Earnings Call Transcript - TEAM Q4 2021

Operator, Operator

Good afternoon. Thank you for joining Atlassian’s Earnings Conference Call for the Fourth Quarter of Fiscal Year 2021. As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Atlassian’s website following this call. I will now hand the call over to Martin Lam, Atlassian’s Head of Investor Relations. Sir, please go ahead.

Martin Lam, Head of Investor Relations

Good afternoon, and welcome to Atlassian’s fourth quarter of fiscal year 2021 earnings call. Thank you for joining us today. On the call today, we have Atlassian’s Co-Founder and Co-CEO, Mike Cannon-Brookes; and our Chief Financial Officer, James Beer.

Mike Cannon-Brookes, Co-CEO

Thanks for joining the call today, everyone from wherever you are in the world. Scott’s out on holiday. So it’ll be just James and I taking your questions today. We’re in lockdown here in Australia. So, you and your loved ones are safe wherever you are. As you’ve already read in our shareholder letter, our Q4 was a ripper of a quarter, as we say. We added over 23,000 net new customers. We generated revenue of $560 million, up 30% year-over-year. Importantly, we grew subscription revenue 50% year-over-year, with cloud revenue up 47% year-over-year. And that cloud migration momentum continues to build.

Operator, Operator

Your first question comes from the line of David Hynes from Canaccord. Your line is now open.

Luke Hannan, Analyst

Hey guys, this is Luke on for DJ. Thanks for taking the question. So, I just had a quick one, I guess, product oriented thinking about your ITSM capabilities, that whole solution set has been considerably bolstered over the last couple of years, starting with Jira Service Desk, and adding incremental functionality with Opsgenie for incident management, Mindville for asset management, Confluence, solving knowledge management. It feels like a really full, complete solution at this point. We expect the question; do you feel like there are other areas there that would still be logical additions to become part of the platform? Thanks.

Mike Cannon-Brookes, Co-CEO

Thanks, I can take that one. Look, we are uniquely positioned in ITSM. We see that positioning resonating with customers every single day. As you know, companies are increasingly blending the line between their software development and IT. We have a single unified payment glass, as we say, in JSM, and then extending to the whole Atlassian family. I think we’ve been very thoughtful and consistent in how we’ve grown that from two, three years ago, when we said we were doubling down on the IT space, and then almost every quarter or six months since then, you’ve seen a steady drumbeat of improvements, as we’ve continued to build capabilities and go after the opportunities that existed. We’re still going to keep doing that. And we believe any opportunities in the broader IT space are very deep. We think we’re the only company that can address those unique requirements, whether for 50-person companies all the way up to 500,000-person companies. We’re very unique in our breadth and span there, and you see a turn up in the results. So, I guess I don’t have a concrete answer other than we deeply believe in the opportunity in front of us in that area, and our uniqueness in positioning, and it’s showing in the resonance we’re getting from the customers.

Operator, Operator

Thank you. Your next question comes from the line of Keith Weiss from Morgan Stanley. Your line is now open.

Keith Weiss, Analyst

Great quarter guys, and really fantastic into the fiscal year. It really seems like something has catalyzed or something has shifted over the past two quarters. You talked in the letter about the 70% acceleration in large customers coming over to cloud. Prior, you guys were a little bit more cautious on the pace of that transition. 23,000 customers read and just say a popping number compared to the 8,000 you did a year ago. Is there something in particular as the macro environment just like the product strategy jelling the distribution strategy show? Is this something you could point to, for that sort of what seems to be a catalyst or an inflection point in the momentum on the cloud strategy? And just like overall customer additions?

Mike Cannon-Brookes, Co-CEO

Yes, hi, Keith. That’s perfect. Look, I think we’re in a great position across the board. And we continue to take our long-term thoughts in mind. If you think about the last year, in such a tumultuous moment, it’s easy to make boneheaded moves. And we’ve kept our heads. We’ve been very sensible about how we’ve made decisions throughout this last 12 to 18 months and continue to focus on the long-term and focus on our customers. The strength that you’re seeing across the board in so many different areas comes from thousands of really smart, really thoughtful, long-term decisions that we’ve made, which are continuing to drive the pace and progress of Atlassian and the value to the customers. I don’t think anything particular has changed in the last few years in that philosophy and strategy, which I always say is more important than individual decisions. And you can certainly point to things like free trials, which have significantly expanded our funnel and ability to grow the customer number in various ways; you can point to the continued integration of Trello. You’ve probably asked a whole series of Trello questions over the last four years, and our answers have been very consistent. That is four years worth of work from the Trello team continuing to make it part of the family, and that continues to pay off as our broader shift in migration to the cloud, which gives us a lot of fantastic capabilities for those customers right on top of our platform, and all the other things that cloud brings us. So, I don’t have a singular shift. I don’t think there’s any individual thing that’s changed. I think it’s our 20 years of Atlassian history and making long-term decisions and continuing to execute very, very well, that continues.

Operator, Operator

Thank you. Your next question comes from the line of Rob Oliver from Baird. Your line is now open.

Rob Oliver, Analyst

Great, thanks, guys for taking my question. Appreciate it. Mike, I’ve got one for you just I saw the Quarter Grand Award from Appfire in the investor letter. And it struck me that one of the things we’re seeing play out for you guys is the very methodical investments you’ve made in both the partner network and those who build apps on your platform. Now, you’re up over 700, and I just wondered if we can just get an update on your philosophy there as that seems to me to be contributing nicely to the kind of early success you’re having here in enterprise, if I understand that right. And I might squeeze in one for James at the same time, just to say that you guys had set up some fairly conservative targets, or at least they seem so to investors around server customers and migration of businesses up through FY 2023. Given the success you guys are having right now, whether there is any thought of sort of reconfiguring those targets. Thanks, guys.

Mike Cannon-Brookes, Co-CEO

Hey, Rob. Look, our channel marketplace continues to be an extremely important pillar of the business going forward. They always bring unique capabilities to our customers that we can’t bring, and we really value them for that. They’re in geographies, industries, and parts of the world that we can’t be. That’s continues to be the case in the cloud. Probably you can see that’s working. Again, in the shareholder letter, we said that our channel partner sales are up over 300% year-over-year when you look at their cloud sales. So, we’ve done a lot of work to help our channel partners understand the cloud. It’s a big strength of Atlassian’s business. And that’s resonating with their customers, our shared customers, and that’s really working. Nothing different than the philosophy that we have to get our customers through this migration journey. We have to get the channel and our partners through the migration journey. So, we do a lot of assets that drive the cloud migration, but also cloud in general. Obviously, from the point of view of the technology partner in the marketplace, we continue to have great progress with Forge in terms of allowing both our customers and our partners to build and extend Atlassian products, which has always been a hallmark of our philosophy. We’ve always been highly extensible and believe in customers’ ability to extend our products. Forge is a way to do that that meets the cloud regulatory and compliance requirements that we’ve talked about that are incredibly challenging for SaaS businesses going forward. We’re really taking an engineering-first approach to that. Forge allows us to solve those problems, giving great security and peace of mind to the customers using those extensions and technologies. We continue to improve, as we’ve mentioned, with more than 500 apps now on the Forge platform, both from third parties and customers, and we expect that number to continue to grow. So no doubt in broad philosophy to your question around the partner ecosystem, we continue to help them, and they continue to help us on the long-term migration journey.

James Beer, CFO

I’ll jump in for the second part of your question. We’re certainly pleased with the developing momentum along the migrations timeline. Mike mentioned the statistic regarding our partners increasing their migration sale activity and cloud orientation by 300% year-over-year. More broadly, we talked about a 2x volume of migrations year-over-year. I think another important element is that quarter-over-quarter, we saw growth in migration activities among our larger customers, those with 1,000 users plus, at 70% quarter-over-quarter. Clearly, with those facts demonstrating nice momentum, we came into this process a little less than a year ago with around 30,000 server customers. We’re pleased with that momentum, but we have plenty of work ahead of us. We have a ramp to execute on, and we feel good about our ability to execute on that ramp. However, it’s a little early to change our thinking around the overall timetable we’ve spoken about. We expect around half of those customers to migrate in fiscal 2023 and 2024. That would probably equate to something around two-thirds of the larger customers migrating in that timeframe. One other thing I would mention is we’re pleased with the early pace of enterprise additions of our cloud products, which will be another important element in terms of bringing more of these larger server customers to be ready to move to the cloud.

Operator, Operator

Thank you, sir. Moving on, your next question comes from the line of Tyler Radke from Citi. Your line is now open.

Tyler Radke, Analyst

Yes, thanks for the question. You talked about your hiring plan in the letter, and it seemed like on the R&D side, as you’ve historically been focused there, that’s where the bulk majority of your investments are going. I was wondering if you could just kind of talk about both the R&D and sales and marketing side. I guess on R&D, what are you most focused on? Is it cloud investments? I know you have kind of talked about introducing some new products in the collaborative work management space. And then on the Salesforce side, just how much importance is there in hiring sales reps to make these cloud transitions to be enterprise customers where things are more complex? Thank you.

Mike Cannon-Brookes, Co-CEO

Hey, Tyler, I can take that one. Look, we’ve continued to say that people are really important to us. We’ve made it quite clear in the shareholder letter, as we did a year ago, we’re going to continue to take opportunities on the front foot that we have continued to build our team. Again, a year ago, we said we’d be adding over 1,000 Atlassians; we ended up adding 1,500, which is a fantastic achievement in the year we’ve had for our talent teams and everybody around the business that has continued to do that. Again, more than a third, I think more than a third of our staff at this stage haven’t stepped into an office at this point ever.

Operator, Operator

Thank you. Your next question comes from the line of Gregg Moskowitz from Mizuho. Your line is now open.

Gregg Moskowitz, Analyst

Okay, thank you very much. And congratulations on not only a terrific quarter but also what has been a transformative year for Atlassian. One of the most impressive data points in my view was a significant acceleration in cloud revenue of 47% year-over-year versus 35% the prior quarter. Obviously, cloud is rapidly recognized, but James, if you could speak to what drove this degree of acceleration that would be helpful. And then for Mike, just getting back to large customer cloud migrations up 70% quarter-over-quarter. What, if anything, do you think has changed over the past 90 days to get large customers more comfortable with migrating that again might drive that sort of increase? Thank you.

James Beer, CFO

Gregg, I can take the first part of your question around the cloud revenue. Really pleased with the underlying performance of the business; I would point to three particular drivers. The premium editions that have been in the marketplace for a year or two now are proving to be very popular with our customers. We continue to see a nice development in the proportion of the total number of customers who are choosing the premium edition. We’re very much following a strategy we’ve talked about for a long time now, consistently adding new functionality and capability to these editions. As we do that, there’s greater approval from our standard cloud customers and indeed others who are migrating from behind the firewall products. There’s increasing attraction to this expanding capabilities of the premium offer. We’re just getting going with the enterprise edition. This is another illustration of this long-term strategy to have a full ladder of offerings, starting with free, then standard, premium, and then enterprise edition. The second thing I’d point to is just the expansion of the number of users at our current customers. That continues to go very nicely consistent, obviously, with the value that our customers are seeing in utilizing our cloud products. The third thing I would point to is improving rates around churn. There are several things going on here that are illustrative of our long-term strategies. Initial free edition customers who convert to a paid plan are stickier. We see the same thing for those who choose premium. My expectation would be consistent with enterprise. Then, perhaps not surprisingly, those who migrate from behind the firewalls to the cloud offerings are also stickier. You’ve got a few different drivers there. Migrations are a relatively small impact on the overall cloud growth rate thus far. At the same time last year, we talked in Q4 of fiscal 2020 about a $10 million revenue headwind due to lockdowns impacting many parts of the world. That made the comp in this Q4, fiscal 2021 a little easier. But there are a variety of drivers that are yielding a strong tailwind for our cloud business generally.

Gregg Moskowitz, Analyst

Super helpful. Thanks for the year color, James. And then Mike, if you have any quick thoughts on what’s driving some larger customer cloud migrations, that’ll be great as well. Thank you.

Mike Cannon-Brookes, Co-CEO

Yes, Greg, it’s probably some of the factors we’ve talked about earlier. The channel becoming more comfortable with cloud is one aspect. I mentioned that is driving that. The larger the customers, the more likely they are to have some sort of partner helping them. That’s continuing to build momentum, which is good. The second thing I would say is we continue to work hard, and it’s not particularly in the last quarter but over the last few years on the enterprise editions and features that come with them, which continue to resonate with customers. Those will have long-term roadmaps that we have in our public cloud roadmap about what we’re adding over time. Customers are not just buying into what we’ve done in the last 12 months but what we have coming up. The more that customers see us deliver against that roadmap when we tell you here are the things we’re going to do each quarter for the next year and then we go do them increases confidence. The third thing is just continuing to deliver against the performance and scale and governance capabilities that large enterprise customers require. You saw that in the last year with things like data residency. We’ll continue to do that more broadly. If there’s a fourth one, it’s probably our platform capabilities continuing to evolve in the enterprise direction. Automation capabilities, smart scale, resonate with larger customers because the bigger the company, the more data they have, and we can leverage AI and machine learning driven features that can help them.

Operator, Operator

Thank you. Your next question comes from the line of James Fish from Piper Sandler. Your line is now open.

James Fish, Analyst

Congrats on the quarter and saying a ripper in the quarter is understating it. I guess going back to this idea of free to premium enterprise, can you walk us through a little more of the details on the adoption curve of standards of premium to enterprise, and any sense of the mix within those buckets at this point and how long it takes to move up the stack on average, or why customers might not be moving up but could move up over the next 12 months? Thanks, guys.

James Beer, CFO

Yes. One of the things I start by saying is how the free edition has really expanded the top of our marketing funnel impressively. We talked in prior quarters about a 3x type factor. As each quarter goes by, we continue to refine the user experience with our free offering, making it easier to invite others on their team, removing the requirement for someone to go through an admin, and changing the trial experience associated with the move up to standard. We continue to refine the user experience and how they gain value from our free offering while introducing them to the additional benefits of the standard paid plan. I think we’re very pleased with how we noticed our monthly cohorts that have started with free over the last year are moving towards paid plans to the degree that we feel very comfortable with the long-term economics of offering free versions of Jira Software, Confluence, and Jira Service Management. That was one of the key initiatives of this last fiscal year that will serve us well over many years to come. In terms of premium, we started off 18 months to two years ago with a relatively modest package of incremental functionality versus the standard plan. Unsurprisingly, it had a modest take-up because that was just getting us out of the gates. We’ve routinely expanded the offerings available in premium, and we will continue to do that. We’ve been pleased with how Jira Software, Jira Service Management, and Confluence premium editions have increased their impact on the overall proportion of cloud customers. We’re just starting with enterprise; it’s very early days, but we see encouraging developments thus far. This is certainly one of our key areas of focus on R&D development. I expect us to continue to build momentum around the enterprise editions over the next year or two. Mike, what would you add to that?

Mike Cannon-Brookes, Co-CEO

James, I think James Beer did a fantastic job answering that question. The only small element of color I would add, it may be taken for granted, but I want to make sure everyone understands a customer does not need to buy one edition across the board. One of our advantages as a family of products is the adoption curves of each product can go at the pace of the particular customer group or department within that customer set. This is where our ladder is very consciously designed to be customer-friendly and customer-first, and it’s really starting to resonate. For example, you could use Jira Software, Enterprise edition or premium edition within a large company because you have a very mature engineering organization with robust capabilities, and adopt Confluence free with a small group of 10 people alongside that as you start to learn how Confluence can add value to your software team. As that Confluence deployment grows, you likely move into standard and premium over time if it’s a large company and the user base continues to grow. We have various success stories with user adoption. This allows a single customer to buy different editions of different products concurrently, depending on where they are in their adoption journey.

Operator, Operator

Thank you. Your next question comes from the line of Keith Bachman from BMO. Your line is now open.

Keith Bachman, Analyst

Hi, many thanks for taking the question. The first one, I think is for you, Mike. I wanted to hear a little bit about platform parity. What I mean by that is, where do you think you are now in terms of the cloud offering, particularly targeting those large enterprise customers that James mentioned would still be migrating late in the cycle? Where are you in terms of the capabilities on cloud versus server versus data center? How might that change over the next year in terms of reaching feature parity to catalyze the great momentum you’ve already started with?

Mike Cannon-Brookes, Co-CEO

Hi, Keith. Great question. Firstly, it should be said that we are very early in the migration journey. This is, as we’ve said repeatedly, a multi-year endeavor. We will continue to evolve with our customers. The capabilities of the cloud are already incredibly unique. There are significant differentiations in terms of capabilities that give options between deployment. We’re continuing to build out our enterprise capabilities. You mentioned the largest customers; you saw that in the last couple of quarters with data residency, continuing to improve compliance requirements and enterprise requirements. We have a public roadmap where we explain to customers where we are at that roadmap and how we’re executing against it. That’s really resonating with those larger customers. We’re in a good spot in terms of how we go through that journey. As we said, it had a relatively modest impact on the results. We are early in that journey; as we continue to power through that, those customer migrations are coming from server and data center - often that journey is not a singular step. The customer may choose to move a few of their users to the cloud to test us. We like that as it shows us demonstrating our capabilities and gives them confidence in the journey.

James Beer, CFO

Just to add on to that, Mike. We’re now seeing that 25% of our seats migrating into the cloud from the data center. Obviously, the data center is where we’ve tended to have our larger customers. I expect that trend of data center to cloud migrations will only increase in the next two plus years as we grow our cloud enterprise editions.

Operator, Operator

Thank you. Moving on, your next question comes from the line of Ari Terjanian from Cleveland Research. Your line is now open.

Ari Terjanian, Analyst

Hi all, thanks for taking the question, and congratulations on the great results. So, double-clicking on the cloud performance, I was wondering if there were any patterns or surprises in terms of the type of customer among these larger enterprise teams. For example, growth in America’s only decelerated 200 basis points. Is it fair to say most of these are the type of customer you’d expect in terms of geography or vertical? Or are you starting to see more non-traditional customers begin to migrate to the cloud as well? Thanks.

James Beer, CFO

Yes, just a thought on that. One of the things we chatted about a quarter or so ago is that we’re quite pleased with how we’re seeing more cloud take-up within the Europe, Middle East, and Africa region. That has been a part of the world that has focused very much on utilizing behind-the-firewall solutions. So we’re pleased to see European-based partners taking on the opportunity, understanding the value of our cloud offerings, as well as the customers. Again, relatively early days versus the Americas, where there has been a longer history of wide-scale cloud adoption. So we’re encouraged by that and will continue to work in that direction.

Operator, Operator

Thank you. Your next question comes from the line of George Iwanyc from Oppenheimer. Your line is now open.

George Iwanyc, Analyst

Thank you for taking my question. Mike, with the context of continuing to be on offense, can you maybe share some color on what you’re seeing on the competitive front? Broadly speaking, and then specifically on your progress with work automation in work management?

Mike Cannon-Brookes, Co-CEO

Sure. I can talk about that. Look, we continue to be, as we always have, philosophically aware of what competitors are doing. However, we absolutely focus on putting customers first in a big way. It’s very easy to say that, and I would say Atlassian is actually a company that does that. There has not really been any change in the competitive landscape in the last quarter. We’re really positive about the opportunities we have and where we sit with our customers. Talking broadly about work automation and work management, it’s a very large space that continues to grow. We have several different offerings targeting that space with customers that resonate strongly for various reasons. Trello continues to grow very strongly; I’m very happy with how Trello is doing, and the team has done a fantastic job. Inside Point A, in terms of innovation and new capabilities, Jira Work Management is doing excellent work connecting the Jira family into exciting areas. It leverages our automation platform and cloud platform to bring structure and rigor needed by many parts of enterprises into the broader work management arena. We’re tremendously excited about all the different investments we have.

James Beer, CFO

Just to add one thought: while the customer accounts we publish do move around each quarter, we’ve always expected the 23,000 number we posted in Q4 to be impressive, illustrating our competitive advantage. Those 23,000 companies evaluated their alternatives and chose Atlassian. As Mike referred, Trello is an important part of that. We’ve emphasized monetization initiatives there for about 18 months. This customer increase was broad-based across Jira Software, Jira Service Management, Confluence, and is very encouraging and illustrative of where we stand on the competitive playing field.

Operator, Operator

Thank you. Your next question comes from the line of Fred Havemeyer from Macquarie. Your line is now open.

Fred Havemeyer, Analyst

Thank you, and congratulations on a really strong quarter here. I’d like to ask a bit about some of your integrations and your strategy around that, because some of the product highlights in your letter around Open DevOps and the importance of integrations really drive home where it is that you’re focusing some of your efforts and product development investment. So, I’d like to ask, do you view integrations within the Jira ecosystem more as opportunities to improve retention, or as an opportunity to also expand user capture by adding essentially more workflows that can be addressed within the Jira ecosystem?

Mike Cannon-Brookes, Co-CEO

Hi Fred, Mike here. Yes, I think that’s an extremely good question. Strategically, we are very pro-integration. Let me explain why. We’ve talked a bit before about what we call Cambrian SaaS; there’s an explosion of SaaS tools occurring. This is a fascinating period for new solutions for customers, with a variety of applications coming from all directions. We focus on what’s best for our customers. It takes a practicality and humility to realize that those customers are going to use many applications from different companies for various reasons. The best thing we can do is to be deeply integrated in all those places. We believe that’s best for the customers. It is our job to automate workflows and coordinate data across different applications, giving the best outcome for the customer, which keeps them satisfied and engaged with Atlassian. Having an increasingly integrated offering becomes sticky and more valuable. One of our biggest advantages is our developer ecosystem and our product extensibility. Cambrian SaaS will continue to create new evolutions of products which allows us to move into those directions through integrations, acquisitions, or automation. Yes, I think strategically it’s extremely important; it resonates with customers that we’ve never been a vendor that said all your tools must be with us only. Instead, we show how we can work with their existing ecosystem. That recognition leads to better customer experiences, which results in better chances of retention, all while benefiting Atlassian’s economics and long-term future. Additionally, the data integration piece is crucial. We’re evolving our data platform to connect across the Atlassian and third-party spaces, providing better insights to customers. We saw this reflected in features we shipped in Jira Software, which can leverage data not just from Jira, but from cloud providers and more, giving the best answers in Atlassian products and outside.

James Beer, CFO

Just a couple of points to add to what Mike mentioned. We’ve seen that when our marketplace vendors, partners, are a part of the customer relationship through an app, our dollar churn declines by around 50%. So that illustrates the stickiness aspect of your question. Also, in the shareholder letter this quarter, we provided materials talking about different types of partners. For example, we discussed the ability to request access to Confluence directly from the Slack channel. It illustrates the sort of enhancements that Mike has been referring to.

Operator, Operator

Thank you. Your next question comes from the line of Brent Thill from Jefferies. Your line is now open.

Unidentified Analyst, Analyst

Hey, everyone, congratulations on wrapping up the year on a high note. I'm with Brent Thill, and I have a question for Mike regarding the impressive growth in new customer acquisitions. What solutions are these new customers choosing? In the past, we’ve seen Jira and Confluence dominate this area. Are the new customers opting for the complete suite of solutions, or are certain products still driving most of the interest? And a question for James: the fiscal 2022 guidance for subscription revenue growth is projected at low-to-mid 40s, which is an improvement from the earlier mid-30s estimate. Can you explain what factors are contributing to this positive outlook and how many migrations are included in this updated guidance? Thank you.

Mike Cannon-Brookes, Co-CEO

Thanks. Look, on the new customer number, a few points: first, we did say six and a half thousand of those are Trello single-user accounts. So the 23,000 is a strong number. Even if you take out those Trello single-user customers, you still have a very strong quarter for customer additions. We say all the time that customer numbers go up and down; we don’t focus on it. We focus on the activities inside the business that lead to the best long-term customer acquisition. Inside that, James has already mentioned free trials continuing to drive that. They’re not customers, right? So if they’re using the free offerings, we don’t count them as customers. So as they convert into being customers, they might have been using Atlassian applications for a long time. The biggest strength gives confidence is the fact that it varies across the board. There’s strength across the software, agile, ITSM spaces, and it’s a very broad-based number reflecting lots of long-term activities across many areas. We’re proud of where we are and our execution. I’ll throw to James for the second part of your question.

James Beer, CFO

Yes, thanks, Mike. A few thoughts around the guide: So both cloud and data center are good organic tailwinds for subscription revenue. I wouldn’t repeat all of the points made about cloud earlier, but we have a lot of new demand for data center. We raised prices around five months ago, and that benefit will increasingly materialize in the upcoming months. Regarding loyalty discounts, we have reduced the size of discounts we offer to migrating server customers to both cloud and data center. That provides a roll-up tailwind. Migrations are projected to drive mid-single-digit growth for our subscription revenue in fiscal 2022 year-over-year. Although not a subscription revenue issue, the server business has ceased selling new licenses five months ago, and will stop selling upgrades in seven months. Thus, that server business will naturally decline as customers migrate to either cloud or data center.

Operator, Operator

Thank you. And your last question is from Michael Turrin from Wells Fargo. Your line is now open.

Michael Turrin, Analyst

Hey there, thanks. Some even more fantastic than usual phrasing in the letter this time; so kudos there. I wanted to return to one of the core markets and just touch on ITSM. You referenced Jira Service Management, now with more than 30,000 customers. It’s a big number. I hope we can discuss whether the more explicit shift towards ITSM is influencing either the type of customer or the pace at which you’re adding customers or seeing engagement from that area.

Mike Cannon-Brookes, Co-CEO

Hey, Michael. Look, we’re very happy with our position in the ITSM space. The type of customer using ITSM solutions is not limited to just large enterprises. An exciting part is we’re attracting smaller customers as those skills of large companies become more accessible to smaller businesses. We’ve long stated we target Fortune 500 and 1000 companies, which remains. However, the ITSM opportunity extends far beyond the Fortune 2000 or the Global 5000. We intend to pursue this opportunity with vigor, solving the technology requirements for companies of all sizes.

Operator, Operator

Thank you for presenters. Ladies and gentlemen, that concludes our Q&A session for today. I will hand it back over to Mr. Mike Cannon-Brookes for any closing remarks.

Mike Cannon-Brookes, Co-CEO

Just wanted to say thank you everyone for joining the call today. We appreciate your continued support and questions. Thank you to all of Atlassian for a fantastic year. We look forward to continuing to power into the future. I hope you and your loved ones wherever you are in the world remain safe and healthy. We’ll talk to you next quarter. Thank you very much.

Operator, Operator

Thank you, ladies and gentlemen. This concludes today’s conference call. Thank you for your participation. You may now disconnect.