Key TakeawaysThe midpoint of Atlassian's outlook for current-quarter revenue came up short of estimates, and it's guidance for full-year growth is below last year's growth.The business software company's fiscal 2024 fourth-quarter adjusted earnings and revenue were in line with forecasts.Atlassian announced that Chief Sale Officer Kevin Egan was leaving the company to pursue other opportunities. Shares of Atlassian (TEAM) sank as the business software provider posted disappointing guidance and announced its ...

Growth is slowing and AI expenses have gone up.Shares of enterprise software company Atlassian (TEAM -17.39%) plunged on Friday after the company reported financial results for its fiscal fourth quarter of 2024, ended June 30. As of 11:30 a.m. ET, Atlassian stock was down 16% and had hit new 52-week lows.Here are some of the problemsFor Atlassian, investors are concerned about both the Q4 numbers and the financial guidance for its fiscal 2025. Management had guided for Q4 revenue of $1.135 billion at most. ...

Atlassian Corporation TEAM reported better-than-expected earnings for its fourth quarter on Thursday.The company posted quarterly earnings of 66 cents per share which beat the analyst consensus estimate of 60 cents per share. The company reported quarterly sales of $1.131 billion which beat the analyst consensus estimate of $1.130 billion."We announced transformative innovations for our customers like Rovo, the latest human-AI technology reshaping the way we work. We achieved significant milestones like Fed ...

Atlassian (TEAM) reported fourth-quarter fiscal 2024 results, wherein earnings beat the Zacks Consensus Estimate and revenues matched the same. Its non-GAAP earnings per share of 66 cents beat the Zacks Consensus Estimate of 59 cents. The figure jumped 15.8% from the year-ago quarter’s non-GAAP earnings of 57 cents per share, mainly driven by strong top-line growth.TEAM’s fiscal fourth-quarter revenues climbed 20.5% year over year to $1.13 billion and came in line with the Zacks Consensus Estimate. The top ...

Financial Data and Key Metrics Changes - Atlassian generated $4.4 billion in revenue for FY24, with over $1.4 billion in free cash flow, surpassing 300,000 customers [9] - The company reported a 31% year-over-year growth in Cloud revenue for Q4, slightly below the guided range of 32% [25][29] - Non-GAAP operating margin for FY25 is expected to be approximately 21.5%, about 200 basis points lower than FY24 due to significant outperformance in data center and marketplace revenue related to server support [53] Business Line Data and Key Metrics Changes - The company has over 500 customers spending more than $1 million annually, which is up 48% year-over-year [20] - Cloud revenue growth is expected to decelerate in FY25, primarily due to less contribution from server migrations [54] - The integration of Loom is expected to contribute about 1.5 to 2 points to FY25 cloud revenue growth, although it may be slightly dilutive to operating margins [65] Market Data and Key Metrics Changes - Atlassian has a $67 billion addressable market opportunity, with $14 billion within its existing enterprise customer base [18] - The company is focusing on migrations from data center to cloud as a key driver for future revenue growth [19] Company Strategy and Development Direction - Atlassian aims to accelerate its path to surpass $10 billion in annual revenue by leveraging its enterprise-grade platform capabilities and innovations [11] - The company is committed to evolving its go-to-market strategy to better serve enterprise customers, including hiring seasoned enterprise sales representatives [30][33] - The focus on AI and analytics is seen as a significant opportunity for future growth [19][22] Management's Comments on Operating Environment and Future Outlook - Management acknowledges macroeconomic uncertainties and execution risks but remains confident in achieving a long-term growth rate of over 20% [17][50] - The transition to cloud is viewed as a critical journey for many large customers, with management expressing optimism about future migrations [40] Other Important Information - This earnings call marks Scott Farquhar's last as co-CEO, with plans for him to continue contributing as a board member [12] - The company has successfully migrated millions of users from Server to Cloud and Data Center, completing a 3.5-year journey [9] Q&A Session Summary Question: Concerns about FY25 revenue guidance - Management explained that FY25 guidance reflects a more conservative and risk-adjusted view due to macroeconomic uncertainties and execution risks [29][50] Question: Impact of Loom on revenue - Loom is expected to contribute 1.5 to 2 points to FY25 cloud revenue growth, although it may slightly dilute operating margins [65] Question: Transition in go-to-market strategy - Management is focused on evolving the go-to-market strategy to better serve enterprise customers and is actively searching for a new CRO [30][48] Question: Customer response to product changes - The integration of Jira Work Management and Jira Software has been positively received, allowing for better collaboration between technical and non-technical teams [42][44] Question: FedRAMP progress and federal deals - Management indicated that the FedRAMP designation is crucial for unlocking federal deals and that many large customers are on a multi-year journey to migrate to the cloud [39][40]

Core Insights - Atlassian reported $1.13 billion in revenue for the quarter ended June 2024, marking a year-over-year increase of 20.5% and an EPS of $0.66 compared to $0.57 a year ago [1] - The reported revenue met the Zacks Consensus Estimate, with a surprise of +0.34%, while the EPS exceeded expectations by +11.86% [1] Revenue Breakdown - Subscription revenue was $1.07 billion, matching the average estimate and reflecting a +33.7% change year-over-year [4] - Other revenue reached $62.72 million, surpassing the average estimate of $53.41 million, with a year-over-year increase of +17.3% [5] - Cloud revenue was $738.01 million, slightly below the estimated $742.79 million, but still showing a +31% change compared to the previous year [6] - Data Center revenue totaled $326.66 million, close to the estimated $327.64 million, with a significant year-over-year increase of +40.7% [7] - Marketplace and other revenue was $66.92 million, exceeding the average estimate of $57.28 million, representing a +16.4% change year-over-year [8] Customer Metrics - The total number of customers stood at 300,000, slightly below the average estimate of 308,187 based on three analysts [3] Stock Performance - Atlassian's shares have returned -3.1% over the past month, contrasting with the Zacks S&P 500 composite's +1.1% change, and the stock currently holds a Zacks Rank 3 (Hold) [8]

Financial Performance - Atlassian reported quarterly earnings of $0.66 per share, exceeding the Zacks Consensus Estimate of $0.59 per share, and up from $0.57 per share a year ago, representing an earnings surprise of 11.86% [1] - The company posted revenues of $1.13 billion for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 0.34%, and an increase from $939.1 million year-over-year [1] - Over the last four quarters, Atlassian has consistently surpassed consensus EPS and revenue estimates [1] Stock Performance - Atlassian shares have declined approximately 25.8% since the beginning of the year, contrasting with the S&P 500's gain of 15.8% [2] - The current Zacks Rank for Atlassian is 3 (Hold), indicating expected performance in line with the market in the near future [4] Future Outlook - The consensus EPS estimate for the upcoming quarter is $0.70 on revenues of $1.16 billion, and for the current fiscal year, it is $3.28 on revenues of $5.15 billion [4] - The estimate revisions trend for Atlassian is mixed, and future changes in estimates will be closely monitored following the recent earnings report [4] Industry Context - The Internet - Software industry, to which Atlassian belongs, is currently ranked in the top 36% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [5] - Another company in the same industry, Bumble Inc., is expected to report quarterly earnings of $0.15 per share, reflecting a year-over-year increase of 200% [5][6]

Revenue Growth - Quarterly revenue reached $1,132 million, representing a 20% year-over-year increase[1] - Subscription revenue for the quarter was $1,069 million, up 34% year-over-year[1] - Total revenue for fiscal year 2024 was $4.4 billion, a 23% increase from $3.5 billion in fiscal year 2023[6] - Total revenues for the three months ended June 30, 2024, were $1,131,590, compared to $939,098 for the same period in 2023, representing a year-over-year increase of approximately 20.6%[20] - Subscription revenue for the fiscal year ended June 30, 2024, reached $3,924,389, up from $2,922,576 in 2023, indicating a growth of about 34.3%[20] - Atlassian expects total revenue for Q1 FY25 to be between $1,149 million and $1,157 million, with cloud revenue growth projected at approximately 27% year-over-year[10] - Atlassian is targeting a total revenue growth of approximately 16% for fiscal year 2025[11] Customer Growth - The number of customers with over $10,000 in Cloud annualized recurring revenue increased by 18% year-over-year, totaling 45,842[8] - The number of customers spending over $1 million annually grew by 48% year-over-year, indicating strong enterprise momentum[8] - The number of customers with Cloud ARR greater than $10,000 is defined as organizations with unique domains and an active Cloud subscription for two or more seats[18] Financial Performance - Operating income for fiscal year 2024 was $1,014.1 million, with a non-GAAP operating margin of 23%[6] - Gross profit for the three months ended June 30, 2024, was $914,085, compared to $769,322 in 2023, reflecting an increase of approximately 18.8%[20] - The net loss for the three months ended June 30, 2024, was $196,919, compared to a net loss of $58,952 in the same period of 2023, showing a significant increase in losses[20] - Operating loss for the three months ended June 30, 2024, was $(66,950), compared to $(50,389) in the same period of 2023, reflecting a worsening of approximately 32.9%[20] - For the fiscal year ended June 30, 2024, Atlassian reported total revenues of $4,358,603,000, a 23% increase from $3,534,647,000 in the previous fiscal year[28] - The net loss for the three months ended June 30, 2024, was $196,919,000, compared to a net loss of $58,952,000 for the same period in 2023[30] - Operating cash flow for the fiscal year ended June 30, 2024, was $1,448,159,000, up from $868,111,000 in the previous year, representing a 67% increase[30] - Atlassian's GAAP gross profit for the fiscal year ended June 30, 2024, was $3,555,108,000, compared to $2,900,882,000 in 2023, reflecting a gross margin of 82%[30] - The company achieved a non-GAAP net income of $762,409,000 for the fiscal year ended June 30, 2024, compared to $492,255,000 in the previous year, marking a 55% increase[30] - The company reported a free cash flow of $1,415,582,000 for the fiscal year ended June 30, 2024, compared to $842,459,000 in the previous year[30] Cash and Assets - Free cash flow for the fourth quarter was $413 million, with a free cash flow margin of 37%[5] - Cash and cash equivalents as of June 30, 2024, were $2,176,930, compared to $2,102,550 as of June 30, 2023, representing an increase of approximately 3.5%[23] - Total current assets increased to $3,076,264 as of June 30, 2024, from $2,736,364 in 2023, marking a growth of about 12.4%[23] - Total liabilities as of June 30, 2024, were $4,179,282, compared to $3,452,107 in 2023, indicating an increase of approximately 21.1%[23] - Atlassian's cash, cash equivalents, and restricted cash at the end of the period was $2,178,122,000, compared to $2,103,915,000 at the beginning of the period[25] - The company’s total cash used in investing activities for the fiscal year ended June 30, 2024, was $963,746,000, compared to $1,258,000 in the previous year[25] Market Position - The company achieved FedRAMP "In Process" designation, enhancing its position in the U.S. public sector cloud market[7] - The company plans to maintain a non-GAAP gross margin of 83.5% for the fiscal year ending June 30, 2025[36]

Investment Thesis - Atlassian Corporation (NASDAQ:TEAM) presents a strong long-term investment opportunity in the enterprise software market, driven by its leadership in collaboration tools and commitment to innovation [4][21] - The company has a serviceable addressable market of approximately $67 billion, growing at a CAGR of 12%, with significant expansion potential within existing accounts [4][13] - Atlassian's cloud-first strategy is enhancing customer lifetime value and driving long-term growth, with cloud revenue now representing 61% of total revenue [13][14] Company Background - Founded in 2002, Atlassian has evolved from a startup to a global leader in team collaboration and productivity tools, known for products like Jira, Confluence, and Trello [6] - The company went public in 2015 and has expanded its market presence through both organic and inorganic growth strategies [6] Market Positioning - Atlassian serves over 300,000 customers, including 84% of Fortune 500 companies, indicating a strong foothold in the enterprise market [13] - The company faces competition from tech giants like Microsoft and Google, as well as specialized firms like Slack and Asana, leading to intense rivalry in the collaboration software sector [11][12] Growth Drivers - Atlassian's total addressable market includes $17 billion in software development, $15 billion in service management, and $35 billion in work management, with respective growth rates of 9%, 13%, and 14% [13] - The company has identified an $18 billion opportunity for wallet share expansion among its existing customer base [13] - Recent innovations, including AI-driven products and new offerings from its Point A incubator, are contributing to significant revenue growth [14] Financial Outlook - Atlassian aims to achieve $10 billion in annual revenue within five years, with projected total revenue growth of over 20% CAGR in the next three years [14][21] - The company's Cloud ARR has surpassed $2.8 billion, with a net expansion rate of 120%, indicating strong customer retention and growth [14] Valuation Analysis - A Discounted Cash Flow Model suggests a fair share price of $221.33, representing an implied upside of 32.05% [17] - The company's focus on enterprise customers and successful cloud migration strategies are expected to yield positive financial results [14][21]

Core Viewpoint - Atlassian is expected to report a year-over-year increase in earnings and revenues, but the actual stock price movement will depend on how the results compare to consensus estimates [1] Earnings Expectations - The consensus estimate for Atlassian's quarterly earnings is $0.59 per share, reflecting a year-over-year change of +3.5% [2] - Revenues are projected to be $1.13 billion, which is an increase of 20.1% from the same quarter last year [2] Estimate Revisions - The consensus EPS estimate has been revised down by 23.96% over the last 30 days, indicating a bearish sentiment among analysts [2] - The Most Accurate Estimate for Atlassian is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -1.86% [5][6] Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive Earnings ESP is a strong predictor of an earnings beat, especially when combined with a Zacks Rank of 1, 2, or 3 [4] - Atlassian currently holds a Zacks Rank of 3, making it challenging to predict an earnings beat conclusively [5][6] Historical Performance - In the last reported quarter, Atlassian had an earnings surprise of +45.90%, beating the consensus estimate of $0.61 per share by reporting $0.89 [7] - The company has beaten consensus EPS estimates in each of the last four quarters [7] Market Context - The overall market reaction to earnings reports can be influenced by various factors beyond just the earnings beat or miss [8] - Other stocks in the software industry, such as Compass, are also reporting earnings, with different expectations and revisions impacting their outlooks [9]