Atlassian (US:TEAM)2025-10-31 20:06Customer Metrics - As of September 30, 2025, the company had more than 300,000 customers, with 53,017 customers generating over $10,000 in annualized recurring revenue from Cloud offerings [119]. - The number of customers with greater than $10,000 in Cloud ARR increased from 51,978 in June 2025 to 53,017 in September 2025 [120]. Financial Performance - Total revenues for the three months ended September 30, 2025, increased by $244.8 million, or 21%, compared to the same period in 2024, reaching $1,432.6 million [139]. - Subscription revenues rose by $242.6 million, or 21%, driven by paid seat expansion and price increases, totaling $1,374.5 million for the period [140]. - Non-GAAP net income for the three months ended September 30, 2025, was $275.7 million, compared to $199.7 million in the same period of 2024 [172]. - Free cash flow for the three months ended September 30, 2025, was $114.6 million, an increase of $40.3 million compared to the same period in 2024, primarily due to higher net cash provided by operating activities [121]. - Free cash flow for the three months ended September 30, 2025, was $114.6 million, up from $74.3 million in the same period of 2024 [173]. Revenue and Cost Structure - Subscription revenues are expected to continue to be the primary driver of revenue growth, particularly from Cloud offerings, with fluctuations based on customer buying patterns [125]. - Cost of revenues increased by $40.3 million, or 19%, primarily due to restructuring charges of $31.6 million, resulting in a total cost of $257.9 million [143]. - The company anticipates an increase in costs of revenues as it continues to invest in its cloud-based infrastructure to support Cloud customers [128]. - Gross margin is expected to remain approximately flat, driven by optimization of Cloud infrastructure costs, despite a revenue mix shift from Data Center to Cloud offerings [129]. Expenses - Research and development expenses grew by $152.9 million, or 25%, totaling $756.0 million, mainly due to increased compensation expenses [144]. - Marketing and sales expenses increased by $84.0 million, or 33%, reaching $336.4 million, attributed to higher compensation and advertising costs [145]. - General and administrative expenses rose by $31.9 million, or 22%, totaling $178.5 million, primarily due to increased compensation and legal fees [146]. - The company recorded restructuring charges totaling $55 million for the three months ended September 30, 2025, including $27.9 million in severance and termination benefits [113]. Cash Flow and Investments - Net cash provided by operating activities increased by $48.2 million to $128.7 million for the three months ended September 30, 2025, compared to $80.5 million in the same period of 2024 [158]. - Net cash used in investing activities rose by $42.0 million to $60.7 million for the three months ended September 30, 2025, primarily due to strategic investments and acquisitions [159]. - Net cash used in financing activities increased by $66.1 million to $252.8 million for the three months ended September 30, 2025, mainly due to stock repurchases [160]. - The company repurchased approximately 1.4 million shares of Class A Common Stock for about $249.9 million at an average price of $180.74 per share during the three months ended September 30, 2025 [164]. - The company has $921.3 million remaining for repurchase under the 2024 Repurchase Program as of September 30, 2025 [164]. - The company acquired The Browser Company of New York Inc. for approximately $610 million, funded through existing cash [166]. - A definitive agreement was made to acquire A Software Company for approximately $1.0 billion, expected to close in the second quarter of fiscal year 2026 [167]. Other Financial Metrics - Other income increased by $38.2 million, or 197%, resulting in a net income of $18.8 million, compared to a loss of $19.4 million in the prior year [147]. - Interest income increased by $1.3 million, or 4%, totaling $29.8 million, due to higher investment income from increased cash balances [148]. - Interest expense rose by $1.3 million, or 18%, totaling $8.6 million, primarily due to the amortization of interest rate swap contracts [149]. - The provision for income taxes decreased by $98.1 million, primarily due to changes in the mix of earnings and losses in foreign jurisdictions [150]. - As of September 30, 2025, the company had cash and cash equivalents totaling $2.3 billion and marketable securities of $456.0 million [157]. Strategic Changes - The company plans to end-of-life its Data Center deployment offering, ceasing sales of term licenses to new customers in March 2026 and to existing customers in March 2028 [111]. - Research and development expenses focus on building new apps and AI agents, enhancing Cloud infrastructure, and advancing artificial intelligence capabilities [131]. - Restructuring charges included stock-based compensation expense related to the rebalancing of resources for the three months ended September 30, 2025 [175]. - There have been no material changes to market risk from the information presented in the Annual Report on Form 10-K for the year ended June 30, 2025 [176].