Atlassian (TEAM) - 2025 Q4 - Annual Report

Part I Business Atlassian provides team collaboration software on its Cloud Platform, serving over 300,000 customers globally through a product-led growth model and a dual sales motion - Atlassian's mission is to unleash the potential of every team through its team collaboration software, which serves over 300,000 customers worldwide, including over 80% of the Fortune 500[18][21] - The company's strategy is built around a 'system of work' delivered through apps, AI agents, and Collections on the Atlassian Cloud Platform, which features a unified data model called the Teamwork Graph[23][26][28] - A significant portion of the workforce is dedicated to innovation, with over 50% of employees involved in research and development activities as of June 30, 2025[44] - The go-to-market strategy employs a dual 'flywheel' and 'sales-led' motion, using a low-touch, self-service approach for initial customer acquisition and a sales force for large enterprise expansion[48][49] - As of June 30, 2025, the company had 13,813 full-time employees and has adopted a distributed work model called 'Team Anywhere'[65][75] Risk Factors The company faces various business, technology, and financial risks, including intense competition, data security threats, and the concentrated voting power from its dual-class stock structure - The company's rapid historical growth makes future prospects difficult to evaluate, and it may not sustain its revenue growth rate or achieve GAAP profitability due to significant investments in R&D and cloud infrastructure[86][87] - The markets for Atlassian's solutions are intensely competitive, with rivals ranging from large technology vendors to smaller, specialized companies, some with greater resources[91][92] - A majority of revenue is derived from Jira, Confluence, and Jira Service Management, making the company's success highly dependent on the continued market acceptance of these key products[121] - Security breaches or unauthorized access to customer data could lead to loss of business, reputational damage, and significant liabilities, and the company has experienced security incidents in the past[135][137] - The dual-class stock structure concentrates approximately 85% of voting power with holders of Class B Common Stock, primarily the company's co-founders, limiting the ability of Class A stockholders to influence corporate matters[216] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[248] Cybersecurity Atlassian implements a cybersecurity risk management program based on NIST frameworks, overseen by the CTrO and CISO with board-level oversight, encompassing risk assessments and incident response - The cybersecurity program is designed and assessed based on the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF) and Secure Software Development Framework (SSDF)[250] - Oversight is managed by the Chief Trust Officer (CTrO) and Chief Information Security Officer (CISO), who report on risks to the Audit Committee quarterly and the full board of directors at least biannually[251][253] - The risk management program includes risk assessments, a dedicated security team, use of external service providers, employee training, incident response playbooks, and a third-party risk management process[255] Properties Atlassian's principal offices are leased facilities in Sydney, Australia, and the San Francisco Bay Area, supplemented by other leased offices globally - The company's principal offices are leased facilities in Sydney, Australia (146,000 sq. ft.) and the San Francisco Bay Area, California (147,000 sq. ft.) as of June 30, 2025[258] Legal Proceedings The company is involved in ordinary course legal proceedings, with management not expecting a material adverse effect on its financial position - Atlassian is party to litigation in the ordinary course of business but does not expect the outcomes to have a material adverse effect on its financial position[259] Mine Safety Disclosures This item is not applicable to the company - Not applicable[260] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Atlassian's Class A Common Stock trades on Nasdaq under 'TEAM', with no foreseeable dividends, and the company actively engages in share repurchases - The company's Class A Common Stock is traded on The Nasdaq Global Select Market under the symbol 'TEAM'[262] - Atlassian does not anticipate declaring or paying any cash dividends in the foreseeable future, intending to retain earnings for business expansion and its share repurchase program[224][264] Issuer Purchases of Equity Securities (Q4 FY2025) | Period | Total Number of Shares Purchased (thousand) | Average Price Paid Per Share ($) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (thousand) | | :--- | :--- | :--- | :--- | | April 2025 | 741 | 205.14 | 1,408,566 | | May 2025 | 685 | 213.69 | 1,262,175 | | June 2025 | 448 | 203.12 | 1,171,238 | | Total | 1,874 | | | - In September 2024, the Board authorized a new $1.5 billion share repurchase program, which commenced in April 2025 after the completion of the previous $1.0 billion program[271] Management's Discussion and Analysis of Financial Condition and Results of Operations Atlassian's FY2025 total revenue grew 20% to $5.22 billion, driven by subscription and cloud revenue, while reporting a GAAP operating loss and net loss amidst increased R&D and marketing investments Fiscal Year 2025 vs 2024 Revenue Performance | Revenue Type | FY 2025 (million) | FY 2024 (million) | $ Change (million) | % Change | | :--- | :--- | :--- | :--- | :--- | | Subscription | $4,930.6 | $3,924.4 | $1,006.2 | 26% | | Other | $284.7 | $434.2 | ($149.5) | -34% | | Total Revenues | $5,215.3 | $4,358.6 | $856.7 | 20% | Key Business Metrics | Metric | As of June 30, 2025 | As of June 30, 2024 | | :--- | :--- | :--- | | Customers with > $10,000 in Cloud ARR | 51,978 | 45,842 | | Free Cash Flow (FY) | $1,415.5M | $1,415.6M | - The 20% increase in total revenue was primarily driven by increased demand from existing customers, who accounted for over 90% of the revenue recognized in fiscal year 2025[310] - Research and development expenses increased 22% to $2.7 billion, representing 51% of total revenue, primarily due to a $462.7 million increase in employee compensation expenses[315] - Marketing and sales expenses rose 29% to $1.1 billion, driven by higher employee compensation and a $74.9 million increase in advertising and marketing program expenses[316] Quantitative and Qualitative Disclosure About Market Risk The company faces market risks from foreign currency exchange rates and interest rates, mitigating currency exposure with hedging programs and having fixed-rate senior notes to limit debt interest rate risk - The company is exposed to foreign exchange risk as a substantial majority of sales are in U.S. dollars, while a large percentage of expenses are in other currencies, primarily the Australian dollar, Indian rupee, Euro, and British pound[348][349] - Atlassian utilizes a cash flow hedging program with foreign currency forward contracts to manage this risk, where a hypothetical 10% strengthening or weakening of the U.S. dollar would change the fair value of these contracts by $102.2 million as of June 30, 2025[350][354] - Interest rate risk exists for the company's $2.5 billion in cash and cash equivalents and $424.3 million in short-term investments, though a sensitivity analysis showed a 100 basis point change in rates would not materially impact their market value[355] - The company's outstanding senior notes totaling approximately $985.6 million have fixed annual interest rates, mitigating economic interest rate exposure on these debt obligations[356] Financial Statements and Supplementary Data The audited consolidated financial statements for FY2025 show total assets of $6.04 billion, total liabilities of $4.70 billion, a net loss of $256.7 million on $5.22 billion revenue, and details on key accounting policies and financial position - The independent registered public accounting firm, Ernst & Young LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of June 30, 2025[361][373] Consolidated Balance Sheet Highlights (as of June 30) | Account | 2025 (billion) | 2024 (billion) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $2.51 | $2.18 | | Total current assets | $3.89 | $3.08 | | Goodwill | $1.30 | $1.29 | | Total Assets | $6.04 | $5.21 | | Liabilities & Equity | | | | Deferred revenue, current | $2.23 | $1.81 | | Total current liabilities | $3.18 | $2.61 | | Long-term debt | $0.99 | $0.99 | | Total Liabilities | $4.70 | $4.18 | | Total Stockholders' Equity | $1.35 | $1.03 | Consolidated Statement of Operations Highlights (Fiscal Year Ended June 30) | Account | 2025 (million) | 2024 (million) | | :--- | :--- | :--- | | Total revenues | $5,215.3 | $4,358.6 | | Gross profit | $4,320.5 | $3,555.1 | | Total operating expenses | $4,450.8 | $3,672.2 | | Operating loss | ($130.4) | ($117.1) | | Net loss | ($256.7) | ($300.5) | | Net loss per share | ($0.98) | ($1.16) | Consolidated Statement of Cash Flows Highlights (Fiscal Year Ended June 30) | Account | 2025 (million) | 2024 (million) | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,460.4 | $1,448.2 | | Net cash used in investing activities | ($342.3) | ($963.7) | | Net cash used in financing activities | ($782.6) | ($408.2) | | Net increase in cash | $335.6 | $74.2 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This item is not applicable to the company - Not applicable[537] Controls and Procedures As of June 30, 2025, the CEO and CFO concluded the company's disclosure controls and internal control over financial reporting were effective, with no material changes during the quarter - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[538] - Management concluded that the company's internal control over financial reporting was effective as of June 30, 2025, based on the COSO framework[539] Other Information A board member adopted a Rule 10b5-1 trading plan to purchase up to $1.075 million of Class A Common Stock through August 2026 - A board member, Scott Belsky, adopted a Rule 10b5-1 trading plan on May 29, 2025, to purchase up to $1,075,000 of Class A Common Stock[543] Disclosures Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to the company - None[544] Part III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2025 Annual Meeting Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Stockholders[546] Executive Compensation Information concerning executive compensation is incorporated by reference from the 2025 Annual Meeting Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Stockholders[547] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership is incorporated by reference from the 2025 Annual Meeting Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Stockholders[548] Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2025 Annual Meeting Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Stockholders[549] Principal Accountant Fees and Services Information detailing fees paid to the principal accountant is incorporated by reference from the 2025 Annual Meeting Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Stockholders[550] Part IV Exhibit and Financial Statement Schedule This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including governance documents, debt agreements, and compensation plans - This item lists all financial statements, schedules, and exhibits filed with the Form 10-K, including governance documents, debt indentures, and executive compensation plans[553][554] Form 10-K Summary The company has not provided a summary for Form 10-K under this item - None[559]