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Atlassian Announces First Quarter Fiscal Year 2023 Results

Quarterly revenue of $807 million, up 31% year-over-year

Quarterly subscription revenue of $651 million, up 50% year-over-year

Quarterly GAAP operating margin of (4)% and non-GAAP operating margin of 18%

Quarterly cash flow from operations of $92 million and free cash flow of $76 million

Atlassian Corporation (NASDAQ: TEAM), a leading provider of team collaboration and productivity software, today announced financial results for its first quarter of fiscal year 2023 ended September 30, 2022 and released a shareholder letter available on Atlassian’s Work Life blog at http://atlassian.com/blog/announcements/shareholder-letter-q1fy23. The shareholder letter was also posted to the Investor Relations section of Atlassian’s website at https://investors.atlassian.com.

“We are proud of our Q1 results, growing subscription revenue 50 percent year-over-year, and we continue to have line of sight to $10 billion in annual revenue,” said Scott Farquhar, Atlassian’s co-founder and co-CEO. “Despite the turbulent macroeconomic environment we find ourselves in, we have conviction about the incredible long-term opportunities in front of us and our ability to capitalize on them. We have the right products, the right leaders, and the right strategies in place to come out of this downturn in a much stronger market position.”

“Q1 was another momentous quarter of execution against our long-term initiatives. We announced a new subscription offering in Atlassian Together, launched Atlas into general availability, and held Work Life, our first large-scale customer event focused on a single market,” said Mike Cannon-Brookes, Atlassian’s co-founder and co-CEO. “We also continue to execute well towards our strategy of hiring and retaining the best talent around the world.”

First Quarter Fiscal Year 2023 Financial Highlights:

As a result of Atlassian's redomiciliation to the United States on September 30, 2022, the company no longer reports financial information in accordance with IFRS. The below financial information has been prepared in accordance with GAAP and should not be expected to correspond to figures previously presented under IFRS.

On a GAAP basis, Atlassian reported:

  • Revenue: Total revenue was $807.4 million for the first quarter of fiscal year 2023, up 31% from $614.0 million for the first quarter of fiscal year 2022.
  • Operating Income (Loss) and Operating Margin: Operating loss was $34.0 million for the first quarter of fiscal year 2023, compared with operating income of $56.5 million for the first quarter of fiscal year 2022. Operating margin was (4)% for the first quarter of fiscal year 2023, compared with 9% for the first quarter of fiscal year 2022.
  • Net Loss and Net Loss Per Diluted Share: Net loss was $13.7 million for the first quarter of fiscal year 2023, compared with a net loss of $411.2 million for the first quarter of fiscal year 2022. Net loss per diluted share was $0.05 for the first quarter of fiscal year 2023, compared with a net loss per diluted share of $1.63, for the first quarter of fiscal year 2022. Mark-to-market accounting of the company’s strategic investments increased net loss per diluted share by $0.05 for the first quarter of fiscal year 2023 and $0.12 for the first quarter of fiscal year 2022.
  • Balance Sheet: Cash and cash equivalents plus short-term investments at the end of the first quarter of fiscal year 2023 totaled $1.5 billion.

On a non-GAAP basis, Atlassian reported:

  • Operating Income and Operating Margin: Operating income was $147.9 million for the first quarter of fiscal year 2023, compared with operating income of $165.4 million for the first quarter of fiscal year 2022. Operating margin was 18% for the first quarter of fiscal year 2023, compared with 27% for the first quarter of fiscal year 2022.
  • Net Income and Net Income Per Diluted Share: Net income was $92.5 million for the first quarter of fiscal year 2023, compared with net income of $94.4 million for the first quarter of fiscal year 2022. Net income per diluted share was $0.36 for the first quarter of fiscal year 2023, compared with $0.37 for the first quarter of fiscal year 2022. Mark-to-market accounting of the company’s strategic investments reduced net income per diluted share by $0.04 for the first quarter of fiscal year 2023 and $0.12 for the first quarter of fiscal year 2022.
  • Free Cash Flow: Cash flow from operations was $92.4 million and free cash flow was $75.9 million for the first quarter of fiscal year 2023. Free cash flow margin for the first quarter of fiscal year 2023 was 9%.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below, under the heading “About Non-GAAP Financial Measures.”

Recent Business Highlights:

  • Atlassian Together: Atlassian announced a new, single subscription to its work management products – Trello, Confluence, Atlas, and Jira Work Management. The subscription also includes Access, an enterprise-grade identity and access management solution that connects Atlassian products to third-party identity providers. Atlassian Together provides organizations with a complete Atlassian tool set that helps teams choose the best tool for the job while ensuring alignment across the organization.
  • Atlas Launch: Atlassian announced Atlas, a new teamwork directory customized to help organizations provide alignment across teams, apps, and work regardless of what tools their teams use, is generally available. Atlas helps teams communicate the context and progress of their work with other teams, and empowers teams to work in the tools that let them thrive.
  • Partnership with Accenture: Atlassian and Accenture are expanding their partnership to help enterprises embrace agile ways of working. With this partnership, Accenture’s global team of experts will help provide enterprise-wide agile consulting and implementation services to help customers realize faster time to value from their investments in Atlassian products, including Jira Align, Jira Software, and Jira Service Management.
  • United States Redomiciliation: Atlassian changed its corporate domicile from the United Kingdom to the United States. As a result, it has transitioned its accounting standards from IFRS to GAAP. Atlassian believes moving its parent entity to the United States will increase its access to a broader set of investors, support inclusion in additional stock indices, improve financial reporting comparability with industry peers, streamline its corporate structure, and provide more flexibility in accessing capital.
  • Sustainability Report: Atlassian released its Fiscal Year 2022 Sustainability Report. This year marked Atlassian’s third consecutive year of operating on 100% renewable energy. The company also accounted for work-from-home emissions for the first time. Atlassian continues its emissions reductions efforts in pursuit of becoming “net zero” by 2040, as well as executing on its diversity, equity, and inclusion strategy, releasing its first human rights statement, and giving back to its communities through philanthropic programs driven by the Atlassian Foundation. Our Fiscal Year 2022 Sustainability Report can be found at https://investors.atlassian.com/Sustainability/default.aspx.
  • Customer Growth: Atlassian ended its first quarter of fiscal year 2023 with a total customer count, on an active subscription or maintenance agreement basis, of 249,173 customers, adding 6,550 net new customers during the quarter.

Financial Targets:

Atlassian is providing its financial targets for the second quarter of fiscal year 2023 as follows:

Second Quarter Fiscal Year 2023:

  • Total revenue is expected to be in the range of $835 million to $855 million.
  • Gross margin is expected to be in the range of 80% to 81% on a GAAP basis and in the range of 83% to 84% on a non-GAAP basis.
  • Operating margin is expected to be approximately (20%) on a GAAP basis and approximately 13% on a non-GAAP basis.

For additional commentary regarding financial targets, please see Atlassian’s first quarter fiscal year 2023 shareholder letter dated November 3, 2022.

With respect to Atlassian’s expectations under “Financial Targets” above, a reconciliation of GAAP to non-GAAP gross margin and operating margin has been provided in the financial statement tables included in this press release.

Shareholder Letter and Webcast Details:

A detailed shareholder letter is available on Atlassian’s Work Life blog at https://atlassian.com/blog/announcements/shareholder-letter-q1fy23, and the Investor Relations section of Atlassian’s website at: https://investors.atlassian.com. Atlassian will host a webcast to answer questions today:

  • When: Thursday, November 3, 2022 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time).
  • Webcast: A live webcast of the call can be accessed from the Investor Relations section of Atlassian’s website at https://investors.atlassian.com. Following the call, a replay will be available on the same website.

Atlassian has used, and will continue to use, its Investor Relations website at https://investors.atlassian.com as a means of making material information public and for complying with its disclosure obligations.

About Atlassian

Atlassian unleashes the potential of every team. Our agile & DevOps, IT service management and work management software helps teams organize, discuss, and complete shared work. The majority of the Fortune 500 and over 240,000 companies of all sizes worldwide - including NASA, Kiva, Deutsche Bank, and Salesforce - rely on our solutions to help their teams work better together and deliver quality results on time. Learn more about our products, including Jira Software, Confluence, Jira Service Management, Trello, Bitbucket, and Jira Align at https://atlassian.com/.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. In some cases, you can identify these statements by forward-looking words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” “estimate,” or “continue,” and similar expressions or variations, but these words are not the exclusive means for identifying such statements. All statements other than statements of historical fact could be deemed forward looking, including risks and uncertainties related to statements about our products, customers, partnerships, sustainability initiatives, macroeconomic environment, anticipated growth, outlook, technology and other key strategic areas, and our financial targets such as revenue and GAAP and non-GAAP financial measures including gross margin and operating margin.

We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.

The achievement or success of the matters covered by such forward-looking statements involves known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management’s beliefs and assumptions only as of the date such statements are made.

Further information on these and other factors that could affect our financial results is included in filings we make with the Securities and Exchange Commission (the “SEC”) from time to time, including the section titled “Risk Factors” in our most recently filed Forms 20-F and 6-K (reporting our quarterly results), as well as Forms 10-K and 10-Q. These documents are available on the SEC Filings section of the Investor Relations section of our website at: https://investors.atlassian.com/.

About Non-GAAP Financial Measures

In addition to the measures presented in our condensed consolidated financial statements, we regularly review other measures that are not presented in accordance with GAAP, defined as non-GAAP financial measures by the SEC, to evaluate our business, measure our performance, identify trends, prepare financial forecasts and make strategic decisions. The key measures we consider are non-GAAP gross profit, non-GAAP operating income, non-GAAP net income, non-GAAP net income per diluted share and free cash flow (collectively, the “Non-GAAP Financial Measures”). These Non-GAAP Financial Measures, which may be different from similarly titled non-GAAP measures used by other companies, provide supplemental information regarding our operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or that occur relatively infrequently and/or that management considers to be unrelated to our core operations. Management believes that tracking and presenting these Non-GAAP Financial Measures provides management, our board of directors, investors and the analyst community with the ability to better evaluate matters such as: our ongoing core operations, including comparisons between periods and against other companies in our industry; our ability to generate cash to service our debt and fund our operations; and the underlying business trends that are affecting our performance.

Our Non-GAAP Financial Measures include:

  • Non-GAAP gross profit. Excludes expenses related to stock-based compensation and amortization of acquired intangible assets.
  • Non-GAAP operating income. Excludes expenses related to stock-based compensation and amortization of acquired intangible assets.
  • Non-GAAP net income and non-GAAP net income per diluted share. Excludes expenses related to stock-based compensation, amortization of acquired intangible assets, non-coupon impact related to exchangeable senior notes and capped calls, gain on a non-cash sale of a controlling interest of a subsidiary and the related income tax effects on these items.
  • Free cash flow. Free cash flow is defined as net cash provided by operating activities less capital expenditures, which consists of purchases of property and equipment.

We understand that although these Non-GAAP Financial Measures are frequently used by investors and the analyst community in their evaluation of our financial performance, these measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. We compensate for such limitations by reconciling these Non-GAAP Financial Measures to the most comparable GAAP financial measures. We encourage you to review the tables in this press release titled “Reconciliation of GAAP to Non-GAAP Results” and “Reconciliation of GAAP to Non-GAAP Financial Targets” that present such reconciliations.

Atlassian Corporation

Condensed Consolidated Statements of Operations

(U.S. $ and shares in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended September 30,

 

 

2022

 

 

 

2021

 

Revenues:

 

 

 

Subscription

$

650,984

 

 

$

435,296

 

Maintenance

 

113,565

 

 

 

130,590

 

Other

 

42,843

 

 

 

48,138

 

Total revenues

 

807,392

 

 

 

614,024

 

Cost of revenues (1) (2)

 

139,392

 

 

 

96,256

 

Gross profit

 

668,000

 

 

 

517,768

 

Operating expenses:

 

 

 

Research and development (1) (2)

 

399,006

 

 

 

272,140

 

Marketing and sales (1) (2)

 

160,128

 

 

 

99,329

 

General and administrative (1)

 

142,893

 

 

 

89,822

 

Total operating expenses

 

702,027

 

 

 

461,291

 

Operating income (loss)

 

(34,027

)

��

 

56,477

 

Other income (expense), net

 

29,289

 

 

 

(455,804

)

Interest income

 

5,143

 

 

 

277

 

Interest expense

 

(6,121

)

 

 

(11,518

)

Loss before income taxes

 

(5,716

)

 

 

(410,568

)

Provision for income taxes

 

(8,025

)

 

 

(636

)

Net loss

$

(13,741

)

 

$

(411,204

)

Net loss per share:

 

 

 

Basic

$

(0.05

)

 

$

(1.63

)

Diluted

$

(0.05

)

 

$

(1.63

)

Weighted-average shares used in computing net loss per share:

 

 

 

Basic

 

255,167

 

 

 

252,106

 

Diluted

 

255,167

 

 

 

252,106

 

(1) Amounts include stock-based compensation as follows:

 

Three Months Ended September 30,

 

 

2022

 

 

2021

Cost of revenues

$

10,613

 

$

5,917

Research and development

 

110,129

 

 

64,282

Marketing and sales

 

23,195

 

 

14,494

General and administrative

 

29,694

 

 

16,214

(2) Amounts include amortization of acquired intangible assets, as follows:

 

Three Months Ended September 30,

 

 

2022

 

 

2021

Cost of revenues

$

5,697

 

$

5,689

Research and development

 

94

 

 

94

Marketing and sales

 

2,505

 

 

2,271

Atlassian Corporation

Condensed Consolidated Balance Sheets

(U.S. $ in thousands)

(unaudited)

 

 

September 30, 2022

 

June 30, 2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

1,468,571

 

 

$

1,385,265

 

Marketable securities

 

54,537

 

 

 

73,294

 

Accounts receivable, net

 

246,781

 

 

 

308,127

 

Assets held for sale

 

 

 

 

60,265

 

Prepaid expenses and other current assets

 

96,999

 

 

 

70,002

 

Total current assets

 

1,866,888

 

 

 

1,896,953

 

Non-current assets:

 

 

 

Property and equipment, net

 

103,336

 

 

 

100,662

 

Operating lease right-of-use assets

 

266,885

 

 

 

277,276

 

Strategic investments

 

239,323

 

 

 

159,064

 

Intangible assets, net

 

92,544

 

 

 

100,840

 

Goodwill

 

721,912

 

 

 

722,838

 

Deferred tax assets

 

9,475

 

 

 

10,335

 

Other assets

 

71,069

 

 

 

58,862

 

Total assets

$

3,371,432

 

 

$

3,326,830

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

111,461

 

 

$

81,220

 

Accrued expenses and other current liabilities

 

274,770

 

 

 

406,139

 

Deferred revenue, current portion

 

1,066,090

 

 

 

1,066,059

 

Operating lease liabilities, current portion

 

45,360

 

 

 

40,638

 

Total current liabilities

 

1,497,681

 

 

 

1,594,056

 

Non-current liabilities:

 

 

 

Deferred revenue, net of current portion

 

106,744

 

 

 

116,621

 

Operating lease liabilities, net of current portion

 

267,373

 

 

 

274,434

 

Term loan facility

 

999,463

 

 

 

999,419

 

Deferred tax liabilities

 

1,038

 

 

 

312

 

Other non-current liabilities

 

18,520

 

 

 

14,616

 

Total liabilities

 

2,890,819

 

 

 

2,999,458

 

Stockholders’ equity

 

 

 

Common stock

 

2

 

 

 

2

 

Additional paid-in capital

 

2,355,991

 

 

 

2,182,536

 

Accumulated other comprehensive income

 

7,391

 

 

 

13,864

 

Accumulated deficit

 

(1,882,771

)

 

 

(1,869,030

)

Total stockholders’ equity

 

480,613

 

 

 

327,372

 

Total liabilities and stockholders’ equity

$

3,371,432

 

 

$

3,326,830

 

Atlassian Corporation

Condensed Consolidated Statements of Cash Flows

(U.S. $ in thousands)

(unaudited)

 

 

Three Months Ended September 30,

 

 

2022

 

 

 

2021

 

Cash flows from operating activities:

 

 

 

Net loss

$

(13,741

)

 

$

(411,204

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

14,620

 

 

 

13,304

 

Stock-based compensation

 

173,631

 

 

 

100,907

 

Deferred income taxes

 

1,522

 

 

 

(1,614

)

Net loss on exchange derivative and capped call transactions

 

 

 

 

424,482

 

Amortization of debt discount and issuance cost

 

118

 

 

 

9,841

 

Net loss on strategic investments

 

11,513

 

 

 

31,422

 

Net foreign currency gain

 

(3,625

)

 

 

(6,398

)

Gain on a non-cash sale of a controlling interest of a subsidiary

 

(43,092

)

 

 

 

Other

 

 

 

 

(615

)

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net

 

61,314

 

 

 

(13,211

)

Prepaid expenses and other assets

 

(22,677

)

 

 

(21,185

)

Accounts payable

 

31,147

 

 

 

10,223

 

Accrued expenses and other liabilities

 

(108,443

)

 

 

(84,406

)

Deferred revenue

 

(9,845

)

 

 

13,455

 

Net cash provided by operating activities

 

92,442

 

 

 

65,001

 

Cash flows from Investing activities:

 

 

 

Business combinations, net of cash acquired

 

(600

)

 

 

(1,138

)

Purchases of property and equipment

 

(16,496

)

 

 

(6,881

)

Purchases of strategic investments

 

(8,350

)

 

 

(53,000

)

Purchases of marketable securities

 

(10,000

)

 

 

(21,003

)

Proceeds from maturities of investments

 

28,950

 

 

 

53,887

 

Proceeds from sale of strategic investments

 

258

 

 

 

 

Proceeds from sales of marketable securities

 

 

 

 

186,262

 

Net cash provided by (used in) investing activities

 

(6,238

)

 

 

158,127

 

Cash flows from financing activities:

 

 

 

Proceeds from term loan facility

 

 

 

 

650,000

 

Repayment of exchangeable senior notes

 

 

 

 

(314,310

)

Proceeds from settlement of capped call transactions

 

 

 

 

30,978

 

Proceeds from other financing arrangements

 

1,572

 

 

 

 

Other financing activities

 

(176

)

 

 

1

 

Net cash provided by financing activities

 

1,396

 

 

 

366,669

 

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash

 

(4,939

)

 

 

(2,109

)

Net increase in cash, cash equivalents, and restricted cash

 

82,661

 

 

 

587,688

 

Cash, cash equivalents, and restricted cash at beginning of period

 

1,386,686

 

 

 

931,023

 

Net decrease in cash and cash equivalents included in assets held for sale

 

602

 

 

 

502

 

Cash, cash equivalents, and restricted cash at end of period

$

1,469,949

 

 

$

1,519,213

 

Atlassian Corporation

Revenues by Deployment Options

(U.S. $ in thousands)

(unaudited)

 

 

Three Months Ended September 30,

 

 

2022

 

 

2021

Cloud

$

475,043

 

$

317,903

Data Center

 

171,228

 

 

111,195

Server (1)

 

113,813

 

 

139,547

Marketplace and services (2)

 

47,308

 

 

45,379

Total revenues

$

807,392

 

$

614,024

(1) Included in Server is perpetual license revenue. Perpetual license revenue is captured as other revenue on the Condensed Consolidated Statements of Operations.

(2) Included in Marketplace and services is premier support revenue. Premier support is a subscription-based arrangement for a higher level of support across different deployment options. Premier support is recognized as subscription revenue on the Condensed Consolidated Statements of Operations as the services are delivered over the term of the arrangement.

Atlassian Corporation

Reconciliation of GAAP to Non-GAAP Results

(U.S. $ and shares in thousands, except per share data)

(unaudited)

 

 

Three Months Ended September 30,

 

 

2022

 

 

 

2021

 

Gross profit

 

 

 

GAAP gross profit

$

668,000

 

 

$

517,768

 

Plus: Stock-based compensation

 

10,613

 

 

 

5,917

 

Plus: Amortization of acquired intangible assets

 

5,697

 

 

 

5,689

 

Non-GAAP gross profit

$

684,310

 

 

$

529,374

 

Operating income

 

 

 

GAAP operating income (loss)

$

(34,027

)

 

$

56,477

 

Plus: Stock-based compensation

 

173,631

 

 

 

100,907

 

Plus: Amortization of acquired intangible assets

 

8,296

 

 

 

8,054

 

Non-GAAP operating income

$

147,900

 

 

$

165,438

 

Net income

 

 

 

GAAP net loss

$

(13,741

)

 

$

(411,204

)

Plus: Stock-based compensation

 

173,631

 

 

 

100,907

 

Plus: Amortization of acquired intangible assets

 

8,296

 

 

 

8,054

 

Plus: Non-coupon impact related to exchangeable senior notes and capped calls

 

 

 

 

433,973

 

Less: Gain on a non-cash sale of a controlling interest of a subsidiary

 

(43,091

)

 

 

 

Less: Income tax effects

 

(32,548

)

 

 

(37,321

)

Non-GAAP net income

$

92,547

 

 

$

94,409

 

Net income per share

 

 

 

GAAP net loss per share - diluted

$

(0.05

)

 

$

(1.63

)

Plus: Stock-based compensation

 

0.68

 

 

 

0.41

 

Plus: Amortization of acquired intangible assets

 

0.03

 

 

 

0.03

 

Plus: Non-coupon impact related to exchangeable senior notes and capped calls

 

 

 

 

1.71

 

Less: Gain on a non-cash sale of a controlling interest of a subsidiary

 

(0.17

)

 

 

 

Less: Income tax effects

 

(0.13

)

 

 

(0.15

)

Non-GAAP net income per share - diluted

$

0.36

 

 

$

0.37

 

Weighted-average diluted shares outstanding

 

 

 

Weighted-average shares used in computing diluted GAAP net loss per share

 

255,167

 

 

 

252,106

 

Plus: Dilution from dilutive securities (1)

 

1,041

 

 

 

3,284

 

Weighted-average shares used in computing diluted non-GAAP net income per share

 

256,208

 

 

 

255,390

 

Free cash flow

 

 

 

GAAP net cash provided by operating activities

$

92,442

 

 

$

65,001

 

Less: Capital expenditures

 

(16,496

)

 

 

(6,881

)

Free cash flow

$

75,946

 

 

$

58,120

 

(1) The effects of these dilutive securities were not included in the GAAP calculation of diluted net loss per share for the three months ended September 30, 2022 and 2021 because the effect would have been anti-dilutive.

Atlassian Corporation

Reconciliation of GAAP to Non-GAAP Financial Targets

(U.S. $)

 

 

Three Months Ending

December 31, 2022

Revenue

$835 million to $855 million

 

 

GAAP gross margin

80% to 81%

Plus: Stock-based compensation

2

Plus: Amortization of acquired intangible assets

1

Non-GAAP gross margin

83% to 84%

 

 

GAAP operating margin

(20%)

Plus: Stock-based compensation

32

Plus: Amortization of acquired intangible assets

1

Non-GAAP operating margin

13%

 

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