Atlassian Announces Third Quarter Fiscal Year 2017 Results

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| Source: Atlassian Corporation Plc

Quarterly revenue of $159.9 million, up 36% year-over-year

Quarterly IFRS operating margin of (14%) and non-IFRS operating margin of 15%

Quarterly free cash flow of $68.3 million

SAN FRANCISCO, April 27, 2017 (GLOBE NEWSWIRE) -- Atlassian Corporation Plc (NASDAQ:TEAM), a leading provider of team collaboration and productivity software, today announced financial results for the third quarter of fiscal 2017 ended March 31, 2017, and released a shareholder letter on the Investor Relations section of its website at https://investors.atlassian.com.

“Q3 was a great quarter for Atlassian. We again drove strong execution across our cloud, server and data center products, and our innovative model continues to combine consistent revenue growth with significant free cash flow generation,” said Scott Farquhar, Atlassian co-CEO and co-founder. “In addition to our broad-based growth, we completed our acquisition of Trello in February and recently launched new Trello integrations for JIRA, Confluence, Bitbucket and HipChat. Together with Trello, we now serve more than 85,000 customers around the world, expanding our path towards supporting teams across the Fortune 500,000.”

Third Quarter Fiscal Year 2017 Financial Highlights:

On an IFRS basis, Atlassian reported:

  • Revenue: Total revenue was $159.9 million for the third quarter of fiscal 2017, up 36% from $117.9 million for the third quarter of fiscal 2016.
  • Operating Loss and Operating Margin: Operating loss was $23.1 million for the third quarter of fiscal 2017, compared with $4.9 million for the third quarter of fiscal 2016. Operating margin was (14%) for the third quarter of fiscal 2017, compared with (4%) for the third quarter of fiscal 2016.
  • Net Loss and Net Loss Per Diluted Share: Net loss was $17.5 million for the third quarter of fiscal 2017, compared with $1.1 million for the third quarter of fiscal 2016. Net loss per diluted share was $0.08 for the third quarter of fiscal 2017, compared with $0.01 for the third quarter of fiscal 2016.
  • Balance Sheet: Cash and cash equivalents and short-term investments at the end of the third quarter of fiscal 2017 totaled $503.6 million.

On a non-IFRS basis, Atlassian reported:

  • Operating Income and Operating Margin: Operating income was $24.5 million for the third quarter of fiscal 2017, compared with $18.3 million for the third quarter of fiscal 2016. Operating margin was 15% for the third quarter of fiscal 2017, compared with 15% for the third quarter of fiscal 2016.
  • Net Income and Net Income Per Diluted Share: Net income was $18.9 million for the third quarter of fiscal 2017, compared with $17.0 million for the third quarter of fiscal 2016. Net income per diluted share was $0.08 for the third quarter of fiscal 2017, compared with $0.07 per diluted share for the third quarter of fiscal 2016.
  • Free Cash Flow: Cash flow from operations for the third quarter of fiscal 2017 was $72.9 million, while capital expenditures totaled $4.6 million, resulting in free cash flow of $68.3 million, an increase of 68% year-over-year.

A reconciliation of IFRS to non-IFRS 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-IFRS Financial Measures.”

Recent Business Highlights:

  • Customer growth: Atlassian ended the third quarter of fiscal 2017 with a total customer count on an active subscription or maintenance agreement basis of 85,031. Atlassian added 16,194 net new customers during the quarter; this number benefited from an increase of 12,789 customers as a result of our acquisition of Trello during the quarter. Excluding Trello, Atlassian ended the third quarter of fiscal 2017 with a total customer count of 72,242, an increase of 26% year-over-year. Net new customers during the quarter excluding Trello were 3,405.
  • Trello integrations with Atlassian products: In March we launched new integrations, called “Power-Ups,” that integrate Trello with the cloud versions of JIRA Software, Confluence, and Bitbucket, and enhanced the existing Power-Up for HipChat. Now teams can customize their Trello boards to surface real-time updates on their work. Attaching issues, pages, and pull requests to Trello cards, or creating cards from their HipChat room, gives teams confidence that they’re working on the most important items.
  • Atlassian Marketplace: With over 3,000 add-ons designed to enhance Atlassian products, the Atlassian Marketplace is one of the largest enterprise software marketplaces and passed a new milestone during the quarter, with more than $250 million in lifetime sales since its inception in 2012.

Financial Targets:

Atlassian is providing its financial targets for the fourth quarter and full fiscal year 2017. The company’s financial targets are as follows:

  • Fourth Quarter Fiscal Year 2017: 
    • Total revenue is expected to be in the range of $170 million to $172 million.*
    • Gross margin is expected to be approximately 80% on an IFRS basis and approximately 84% on a non-IFRS basis. 
    • Operating margin is expected to be approximately (20%) on an IFRS basis and approximately 14% on a non-IFRS basis. 
    • Weighted-average share count is expected to be in the range of 238 million to 240 million shares on a fully diluted basis. 
    • Net loss per diluted share is expected to be approximately ($0.10) on an IFRS basis, and net income per diluted share is expected to be approximately $0.08 on a non-IFRS basis.
  • Fiscal Year 2017: 
    • Total revenue is expected to be in the range of $616 million to $618 million.**
    • Gross margin is expected to be approximately 81% on an IFRS basis and approximately 84% on a non-IFRS basis. 
    • Operating margin is expected to be approximately (11%) on an IFRS basis and approximately 17% on a non-IFRS basis. 
    • Weighted-average share count is expected to be in the range of 235 million to 236 million shares on a fully diluted basis. 
    • Net loss per diluted share is expected to be approximately ($0.20) on an IFRS basis, and net income per diluted share is expected to be approximately $0.35 on a non-IFRS basis. 
    • Free cash flow is expected to be in the range of $173 million to $177 million, which factors in capital expenditures that are expected to be approximately $15 million in fiscal 2017.

*Our fourth quarter fiscal 2017 revenue target includes a revenue contribution from Trello of approximately $3 million.
** Our full year fiscal 2017 revenue target includes a revenue contribution from Trello of approximately $4 million.

With respect to Atlassian’s expectations under “Financial Targets” above, a reconciliation of IFRS to non-IFRS gross margin, operating margin, net income per diluted share, and free cash flow have been provided in the financial statement tables included in this press release.

Shareholder Letter and Webcast/Conference Call Details

A detailed shareholder letter is available on the Investor Relations section of Atlassian’s website at: https://investors.atlassian.com. Atlassian will host a webcast and conference call to answer questions today:

  • When: Thursday, April 27, 2017 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.
  • Dial in: To access the call via telephone in North America, please dial 1-888-346-0688. For international callers, please dial 1-412-902-4250. Participants should request the “Atlassian call” after dialing in.
  • Audio replay: An audio replay of the call will be available via telephone for seven days, beginning two hours after the call. To listen to the replay in North America, please dial 1-877-344-7529 (access code 10103769). International callers, please dial 1-412-317-0088 (access code 10103769).

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

About Atlassian

Atlassian unleashes the potential in every team. Our collaboration software helps teams organize, discuss and complete shared work. Teams at more than 85,000 large and small organizations - including Citigroup, eBay, Coca-Cola, Visa, BMW and NASA - use Atlassian's project tracking, content creation and sharing, real-time communication and service management products to work better together and deliver quality results on time. Learn more about products including JIRA Software, Confluence, HipChat, Trello, Bitbucket and JIRA Service Desk at https://atlassian.com.

Forward-Looking Statements

This press release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. All statements other than statements of historical fact could be deemed forward looking, including risks and uncertainties related to statements about Atlassian’s products, technology and other key strategic areas, and Atlassian’s financial targets such as revenue, share count and IFRS and non-IFRS financial measures including gross margin, operating margin, net income per diluted share and free cash flow.

Atlassian undertakes 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 from time to time, including the section titled “Risk Factors” in our most recent Forms 20-F and 6-K (reporting our quarterly results). These documents are available on the SEC Filings section of the Investor Relations section of our website at: https://investors.atlassian.com.

About Non-IFRS Financial Measures

Our reported results and financial targets include certain non-IFRS financial measures, including non-IFRS gross profit, non-IFRS operating income, non-IFRS net income, non-IFRS net income per diluted share, and free cash flow. Management believes that the use of these non-IFRS financial measures provides consistency and comparability with our past financial performance, facilitates period-to-period comparisons of our results of operations, and also facilitates comparisons with peer companies, many of which use similar non-IFRS or non-GAAP financial measures to supplement their IFRS or GAAP results. Non-IFRS results are presented for supplemental informational purposes only to aid in understanding our operating results. The non-IFRS results should not be considered a substitute for financial information presented in accordance with IFRS, and may be different from non-IFRS or non-GAAP measures used by other companies.

Our non-IFRS financial measures reflect adjustments based on the items below:

  • Non-IFRS gross profit. Excludes expenses related to share-based compensation and amortization of acquired intangible assets.
  • Non-IFRS operating income. Excludes expenses related to share-based compensation and amortization of acquired intangible assets.
  • Non-IFRS net income and non-IFRS net income per diluted share. Excludes expenses related to share- based compensation, amortization of acquired intangible assets and 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 primarily of purchases of property and equipment.

We exclude expenses related to share-based compensation, amortization of acquired intangible assets and the related income tax effects on these items from certain of our non-IFRS financial measures as we believe this helps investors understand our operational performance. In addition, share-based compensation expense can be difficult to predict and varies from period to period and company to company due to differing valuation methodologies, subjective assumptions and the variety of equity instruments, as well as changes in stock price. Management believes that providing non-IFRS financial measures that exclude share-based compensation expense, amortization of acquired intangible assets and the related income tax effects on these items allow for more meaningful comparisons between our operating results from period to period.

We include the effect of our outstanding share options and restricted share units (“RSUs”) in weighted-average shares used in computing non-IFRS net income per diluted share. IFRS excludes the impact of the full weighting of these outstanding equity awards until the effectiveness of our initial public offering (“IPO”). We have presented the full weighting impact of these additional shares from previously granted share options and RSUs, as if they were outstanding from the date of grant, in order to provide investors with insight into the full impact of all potentially dilutive awards outstanding and to provide comparability across periods.

Management considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business, making strategic acquisitions and strengthening our statement of financial position.

Management uses non-IFRS gross profit, non-IFRS operating income, non-IFRS net income, non-IFRS net income per diluted share and free cash flow:

  • As measures of operating performance, because these financial measures do not include the impact of items not directly resulting from our core operations; 
  • For planning purposes, including the preparation of our annual operating budget; 
  • To allocate resources to enhance the financial performance of our business; 
  • To evaluate the effectiveness of our business strategies; and 
  • In communications with our board of directors concerning our financial performance.

The tables in this press release titled “Reconciliation of IFRS to Non-IFRS Results” and “Reconciliation of IFRS to Non-IFRS Financial Targets” provide reconciliations of non-IFRS financial measures to the most recent directly comparable financial measures calculated and presented in accordance with IFRS.

We understand that although non-IFRS gross profit, non-IFRS operating income, non-IFRS net income, non-IFRS net income per diluted share and free cash flow are frequently used by investors and securities analysts in their evaluation of companies, these measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results of operations as reported under IFRS.

 
Atlassian Corporation Plc
Consolidated Statements of Operations
(U.S. $ and shares in thousands, except per share data)
(unaudited)
 
 Three Months Ended March 31, Nine Months Ended March 31,
 2017 2016 2017 2016
Revenues:       
Subscription$63,369  $38,691  $169,626  $103,069 
Maintenance67,072  56,178  193,873  160,040 
Perpetual license19,495  16,430  55,206  47,576 
Other9,973  6,643  26,900  18,785 
Total revenues159,909  117,942  445,605  329,470 
Cost of revenues (1) (2)32,895  19,764  82,356  54,657 
Gross profit127,014  98,178  363,249  274,813 
Operating expenses:       
Research and development (1)82,262  54,170  219,477  147,476 
Marketing and sales (1) (2)36,625  24,436  89,021  62,411 
General and administrative (1)31,190  24,507  85,581  59,416 
Total operating expenses150,077  103,113  394,079  269,303 
Operating income (loss)(23,063) (4,935) (30,830) 5,510 
Other non-operating expense, net(492) 54  (806) (730)
Finance income1,040  703  3,803  872 
Finance costs(6) (5) (51) (62)
Income (loss) before income tax benefit(22,521) (4,183) (27,884) 5,590 
Income tax benefit5,060  3,111  6,088  3,485 
Net income (loss)$(17,461) $(1,072) $(21,796) $9,075 
Net income (loss) per share attributable to ordinary shareholders:       
Basic$(0.08) $(0.01) $(0.10) $0.05 
Diluted$(0.08) $(0.01) $(0.10) $0.05 
Weighted-average shares outstanding used to compute net income (loss) per share attributable to ordinary shareholders:       
Basic223,333  212,920  221,034  172,272 
Diluted223,333  212,920  221,034  180,417 
            

________________

(1) Amounts include share-based payment expense, as follows:

 Three Months Ended March 31, Nine Months Ended March 31,
 2017 2016 2017 2016
Cost of revenues$1,853  $1,258  $4,697  $3,765 
Research and development21,628  9,495  54,786  23,193 
Marketing and sales5,336  2,754  11,940  8,560 
General and administrative8,965  7,739  24,688  14,876 

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

 Three Months Ended March 31, Nine Months Ended March 31,
 2017 2016 2017 2016
Cost of revenues$4,907  $1,921  $9,307  $5,496 
Marketing and sales4,866  22  5,281  65 


Atlassian Corporation Plc
Consolidated Statements of Financial Position
(U.S. $ in thousands)
(unaudited)
 
 March 31, 2017 June 30, 2016
Assets   
Current assets:   
Cash and cash equivalents$196,882  $259,709 
Short-term investments306,676  483,405 
Trade receivables26,481  15,233 
Current tax receivables6,070  6,013 
Prepaid expenses and other current assets19,337  14,178 
Total current assets555,446  778,538 
Non-current assets:   
Property and equipment, net45,190  58,762 
Deferred tax assets179,775  127,411 
Goodwill311,748  7,138 
Intangible assets, net134,992  13,577 
Other non-current assets8,513  5,547 
Total non-current assets680,218  212,435 
Total assets$1,235,664  $990,973 
Liabilities   
Current liabilities:   
Trade and other payables$71,381  $57,886 
Current tax liabilities5,250  286 
Provisions5,585  4,716 
Deferred revenue221,860  173,612 
Total current liabilities304,076  236,500 
Non-current liabilities:   
Deferred tax liabilities57,240  6,639 
Provisions2,942  2,170 
Deferred revenue10,884  7,456 
Other non-current liabilities6,914  6,545 
Total non-current liabilities77,980  22,810 
Total liabilities$382,056  $259,310 
Equity   
Share capital$22,422  $21,620 
Share premium448,986  441,734 
Other capital reserves379,555  244,335 
Other components of equity5,166  4,699 
Retained earnings (accumulated deficit)(2,521) 19,275 
Total equity$853,608  $731,663 
Total liabilities and equity$1,235,664  $990,973 
        


Atlassian Corporation Plc
Consolidated Statements of Cash Flows
(U.S. $ in thousands)
(unaudited)
 Three Months Ended March 31, Nine Months Ended March 31,
 2017 2016 2017 2016
Operating activities       
Income (loss) before income tax$(22,521) $(4,183) $(27,884) $5,590 
Adjustments to reconcile income (loss) before income tax to net cash provided by operating activities:       
Depreciation and amortization18,485  5,678  37,780  15,584 
Loss (gain) on sale of investments and other assets(15) 61  (422) 198 
Net unrealized foreign currency loss (gain)209  (442) 1  (8)
Share-based payment expense37,782  21,246  96,111  50,394 
Interest income(1,040) (703) (3,803) (872)
Changes in assets and liabilities:       
Trade receivables2,155  1,003  (9,913) (3,311)
Prepaid expenses and other assets(89) (796) (2,859) (824)
Trade and other payables, provisions and other non-current liabilities12,707  10,717  9,308  5,975 
Deferred revenue25,035  15,272  49,352  29,524 
Interest received1,470  1,352  5,147  1,458 
Income tax paid, net of refunds(1,255) (961) (4,034) (9,161)
Net cash provided by operating activities72,923  48,244  148,784  94,547 
Investing activities       
Business combinations, net of cash acquired(362,795)   (381,090)  
Purchases of property and equipment(4,623) (7,531) (9,921) (16,819)
Proceeds from sale of other assets    342   
Purchases of investments(105,021) (318,785) (338,385) (435,428)
Proceeds from maturities of investments23,088  13,202  80,188  47,824 
Proceeds from sales of investments235,173  6,361  433,761  6,361 
Increase in restricted cash    (3,369)  
Payment of deferred consideration    (935) (1,025)
Net cash used in investing activities(214,178) (306,753) (219,409) (399,087)
Financing activities       
Proceeds from issuance of ordinary shares upon initial public offering, net of offering costs      431,447 
Proceeds from exercise of share options1,535  764  7,403  4,266 
Employee payroll taxes paid related to net share settlement of equity awards      (5,395)
Net cash provided by financing activities1,535  764  7,403  430,318 
Effect of exchange rate changes on cash and cash equivalents440  371  395  22 
Net increase (decrease) in cash and cash equivalents(139,280) (257,374) (62,827) 125,800 
Cash and cash equivalents at beginning of period336,162  570,268  259,709  187,094 
Cash and cash equivalents at end of period$196,882  $312,894  $196,882  $312,894 
                


Atlassian Corporation Plc
Reconciliation of IFRS to Non-IFRS Results
(U.S. $ and shares in thousands, except per share data)
(unaudited)
 
 Three Months Ended March 31, Nine Months Ended March 31,
 2017 2016 2017 2016
Gross profit       
IFRS gross profit$127,014  $98,178  $363,249  $274,813 
Plus: Share-based payment expense1,853  1,258  4,697  3,765 
Plus: Amortization of acquired intangible assets4,907  1,921  9,307  5,496 
Non-IFRS gross profit$133,774  $101,357  $377,253  $284,074 
Operating income       
IFRS operating income (loss)$(23,063) $(4,935) $(30,830) $5,510 
Plus: Share-based payment expense37,782  21,246  96,111  50,394 
Plus: Amortization of acquired intangible assets9,773  1,943  14,588  5,561 
Non-IFRS operating income$24,492  $18,254  $79,869  $61,465 
Net income       
IFRS net income (loss)$(17,461) $(1,072) $(21,796) $9,075 
Plus: Share-based payment expense37,782  21,246  96,111  50,394 
Plus: Amortization of acquired intangible assets9,773  1,943  14,588  5,561 
Less: Income tax effects and adjustments(11,162) (5,157) (25,587) (10,581)
Non-IFRS net income$18,932  $16,960  $63,316  $54,449 
Net income per share       
IFRS net income (loss) per share - basic$(0.08) $(0.01) $(0.10) $0.05 
Plus: Share-based payment expense0.17  0.10  0.44  0.30 
Plus: Amortization of acquired intangible assets0.04  0.01  0.07  0.03 
Less: Income tax effects and adjustments(0.05) (0.02) (0.12) (0.06)
Non-IFRS net income per share - basic$0.08  $0.08  $0.29  $0.32 
        
IFRS net income (loss) per share - diluted$(0.08) $(0.01) $(0.10) $0.05 
Plus: Share-based payment expense0.17  0.09  0.42  0.26 
Plus: Amortization of acquired intangible assets0.04  0.01  0.06  0.03 
Less: Income tax effects and adjustments(0.05) (0.02) (0.11) (0.06)
Non-IFRS net income per share - diluted$0.08  $0.07  $0.27  $0.28 
Weighted-average diluted shares outstanding       
Weighted-average shares used in computing diluted IFRS net income (loss) per share223,333  212,920  221,034  180,417 
Plus: Dilution from share options and RSUs (1)12,900  18,023  13,900   
Plus: Dilution from share options and RSUs granted in periods prior to IPO (2)      11,247 
Weighted-average shares used in computing diluted non-IFRS net income per share236,233  230,943  234,934  191,664 
Free cash flow       
IFRS net cash provided by operating activities$72,923  $48,244  $148,784  $94,547 
Less: Capital expenditures(4,623) (7,531) (9,921) (16,819)
Free cash flow$68,300  $40,713  $138,863  $77,728 
                

(1) The effects of these dilutive securities were not included in the IFRS calculation of diluted net loss per share for the three and nine months ended March 31, 2017 and the three months ended March 31, 2016 because the effect would have been anti-dilutive.
(2) Gives effect to share options and RSUs in periods prior to our IPO for comparability.

 
 
Atlassian Corporation Plc
Reconciliation of IFRS to Non-IFRS Results
(as a percentage of total revenues)
(unaudited)
 
 Three Months Ended March 31,
 2017 2016
Operating margin   
IFRS operating margin(14%) (4%)
Plus: Share-based payment expense23  17 
Plus: Amortization of acquired intangible assets6  2 
Non-IFRS operating margin15% 15%
      


Atlassian Corporation Plc
Reconciliation of IFRS to Non-IFRS Financial Targets
(U.S. $)
 
 Three Months Ending
June 30, 2017
 Fiscal Year Ending
June 30, 2017
Revenue$170 million to $172 million $616 million to $618 million
    
IFRS gross margin 80%   81% 
Plus: Share-based payment expense 1
   1
 
Plus: Amortization of acquired intangible assets 3
   2
 
Non-IFRS gross margin 84%   84% 
    
IFRS operating margin (20%)   (11%) 
Plus: Share-based payment expense 27
   23
 
Plus: Amortization of acquired intangible assets 7
   5
 
Non-IFRS operating margin 14%   17% 
    
IFRS net loss per share - diluted($0.10)
  ($0.20)
 
Plus: Share-based payment expense 0.19   0.60 
Plus: Amortization of acquired intangible assets 0.05   0.12 
Less: Income tax effects and adjustments (0.06)   (0.17) 
Non-IFRS net income per share - diluted$0.08  $0.35 
Weighted-average shares used in computing diluted non-IFRS net income per share238 million to 240 million 235 million to 236 million
    
IFRS net cash provided by operations  $188 million to $192 million
Less: Capital expenditures  (15 million)
Free cash flow  $173 million to $177 million
    

 

Investor Relations Contact
Ian Lee
IR@atlassian.com

Media Contact
Paul Loeffler
press@atlassian.com