-new Adobe Experience Manager Sites that enable businesses and developers to quickly test and optimize web content, deliver fastest possible page load times, and maximize SEO rankings, lighthouse scores, and conversion. Adobe was recognized as a leader in over 25 industry analyst reports this year, including the Gartner Magic Quadrant for Digital Experience Platforms, B2B marketing automation platforms, and multichannel marketing hubs.

In the Forrester Wave for Digital Experience Platforms which was published last week, Adobe received the highest scores for strategy. Key customer wins include Alshaya, Coca-Cola, EY, IBM, Marriott, Riyadh Air, Santander Brasil, Sony, Southern Graphics, Unilever, Vanguard, and Verizon. In our conversations with these and other customers around the world, c-Level executives are continuing to prioritize experience-led growth as a critical business imperative, despite ongoing budget scrutiny. Adobe Experience Cloud is well-positioned to keep winning with innovative products that power end-to-end customer experiences and enable companies to simultaneously drive growth and profitability. We are looking forward to continuing our leadership and momentum into 2024.

I’ll now pass it to Dan.

Dan Durn: Thanks, Anil. Our earnings report today covers both Q4 and FY ’23 results. What a year 2023 was, fueled by a deep understanding of our customers, product innovation, and outstanding execution, we delivered strong financial results and world-class margins, positioning the company for years of continued growth. In FY ’23, Adobe achieved record revenue of $19.41 billion, which represents 10% year-over-year growth or 13% growth in constant currency. GAAP EPS for the year was $11.82 and non-GAAP EPS was $16.7; each growing 17% year-over-year. FY ’23 business and financial highlights included Digital Media revenue of $14.22 billion, net new Digital Media ARR of $1.91 billion, Digital Experience revenue of $4.89 billion, cash flows from operations of $7.3 billion, RPO was $17.22 billion exiting the year and repurchasing approximately 11.5 million shares of our stock during the year at a cost of $4.63 billion.

In the fourth quarter of FY ’23, Adobe achieved revenue of $5.05 billion, which represents 12% year-over-year growth or 13% in constant currency. GAAP-diluted earnings per share in Q4 was $3.23 and non-GAAP diluted earnings per share was a record $4.27, growing 28% and 19% year-over-year, respectively. Q4 business and financial highlights included Digital Media revenue of $3.72 billion, net new Digital Media ARR of $569 million, Digital Experience revenue of $1.27 billion, cash flows from operations of $1.6 billion. Adding approximately $1.5 billion RPO in the quarter, our highest sequential quarterly increase ever and repurchasing approximately 1.8 million shares of our stock. In our Digital Media segment, we achieved Q4 revenue of $3.72 billion, which represents 13% year-over-year growth, or 14% in constant currency.

Our net-new ARR in Q4 was $569 million, which was a quarterly record in constant currency and we exited the quarter with $15.17 billion of Digital Media ARR. We achieved Creative revenue of $3 billion, which represents 12% year-over-year growth or 14% in constant currency and we added $398 million of net-new Creative ARR in the quarter. Driving this performance was strong customer acquisition throughout the quarter as well as strength during the peak holiday shopping weeks. Fourth quarter Creative growth drivers included individual subscriber growth fueled by targeted campaigns and strong web traffic. A strong quarter for Creative Cloud All Apps subscriptions across customer segments and geographies, with particular strength in emerging markets.

Sales of CC single apps, including a strong quarter for Imaging and photography offerings. Continued growth of our Frame.io offering and Adobe Stock which capped off its best year ever in terms of net-new ARR. Customer demand in education driven by back-to-school purchasing as well as migrations to full-priced offerings by graduating students entering the workforce. And typical Q4 strength in the Enterprise, including significant upsell of our new Firefly and Express offerings. Adobe achieved Document Cloud revenue of $721 million, which represents 16% year-over-year growth or 17% in constant currency. We added a record $171 million of net new Document Cloud ARR in the quarter. Fourth quarter Document Cloud growth drivers included, Acrobat’s subscription demand across all customer segments routes-to-market, and geographies.

Continued strength of our free-to-paid funnels including Reader on the desktop and Acrobat web. Strong performance of our collaboration services including PDF link sharing and Sign, which are virally bringing new users to the Acrobat ecosystem. An outstanding quarter for Acrobat Mobile as a result of increased proliferation, usage, and conversion and year-end seasonal strength in SMB and enterprise. Turning to our Digital Experience segment, in Q4, we achieved revenue of $1.27 billion, growing 10% year-over-year, or 11% in constant currency. We achieved subscription revenue of $1.12 billion, which represents 12% year-over-year growth. Fourth quarter Digital Experience growth drivers included strong year-end bookings across solutions with particular strength in North America, continued success closing multi-solution transformational deals with large enterprises, momentum with AEP and native applications with the FY ’23 exiting book of business growing greater than 60% year-over-year, strong net dollar retention for early adopters of AEP, demonstrating the value enterprises are realizing from our real-time data platform and integrated offerings, and strength across our data and insights, content and workfront solutions and growing customer interest and pipeline for our new GenStudio solution.

We drove world-class operating margins in Q4 and throughout fiscal 2023 by making disciplined investments in R&D marketing and sales and we’re pleased that we grew EPS faster than revenue. Adobe’s effective tax rate in Q4 was 18% on a GAAP basis and 18.5% on a non-GAAP basis in line with our expectations. RPO exiting the quarter was $17.22 billion, growing 13% year-over-year. Our ending cash and short-term investment position exiting Q4 was $7.84 billion and cash flows from operations in the quarter were $1.6 billion, after making a previously discussed payment in the quarter of $826 million of US Federal taxes that we deferred from the second and third quarters of FY ’23. In Q4, we entered into a $1 billion share repurchase agreement and we currently have $2.15 billion remaining of our $15 billion authorization granted in December 2020.

As a reminder, we measure ARR on a constant-currency basis during the fiscal year and revalue ARR at year-end. FX rate changes between December of 2022 and this year have resulted in a $160 million increase to Digital Media ARR balance entering FY ’24, which is now $15.33 billion and is reflected in our updated investor datasheet. Factoring in the momentum across our businesses and current expectations for the macroeconomic and foreign-exchange environments, for FY ’24, we are targeting total Adobe revenue of $21.30 billion to $21.50 billion. Digital Media net new ARR of approximately $1.9 billion, Digital Media segment revenue of $15.75 billion to $15.85 billion, Digital Experience segment revenue of $5.275 billion to $5.375 billion, Digital Experience subscription revenue of $4.75 billion to $4.80 billion.

Tax rate of approximately 18% on a GAAP basis and 18.5% on a non-GAAP basis. GAAP earnings per share of $13.45 to $13.85. And non-GAAP earnings per share of $17.60 to $18. As a reminder, and as is customary, these targets do not reflect our planned acquisition of Figma. We expect normal seasonality throughout the year with a seasonal step-down for new business into the first quarter, sequential growth from Q1 to Q2, typical Q3 summer seasonality, and a strong finish to the year in Q4. We expect our cash tax rate to improve sequentially in FY ’24 by 2 percentage points as the amortization of previously capitalized R&D increases our deductions next year for tax purposes, benefiting our operating cash flows next year. For Q1 FY ’24, we’re targeting total Adobe revenue of $5.10 billion to $5.15 billion, Digital Media net new ARR of approximately $410 million, Digital Media segment revenue was $3.77 billion to 3.80 billion, Digital Experience segment revenue of $1.27 billion to $1.29 billion, Digital Experience subscription revenue of $1.14 billion to $1.16 billion.

Tax rate of approximately 18% on a GAAP basis and 18.5% on a non-GAAP basis. GAAP earnings per share of $3.35 to $3.40. And non-GAAP earnings per share of $4.35 to $4.40. While the implied operating margin for Q1 is up sequentially, we expect a typical seasonal margin step-down starting in Q2 as a result of the annual merit increases and disciplined investments to drive growth. In summary, I couldn’t be prouder of the company’s performance in FY ’23 and the momentum we’re carrying into 2024 across Creative Cloud, Document Cloud, and Experience Cloud. Our strategy, scale, speed of execution, and profitability position us for years of sustained success. Shantanu, back to you.

Shantanu Narayen: Thanks, Dan. In addition to our financial accomplishments, we are proud to once again be recognized for our industry leadership. Content credentials and Adobe’s approach to responsible AI were recognized by Fast Company as one of the year’s breakthrough innovations. We were again named to the Dow Jones Sustainability Index, Glassdoor listed Adobe is one of the best places to work and Interbrand ranked us in the top 20 Best Global Brands as the rising brand for the eighth year in a row. Digital remains a massive tailwind as content demand and consumption continues to grow and businesses of all sizes are focused on transforming their customer experiences. Adobe is incredibly well-positioned to lead and capitalize on this opportunity.

Thanks to our innovative roadmap expanding global customer base, strong brand, and the best employees in the world. Our fiscal ’24 financial targets reflect our confidence in continuing to drive strong topline growth and world-class profitability. I am more certain than ever that Adobe’s best days are ahead of us. Thank you, and we will now take questions. Operator.

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Q&A Session

Operator: [Operator Instructions] We ask that you please limit yourself to one question. [Operator Instructions] We’ll take our first question from Kash Rangan with Goldman Sachs. Please go ahead.

Kash Rangan: Hi. Thank you very much. Congrats on the quarter and happy holidays. Shantanu and team, I’m wondering, going into 2024, it definitely feels like the economy is in stable footing and in general, the software metrics are all improving as the year unfolded. And very different from going from ’22 to ’23, yet your DM – new ARR guidance is about the same as how you started last year, but you got the benefit of generative AI, tailwinds from the economy, and got pricing and Firefly. Can you just help us understand if you isolate for those factors, what has gone into your — into your guidance, but it seems like, if we exclude the optionality that you have, including the tailwinds in economy that guidance looks like it’s very conservative. And maybe that’s the right thing to do, but just wanted to understand your thought process. Thank you so much.

Shantanu Narayen: Yeah. Thanks, Kash. I mean, certainly, really thrilled with what a phenomenal year we had across all aspects of the business, whether it was the $5 billion quarter, $5 billion book of business now in DX exiting, and certainly Digital Media ARR performance. Let’s — if you reflect, I mean, you talked about the guidance that we gave at the beginning of ’23 and ’24, if you recall, we actually had guided to $16.50 first then we opted as you know, to $17.50, and ended with $19.13. And so to your point on the execution front, we have delivered some great innovative products. We’ve expanded the customer base with new products like Express and Firefly. We’re certainly focused on surfaces and making sure all of our flagship products are available across all surfaces.

And so we do have multiple growth drivers to your point. And we are focused on monetizing the opportunity. I mean, I would say, we take our guide very seriously, the other way of looking at it, Kash, is it’s our highest annual guide ever in terms of what the guide we’ve issued, it’s the highest Q1 guide ever and we want to go again, execute against this large opportunity and have another record year. So, we’re feeling good, the momentum is certainly there in the business. But we take our guidance at this point of the year very seriously.

Kash Rangan: Thank you so much and happy holidays. All the best for 2024.

Shantanu Narayen: Thanks. Happy holidays.

Operator: We will take our next question from Keith Weiss with Morgan Stanley. Please go ahead.

Keith Weiss: Excellent. Thank you guys for taking the question. I think this is in a similar vein to what Kash was trying to get at. But maybe a little bit more focused on Q4 in particular. When we look at the Digital Media net new ARR adds in Q4, it looks like you had a very, very strong Document Cloud, record quarter like you were saying, really strong year-on-year growth in those net adds. Creative Cloud, where we actually saw price increase and we have all the excitement in Firefly, that was actually down on a year-on-year basis. And this is the first time since 2018 we’ve seen Creative Cloud net new ARR below $400 million. I think that’s the surprise for investors — a negative surprise for investors that we’re trying to figure out, was there something dragging the Creative Cloud side of the equation this year, or a tough comp from last year, or something that explains why the price increases in all the positive momentum and innovation out of Adobe MAX isn’t translating into net new ARR growth for Creative Cloud in particular.

David Wadhwani: Yeah. Happy to take that. Keith, David here. So first of all, as you’ve mentioned in the DME business, we’re really excited about the results for ’24, over $1.9 billion in net new ARR obviously well above the guide. We see an expanding base of customers and a lot of momentum coming from gen AI as you noted. As part of this, we delivered — what we delivered in Q4 was net new ARR — was a record net new ARR in constant currency. Now specific to your question on Creative Cloud momentum and how to interpret the numbers that you see there, underlying all of this is very strong momentum because we delivered a record Creative Cloud new commercial subscriptions number in the year. So that is really the foundation and the base of customers coming in and really benefiting from not just what we get in this quarter, but also how we build on that going forward.

So it really just sets us up well for FY ’24. As you look at the numbers for Creative Cloud ARR, net-new ARR in the quarter, you have to look at it relative — Q4 FY ’23 relative to Q4 FY ’22 as you mentioned. You need to consider that FY ’22 had two pricing actions, that accrued to Creative Cloud that are much lower now in Q4 FY ’23. So, if you normalize for the impact of the pricing that rolled off and the pricing that came on, Creative Cloud net new ARR in Q4 grew on a constant currency basis.

Shantanu Narayen: And Keith, just to punctuate the two points that David made — David said, first, it was a record for Creative ARR as it related to subscriptions in Q4 of 2023 and Creative ARR would have grown if you had backed out the pricing. So, the business continues to be extremely healthy to your point.

Keith Weiss: Excellent. Thank you, guys.

Operator: We will take our next question from Alex Zukin with Wolfe Research. Please go ahead.

Alex Zukin: Hey, guys. Thanks for taking my question. I guess maybe looking at next year, as we look at how much of the renewal base in Creative Cloud is potentially up for that type of the pricing uplift. And as we look at Acrobat, specifically the AI functionality that you’re releasing into public beta. How should we think about the tailwind to both Creative Cloud from pricing and to Document Cloud, specifically from an AI product monetization perspective for ’24 — for calendar ’24?

David Wadhwani: Yeah. Happy to take that Alex, a lot packed into that question. So let me try to tease them apart. Let me first start with the question around FY ’24 and impact of pricing. Before we jump straight into that I do want to take a bit of a step back and just remind everyone that Digital Media ARR is a mix of a few things, new subscriptions which as I mentioned we had a record number of new subscriptions in Q4, up-sell and cross-sell, which is transitioning people to higher plans from the plan that they’re on. And then lastly offer optimization. And as you’ve noted in the last couple of years, we’ve really been broadening the number of offers we have all the way down from free price points to the all-apps price points, but even beyond that, we now have capabilities to sell add-ons to all-apps as well.