Atlassian (TEAM) - 2024 Q3 - Quarterly Results

Atlassian Q3 FY2024 Earnings Release Financial Highlights (Q3 FY2024) The company reported strong Q3 revenue growth to $1.19 billion, improved profitability, and record free cash flow Q3 FY2024 Key Financial Metrics (YoY Comparison) | Metric | Q3 FY2024 | Q3 FY2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $1,189.1M | $915.5M | +30% | | Subscription Revenue | $1,071.0M | $760.7M | +41% | | GAAP Operating Margin | 1% | (18%) | +19 pts | | Non-GAAP Operating Margin | 27% | 22% | +5 pts | | GAAP Net Income (Loss) | $12.8M | ($209.0M) | N/A | | Non-GAAP Net Income | $232.5M | $138.0M | +68% | | GAAP EPS (Diluted) | $0.05 | ($0.81) | N/A | | Non-GAAP EPS (Diluted) | $0.89 | $0.54 | +65% | | Free Cash Flow | $554.9M | $349.7M | +59% | - The company has successfully transitioned to a cloud-majority business, with over 300,000 customers on its Cloud products and a 3x increase in paid cloud seats since announcing the end-of-support for Server[2] - Cash, cash equivalents, and marketable securities totaled $2.1 billion at the end of the quarter[4] CEO Transition Co-founder Scott Farquhar will step down as co-CEO, with Mike Cannon-Brookes becoming the sole CEO - Scott Farquhar will step down as co-CEO to spend more time with his family, engage in philanthropy, and support the global technology industry[3] - The transition is effective August 31, 2024, and Farquhar will continue as a Board member and special advisor[3] - Mike Cannon-Brookes will become the sole CEO, leading the company's mission and capitalizing on opportunities in the AI era[3] Recent Business Highlights The company achieved key milestones including Marketplace sales growth, the acquisition of Optic, and product expansion - The Atlassian Marketplace surpassed $4 billion in lifetime sales since its 2012 inception, with over 1,800 partners and 5,700 apps[6] - Acquired Optic, an API documentation and management company, to enhance Compass and improve developer productivity[6] - Released Confluence whiteboards into general availability, offering a freeform collaboration tool integrated with Jira[6] - Expanded data residency to 12 geographies with the addition of India, Japan, South Korea, Switzerland, and the UK[6] - The number of customers with over $10,000 in Cloud Annualized Recurring Revenue (ARR) grew to 44,336, a 19% increase year-over-year[6] Financial Outlook (Q4 FY2024) The company projects Q4 revenue between $1.12B and $1.135B with continued strong cloud and data center growth Q4 FY2024 Financial Targets | Metric | Target | | :--- | :--- | | Total Revenue | $1,120M - $1,135M | | Cloud Revenue Growth (YoY) | ~32% | | Data Center Revenue Growth (YoY) | 40% - 42% | | GAAP Gross Margin | ~81.0% | | Non-GAAP Gross Margin | ~83.5% | | GAAP Operating Margin | ~(7.0%) | | Non-GAAP Operating Margin | ~18.5% | Financial Statements and Reconciliations Condensed Consolidated Statements of Operations Q3 revenues grew 30% YoY to $1.19 billion, with a significant turnaround to positive GAAP net income Statement of Operations Highlights (Q3 FY2024 vs Q3 FY2023) | Metric (in thousands) | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Total Revenues | $1,189,128 | $915,453 | | Gross Profit | $975,703 | $746,801 | | Operating Income (Loss) | $17,804 | ($161,567) | | Net Income (Loss) | $12,752 | ($209,037) | | Diluted Net Income (Loss) per Share | $0.05 | ($0.81) | Condensed Consolidated Balance Sheets Total assets grew to $5.06 billion, driven by increased goodwill, while liabilities and equity also increased Balance Sheet Highlights (in thousands) | Metric | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,948,978 | $2,102,550 | | Goodwill | $1,285,745 | $727,211 | | Total Assets | $5,063,265 | $4,106,779 | | Deferred Revenue (Current) | $1,698,639 | $1,362,736 | | Total Liabilities | $3,929,094 | $3,452,107 | | Total Stockholders' Equity | $1,134,171 | $654,672 | Condensed Consolidated Statements of Cash Flows The company generated $565.4 million in net cash from operations, a significant increase from the prior year Cash Flow Summary (Q3, in thousands) | Activity | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $565,390 | $352,369 | | Net cash provided by (used in) investing activities | ($26,314) | $14,567 | | Net cash used in financing activities | ($47,877) | ($31,746) | | Net increase in cash | $488,430 | $335,611 | Revenues by Deployment Options Q3 revenue growth was driven by Cloud and Data Center segments, offsetting the planned decline in Server revenue Revenue by Deployment (Q3, in thousands) | Deployment | Q3 FY2024 | Q3 FY2023 | YoY Change | | :--- | :--- | :--- | :--- | | Cloud | $703,036 | $534,891 | +31.4% | | Data Center | $364,134 | $221,551 | +64.3% | | Server | $29,720 | $94,389 | -68.5% | | Marketplace and other | $92,238 | $64,622 | +42.7% | Reconciliation of GAAP to Non-GAAP Results Non-GAAP results primarily exclude stock-based compensation and amortization of acquired intangible assets - The main reconciling items between GAAP and non-GAAP figures are stock-based compensation, amortization of acquired intangible assets, and restructuring charges[12][24] GAAP to Non-GAAP Reconciliation (Q3 FY2024, in thousands) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Operating Income | $17,804 | $298,713 | $316,517 | | Net Income | $12,752 | $219,744 | $232,496 | - For fiscal year 2024, the company began using a fixed long-term projected non-GAAP tax rate of 27% to provide better consistency across reporting periods[25]