8-K
Atlassian Corp (TEAM)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 8-K_________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 3, 2022
ATLASSIAN CORPORATION
(Exact Name of Registrant as Specified in its Charter)
_________________
| Delaware | 001-37651 | 88-3940934 | |
|---|---|---|---|
| (State or other jurisdiction of<br><br>incorporation or organization) | (Commission File Number) | (I.R.S. Employer<br><br>Identification No.) | |
| 350 Bush Street, Floor 13 | |||
| San Francisco, | California | 94104 | |
| (Address of principal executive offices) | (Zip Code) |
(415) 701-1110
(Registrant’s telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
_________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
|---|---|---|---|---|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | Securities registered pursuant to Section 12(b) of the Act: | ||||
| --- | --- | --- | --- | |||
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||
| Class A Common Stock, par value $0.00001 per share | TEAM | Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On November 3, 2022, Atlassian Corporation (the “Company”) issued a press release announcing its results for the quarter ended September 30, 2022. A copy of the press release is attached as Exhibit 99.1 to this current report on Form 8-K and is incorporated by reference herein. The Company also published a letter to its shareholders announcing its financial results for the quarter ended September 30, 2022 (the “Shareholder Letter”). The full text of the Shareholder Letter is attached as Exhibit 99.2 to this current report on Form 8-K and is incorporated by reference herein.
The information in this Item 2.02, including Exhibit 99.1 and Exhibit 99.2, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1* | Press Release datedNovember 3, 2022. |
| 99.2* | Shareholder Letter datedNovember 3, 2022. |
| 104.1 | Cover Page Interactive Data File (formatted as Inline XBRL). |
* Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| ATLASSIAN CORPORATION | |||
|---|---|---|---|
| Date: | November 3, 2022 | By: | /s/ Joseph Binz |
| Joseph Binz | |||
| Chief Financial Officer |
Document
Atlassian Announces First Quarter Fiscal Year 2023 Results
Quarterly revenue of $807 million, up 31% year-over-year
Quarterly subscription revenue of $651 million, up 50% year-over-year
Quarterly GAAP operating margin of (4)% and non-GAAP operating margin of 18%
Quarterly cash flow from operations of $92 million and free cash flow of $76 million
TEAM, Anywhere/SEATTLE (November 3, 2022) — Atlassian Corporation (NASDAQ: TEAM), a leading provider of team collaboration and productivity software, today announced financial results for its first quarter of fiscal year 2023 ended September 30, 2022 and released a shareholder letter available on Atlassian’s Work Life blog at http://atlassian.com/blog/announcements/shareholder-letter-q1fy23. The shareholder letter was also posted to the Investor Relations section of Atlassian’s website at https://investors.atlassian.com.
“We are proud of our Q1 results, growing subscription revenue 50 percent year-over-year, and we continue to have line of sight to $10 billion in annual revenue,” said Scott Farquhar, Atlassian’s co-founder and co-CEO. “Despite the turbulent macroeconomic environment we find ourselves in, we have conviction about the incredible long-term opportunities in front of us and our ability to capitalize on them. We have the right products, the right leaders, and the right strategies in place to come out of this downturn in a much stronger market position.”
“Q1 was another momentous quarter of execution against our long-term initiatives. We announced a new subscription offering in Atlassian Together, launched Atlas into general availability, and held Work Life, our first large-scale customer event focused on a single market,” said Mike Cannon-Brookes, Atlassian’s co-founder and co-CEO. “We also continue to execute well towards our strategy of hiring and retaining the best talent around the world.”
First Quarter Fiscal Year 2023 Financial Highlights:
As a result of Atlassian's redomiciliation to the United States on September 30, 2022, the company no longer reports financial information in accordance with IFRS. The below financial information has been prepared in accordance with GAAP and should not be expected to correspond to figures previously presented under IFRS.
On a GAAP basis, Atlassian reported:
•Revenue: Total revenue was $807.4 million for the first quarter of fiscal year 2023, up 31% from $614.0 million for the first quarter of fiscal year 2022.
•Operating Income (Loss) and Operating Margin: Operating loss was $34.0 million for the first quarter of fiscal year 2023, compared with operating income of $56.5 million for the first quarter of fiscal year 2022. Operating margin was (4)% for the first quarter of fiscal year 2023, compared with 9% for the first quarter of fiscal year 2022.
•Net Loss and Net Loss Per Diluted Share: Net loss was $13.7 million for the first quarter of fiscal year 2023, compared with a net loss of $411.2 million for the first quarter of fiscal year 2022. Net loss per diluted share was $0.05 for the first quarter of fiscal year 2023, compared with a net loss per diluted share of $1.63, for the first quarter of fiscal year 2022. Mark-to-market accounting of the company’s strategic investments increased net loss per diluted share by $0.05 for the first quarter of fiscal year 2023 and $0.12 for the first quarter of fiscal year 2022.
•Balance Sheet: Cash and cash equivalents plus short-term investments at the end of the first quarter of fiscal year 2023 totaled $1.5 billion.
On a non-GAAP basis, Atlassian reported:
•Operating Income and Operating Margin: Operating income was $147.9 million for the first quarter of fiscal year 2023, compared with operating income of $165.4 million for the first quarter of fiscal year 2022. Operating margin was 18% for the first quarter of fiscal year 2023, compared with 27% for the first quarter of fiscal year 2022.
•Net Income and Net Income Per Diluted Share: Net income was $92.5 million for the first quarter of fiscal year 2023, compared with net income of $94.4 million for the first quarter of fiscal year 2022. Net income per diluted share was $0.36 for the first quarter of fiscal year 2023, compared with $0.37 for the first quarter of fiscal year 2022. Mark-to-market accounting of the company’s strategic investments reduced net income per diluted share by $0.04 for the first quarter of fiscal year 2023 and $0.12 for the first quarter of fiscal year 2022.
•Free Cash Flow: Cash flow from operations was $92.4 million and free cash flow was $75.9 million for the first quarter of fiscal year 2023. Free cash flow margin for the first quarter of fiscal year 2023 was 9%.
A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below, under the heading “About Non-GAAP Financial Measures.”
Recent Business Highlights:
•Atlassian Together: Atlassian announced a new, single subscription to its work management products – Trello, Confluence, Atlas, and Jira Work Management. The subscription also includes Access, an enterprise-grade identity and access management solution that connects Atlassian products to third-party identity providers. Atlassian Together provides organizations with a complete Atlassian tool set that helps teams choose the best tool for the job while ensuring alignment across the organization.
•Atlas Launch: Atlassian announced Atlas, a new teamwork directory customized to help organizations provide alignment across teams, apps, and work regardless of what tools their teams use, is generally available. Atlas helps teams communicate the context and progress of their work with other teams, and empowers teams to work in the tools that let them thrive.
•Partnership with Accenture: Atlassian and Accenture are expanding their partnership to help enterprises embrace agile ways of working. With this partnership, Accenture’s global team of experts will help provide enterprise-wide agile consulting and implementation services to help customers realize faster time to value from their investments in Atlassian products, including Jira Align, Jira Software, and Jira Service Management.
•United States Redomiciliation: Atlassian changed its corporate domicile from the United Kingdom to the United States. As a result, it has transitioned its accounting standards from IFRS to GAAP. Atlassian believes moving its parent entity to the United States will increase its access to a broader set of investors, support inclusion in additional stock indices, improve financial reporting comparability with industry peers, streamline its corporate structure, and provide more flexibility in accessing capital.
•Sustainability Report: Atlassian released its Fiscal Year 2022 Sustainability Report. This year marked Atlassian’s third consecutive year of operating on 100% renewable energy. The company also accounted for work-from-home emissions for the first time. Atlassian continues its emissions reductions efforts in pursuit of becoming “net zero” by 2040, as well as executing on its diversity, equity, and inclusion strategy, releasing its first human rights statement, and giving back to its communities through philanthropic programs driven by the Atlassian Foundation. Our Fiscal Year 2022 Sustainability Report can be found at https://investors.atlassian.com/Sustainability/default.aspx.
•Customer Growth: Atlassian ended its first quarter of fiscal year 2023 with a total customer count, on an active subscription or maintenance agreement basis, of 249,173 customers, adding 6,550 net new customers during the quarter.
Financial Targets:
Atlassian is providing its financial targets for the second quarter of fiscal year 2023 as follows:
Second Quarter Fiscal Year 2023:
•Total revenue is expected to be in the range of $835 million to $855 million.
•Gross margin is expected to be in the range of 80% to 81% on a GAAP basis and in the range of 83% to 84% on a non-GAAP basis.
•Operating margin is expected to be approximately (20%) on a GAAP basis and approximately 13% on a non-GAAP basis.
For additional commentary regarding financial targets, please see Atlassian’s first quarter fiscal year 2023 shareholder letter dated November 3, 2022.
With respect to Atlassian’s expectations under “Financial Targets” above, a reconciliation of GAAP to non-GAAP gross margin and operating margin has been provided in the financial statement tables included in this press release.
Shareholder Letter and Webcast Details:
A detailed shareholder letter is available on Atlassian’s Work Life blog at https://atlassian.com/blog/announcements/shareholder-letter-q1fy23, and the Investor Relations section of Atlassian’s website at: https://investors.atlassian.com. Atlassian will host a webcast to answer questions today:
•When: Thursday, November 3, 2022 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time).
•Webcast: A live webcast of the call can be accessed from the Investor Relations section of Atlassian’s website at https://investors.atlassian.com. Following the call, a replay will be available on the same website.
Atlassian has used, and will continue to use, its Investor Relations website at https://investors.atlassian.com as a means of making material information public and for complying with its disclosure obligations.
About Atlassian
Atlassian unleashes the potential of every team. Our agile & DevOps, IT service management and work management software helps teams organize, discuss, and complete shared work. The majority of the Fortune 500 and over 240,000 companies of all sizes worldwide - including NASA, Kiva, Deutsche Bank, and Salesforce - rely on our solutions to help their teams work better together and deliver quality results on time. Learn more about our products, including Jira Software, Confluence, Jira Service Management, Trello, Bitbucket, and Jira Align at https://atlassian.com/.
Investor Relations Contact
Martin Lam
IR@atlassian.com
Media Contact
Marie-Claire Maple
press@atlassian.com
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. In some cases, you can identify these statements by forward-looking words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” “estimate,” or “continue,” and similar expressions or variations, but these words are not the exclusive means for identifying such statements. All statements other than statements of historical fact could be deemed forward looking, including risks and uncertainties related to statements about our products, customers, partnerships, sustainability initiatives, macroeconomic environment, anticipated growth, outlook, technology and other key strategic areas, and our financial targets such as revenue and GAAP and non-GAAP financial measures including gross margin and operating margin.
We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.
The achievement or success of the matters covered by such forward-looking statements involves known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management’s beliefs and assumptions only as of the date such statements are made.
Further information on these and other factors that could affect our financial results is included in filings we make with the Securities and Exchange Commission (the “SEC”) from time to time, including the section titled “Risk Factors” in our most recently filed Forms 20-F and 6-K (reporting our quarterly results), as well as Forms 10-K and 10-Q. These documents are available on the SEC Filings section of the Investor Relations section of our website at: https://investors.atlassian.com/.
About Non-GAAP Financial Measures
In addition to the measures presented in our condensed consolidated financial statements, we regularly review other measures that are not presented in accordance with GAAP, defined as non-GAAP financial measures by the SEC, to evaluate our business, measure our performance, identify trends, prepare financial forecasts and make strategic decisions. The key measures we consider are non-GAAP gross profit, non-GAAP operating income, non-GAAP net income, non-GAAP net income per diluted share and free cash flow (collectively, the “Non-GAAP Financial Measures”). These Non-GAAP Financial Measures, which may be different from similarly titled non-GAAP measures used by other companies, provide supplemental information regarding our operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or that occur relatively infrequently and/or that management considers to be unrelated to our core operations. Management believes that tracking and presenting these Non-GAAP Financial Measures provides management, our board of directors, investors and the analyst community with the ability to better evaluate matters such as: our ongoing core operations, including comparisons between periods and against other companies in our industry; our ability to generate cash to service our debt and fund our operations; and the underlying business trends that are affecting our performance.
Our Non-GAAP Financial Measures include:
•Non-GAAP gross profit. Excludes expenses related to stock-based compensation and amortization of acquired intangible assets.
•Non-GAAP operating income. Excludes expenses related to stock-based compensation and amortization of acquired intangible assets.
•Non-GAAP net income and non-GAAP net income per diluted share. Excludes expenses related to stock-based compensation, amortization of acquired intangible assets, non-coupon impact related to exchangeable senior notes and capped calls, gain on a non-cash sale of a controlling interest of a subsidiary and the related income tax effects on these items.
•Free cash flow. Free cash flow is defined as net cash provided by operating activities less capital expenditures, which consists of purchases of property and equipment.
We understand that although these Non-GAAP Financial Measures are frequently used by investors and the analyst community in their evaluation of our financial performance, these measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. We compensate for such limitations by reconciling these Non-GAAP Financial Measures to the most comparable GAAP financial measures. We encourage you to review the tables in this press release titled “Reconciliation of GAAP to Non-GAAP Results” and “Reconciliation of GAAP to Non-GAAP Financial Targets” that present such reconciliations.
Atlassian Corporation
Condensed Consolidated Statements of Operations
(U.S. $ and shares in thousands, except per share data)
(unaudited)
| Three Months Ended September 30, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Revenues: | ||||
| Subscription | $ | 650,984 | $ | 435,296 |
| Maintenance | 113,565 | 130,590 | ||
| Other | 42,843 | 48,138 | ||
| Total revenues | 807,392 | 614,024 | ||
| Cost of revenues (1) (2) | 139,392 | 96,256 | ||
| Gross profit | 668,000 | 517,768 | ||
| Operating expenses: | ||||
| Research and development (1) (2) | 399,006 | 272,140 | ||
| Marketing and sales (1) (2) | 160,128 | 99,329 | ||
| General and administrative (1) | 142,893 | 89,822 | ||
| Total operating expenses | 702,027 | 461,291 | ||
| Operating income (loss) | (34,027) | 56,477 | ||
| Other income (expense), net | 29,289 | (455,804) | ||
| Interest income | 5,143 | 277 | ||
| Interest expense | (6,121) | (11,518) | ||
| Loss before income taxes | (5,716) | (410,568) | ||
| Provision for income taxes | (8,025) | (636) | ||
| Net loss | $ | (13,741) | $ | (411,204) |
| Net loss per share: | ||||
| Basic | $ | (0.05) | $ | (1.63) |
| Diluted | $ | (0.05) | $ | (1.63) |
| Weighted-average shares used in computing net loss per share: | ||||
| Basic | 255,167 | 252,106 | ||
| Diluted | 255,167 | 252,106 |
(1)Amounts include stock-based compensation as follows:
| Three Months Ended September 30, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Cost of revenues | $ | 10,613 | $ | 5,917 |
| Research and development | 110,129 | 64,282 | ||
| Marketing and sales | 23,195 | 14,494 | ||
| General and administrative | 29,694 | 16,214 |
(2)Amounts include amortization of acquired intangible assets, as follows:
| Three Months Ended September 30, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Cost of revenues | $ | 5,697 | $ | 5,689 |
| Research and development | 94 | 94 | ||
| Marketing and sales | 2,505 | 2,271 |
Atlassian Corporation
Condensed Consolidated Balance Sheets
(U.S. $ in thousands)
(unaudited)
| September 30, 2022 | June 30, 2022 | |||
|---|---|---|---|---|
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 1,468,571 | $ | 1,385,265 |
| Marketable securities | 54,537 | 73,294 | ||
| Accounts receivable, net | 246,781 | 308,127 | ||
| Assets held for sale | — | 60,265 | ||
| Prepaid expenses and other current assets | 96,999 | 70,002 | ||
| Total current assets | 1,866,888 | 1,896,953 | ||
| Non-current assets: | ||||
| Property and equipment, net | 103,336 | 100,662 | ||
| Operating lease right-of-use assets | 266,885 | 277,276 | ||
| Strategic investments | 239,323 | 159,064 | ||
| Intangible assets, net | 92,544 | 100,840 | ||
| Goodwill | 721,912 | 722,838 | ||
| Deferred tax assets | 9,475 | 10,335 | ||
| Other assets | 71,069 | 58,862 | ||
| Total assets | $ | 3,371,432 | $ | 3,326,830 |
| Liabilities and Stockholders’ Equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 111,461 | $ | 81,220 |
| Accrued expenses and other current liabilities | 274,770 | 406,139 | ||
| Deferred revenue, current portion | 1,066,090 | 1,066,059 | ||
| Operating lease liabilities, current portion | 45,360 | 40,638 | ||
| Total current liabilities | 1,497,681 | 1,594,056 | ||
| Non-current liabilities: | ||||
| Deferred revenue, net of current portion | 106,744 | 116,621 | ||
| Operating lease liabilities, net of current portion | 267,373 | 274,434 | ||
| Term loan facility | 999,463 | 999,419 | ||
| Deferred tax liabilities | 1,038 | 312 | ||
| Other non-current liabilities | 18,520 | 14,616 | ||
| Total liabilities | 2,890,819 | 2,999,458 | ||
| Stockholders’ equity | ||||
| Common stock | 2 | 2 | ||
| Additional paid-in capital | 2,355,991 | 2,182,536 | ||
| Accumulated other comprehensive income | 7,391 | 13,864 | ||
| Accumulated deficit | (1,882,771) | (1,869,030) | ||
| Total stockholders’ equity | 480,613 | 327,372 | ||
| Total liabilities and stockholders’ equity | $ | 3,371,432 | $ | 3,326,830 |
Atlassian Corporation
Condensed Consolidated Statements of Cash Flows
(U.S. $ in thousands)
(unaudited)
| Three Months Ended September 30, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Cash flows from operating activities: | ||||
| Net loss | $ | (13,741) | $ | (411,204) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||
| Depreciation and amortization | 14,620 | 13,304 | ||
| Stock-based compensation | 173,631 | 100,907 | ||
| Deferred income taxes | 1,522 | (1,614) | ||
| Net loss on exchange derivative and capped call transactions | — | 424,482 | ||
| Amortization of debt discount and issuance cost | 118 | 9,841 | ||
| Net loss on strategic investments | 11,513 | 31,422 | ||
| Net foreign currency gain | (3,625) | (6,398) | ||
| Gain on a non-cash sale of a controlling interest of a subsidiary | (43,092) | — | ||
| Other | — | (615) | ||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable, net | 61,314 | (13,211) | ||
| Prepaid expenses and other assets | (22,677) | (21,185) | ||
| Accounts payable | 31,147 | 10,223 | ||
| Accrued expenses and other liabilities | (108,443) | (84,406) | ||
| Deferred revenue | (9,845) | 13,455 | ||
| Net cash provided by operating activities | 92,442 | 65,001 | ||
| Cash flows from Investing activities: | ||||
| Business combinations, net of cash acquired | (600) | (1,138) | ||
| Purchases of property and equipment | (16,496) | (6,881) | ||
| Purchases of strategic investments | (8,350) | (53,000) | ||
| Purchases of marketable securities | (10,000) | (21,003) | ||
| Proceeds from maturities of investments | 28,950 | 53,887 | ||
| Proceeds from sale of strategic investments | 258 | — | ||
| Proceeds from sales of marketable securities | — | 186,262 | ||
| Net cash provided by (used in) investing activities | (6,238) | 158,127 | ||
| Cash flows from financing activities: | ||||
| Proceeds from term loan facility | — | 650,000 | ||
| Repayment of exchangeable senior notes | — | (314,310) | ||
| Proceeds from settlement of capped call transactions | — | 30,978 | ||
| Proceeds from other financing arrangements | 1,572 | — | ||
| Other financing activities | (176) | 1 | ||
| Net cash provided by financing activities | 1,396 | 366,669 | ||
| Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | (4,939) | (2,109) | ||
| Net increase in cash, cash equivalents, and restricted cash | 82,661 | 587,688 | ||
| Cash, cash equivalents, and restricted cash at beginning of period | 1,386,686 | 931,023 | ||
| Net decrease in cash and cash equivalents included in assets held for sale | 602 | 502 | ||
| Cash, cash equivalents, and restricted cash at end of period | $ | 1,469,949 | $ | 1,519,213 |
Atlassian Corporation
Revenues by Deployment Options
(U.S. $ in thousands)
(unaudited)
| Three Months Ended September 30, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Cloud | $ | 475,043 | $ | 317,903 |
| Data Center | 171,228 | 111,195 | ||
| Server (1) | 113,813 | 139,547 | ||
| Marketplace and services (2) | 47,308 | 45,379 | ||
| Total revenues | $ | 807,392 | $ | 614,024 |
(1) Included in Server is perpetual license revenue. Perpetual license revenue is captured as other revenue on the Condensed Consolidated Statements of Operations.
(2) Included in Marketplace and services is premier support revenue. Premier support is a subscription-based arrangement for a higher level of support across different deployment options. Premier support is recognized as subscription revenue on the Condensed Consolidated Statements of Operations as the services are delivered over the term of the arrangement.
Atlassian Corporation
Reconciliation of GAAP to Non-GAAP Results
(U.S. $ and shares in thousands, except per share data)
(unaudited)
| Three Months Ended September 30, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Gross profit | ||||
| GAAP gross profit | $ | 668,000 | $ | 517,768 |
| Plus: Stock-based compensation | 10,613 | 5,917 | ||
| Plus: Amortization of acquired intangible assets | 5,697 | 5,689 | ||
| Non-GAAP gross profit | $ | 684,310 | $ | 529,374 |
| Operating income | ||||
| GAAP operating income (loss) | $ | (34,027) | $ | 56,477 |
| Plus: Stock-based compensation | 173,631 | 100,907 | ||
| Plus: Amortization of acquired intangible assets | 8,296 | 8,054 | ||
| Non-GAAP operating income | $ | 147,900 | $ | 165,438 |
| Net income | ||||
| GAAP net loss | $ | (13,741) | $ | (411,204) |
| Plus: Stock-based compensation | 173,631 | 100,907 | ||
| Plus: Amortization of acquired intangible assets | 8,296 | 8,054 | ||
| Plus: Non-coupon impact related to exchangeable senior notes and capped calls | — | 433,973 | ||
| Less: Gain on a non-cash sale of a controlling interest of a subsidiary | (43,091) | — | ||
| Less: Income tax effects | (32,548) | (37,321) | ||
| Non-GAAP net income | $ | 92,547 | $ | 94,409 |
| Net income per share | ||||
| GAAP net loss per share - diluted | $ | (0.05) | $ | (1.63) |
| Plus: Stock-based compensation | 0.68 | 0.41 | ||
| Plus: Amortization of acquired intangible assets | 0.03 | 0.03 | ||
| Plus: Non-coupon impact related to exchangeable senior notes and capped calls | — | 1.71 | ||
| Less: Gain on a non-cash sale of a controlling interest of a subsidiary | (0.17) | — | ||
| Less: Income tax effects | (0.13) | (0.15) | ||
| Non-GAAP net income per share - diluted | $ | 0.36 | $ | 0.37 |
| Weighted-average diluted shares outstanding | ||||
| Weighted-average shares used in computing diluted GAAP net loss per share | 255,167 | 252,106 | ||
| Plus: Dilution from dilutive securities (1) | 1,041 | 3,284 | ||
| Weighted-average shares used in computing diluted non-GAAP net income per share | 256,208 | 255,390 | ||
| Free cash flow | ||||
| GAAP net cash provided by operating activities | $ | 92,442 | $ | 65,001 |
| Less: Capital expenditures | (16,496) | (6,881) | ||
| Free cash flow | $ | 75,946 | $ | 58,120 |
(1) The effects of these dilutive securities were not included in the GAAP calculation of diluted net loss per share for the three months ended September 30, 2022 and 2021 because the effect would have been anti-dilutive.
Atlassian Corporation
Reconciliation of GAAP to Non-GAAP Financial Targets
(U.S. $)
| Three Months Ending<br> December 31, 2022 | |
|---|---|
| Revenue | $835 million to $855 million |
| GAAP gross margin | 80% to 81% |
| Plus: Stock-based compensation | 2 |
| Plus: Amortization of acquired intangible assets | 1 |
| Non-GAAP gross margin | 83% to 84% |
| GAAP operating margin | (20%) |
| Plus: Stock-based compensation | 32 |
| Plus: Amortization of acquired intangible assets | 1 |
| Non-GAAP operating margin | 13% |
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teamq12023shareholderlet
Q1 FY23 | November 3, 2022 Shareholder Letter
Q1 FY23 Fellow sh!reholders, Atl!ssi!n’s mission to unle!sh the potenti!l of every te!m !dv!nces ever onw!rd, !nd Q1 w!s !nother momentous qu!rter of executing !g!inst our long-term initi!tives. We !nnounced ! new subscription offering, l!unched ! product into gener!l !v!il!bility, !nd held our first l!rge-sc!le customer event focused on ! single m!rket, which got r!ve reviews from !ttendees. Th!t s!id, comp!nies in ne!rly every industry !re f!cing he!dwinds, !nd we’re beginning to see the imp!ct on our business. In the spirit of our “Open comp!ny, no bullshit” v!lue , let's st!rt with the topic th!t’s top of mind for sh!reholders: m!cro imp!cts. 1. L!st qu!rter, we sh!red th!t we s!w ! decre!se in the r!te of Free inst!nces converting to p!id pl!ns. Th!t trend bec!me more pronounced in Q1. 2. This qu!rter, we st!rted to see ! slowing in the r!te of p!id user growth from existing customers. To be cle!r, we’re not seeing !ny ch!nges in our competitive position or in the inherent dem!nd for our products. Looking !cross our customer b!se of 249,000+, there h!s been no over!ll decre!se in us!ge or ch!nge in churn. The !bove two trends !re the result of comp!nies tightening their belts !nd slowing their p!ce of hiring. In other words, Atl!ssi!n is not immune to bro!der m!croeconomic imp!cts. Our outlook !ssumes these trends will persist, but we’ll monitor, respond, !nd keep you upd!ted !ccordingly. Turbulent m!rkets provide !n opportunity to sh!ke up the le!derbo!rds, !nd we !re poised to pl!y offense in this environment. Buoyed by the secul!r t!ilwinds of digit!l !nd cultur!l tr!nsform!tion, Atl!ssi!n is incredibly well-positioned to c!pture !ddition!l sh!re in e!ch of our three m!ssive m!rkets – !gile/DevOps, IT service m!n!gement (ITSM), !nd work m!n!gement – !nd we’re working to do just th!t. In p!rticul!r, we h!ve huge opportunities with Cloud migr!tions, serving enterprises, !nd ITSM – !re!s where we’ve !lre!dy seen signific!nt momentum !nd strong ROI. In the p!st ye!r, Cloud migr!tions !nd Cloud enterprise de!ls were both up more th!n 2x !nd Jir! Service M!n!gement !dded 10,000 new customers. We will focus our investments on strengthening our m!rket position !nd scooping up top-tier t!lent in this environment. But we will b!l!nce these investments with the growth of our business !nd be responsive to the m!croeconomic conditions. So while we’re lowering our revenue outlook for FY23 b!sed on m!croeconomic he!dwinds, we !re m!int!ining our mid- teens % oper!ting m!rgin outlook for the ye!r (for further det!il, see the Fin!nci!l T!rgets section below). Despite the ne!r-term inst!bility in the world !round us, we rem!in cert!in !bout the incredible long-term opportunities in front of Atl!ssi!n !nd our !bility to c!pit!lize on them. We’ve t!lked !bout h!ving ! line of sight to $10 billion in !nnu!l revenue. This h!sn’t ch!nged. We h!ve the right products, the right le!ders, !nd the right str!tegies in pl!ce to come out of this downturn in !n even stronger position. When obst!cles emerge !long the w!y, we’ll n!vig!te !round them !s we !lw!ys h!ve: with vigil!nce, pr!gm!tism, !nd !gility. From the CEOs 2 !
Q1 FY23 3 Cloud update: migrations and innovations continue, rain or shine Migr!tions from Server !nd D!t! Center keep on rolling like thunder. For enterprise customers, the shift to the cloud is !ll !bout recl!iming more c!p!city for innov!tion !nd cre!ting customer v!lue !s it frees their !dmins from m!n!ging b!ckups !nd inst!lling new upgr!des. In f!ct, UK- b!sed cybersecurity firm Sophos w!s !ble to move engineers off of routine !dmin work !nd onto v!lue-driven projects !fter migr!ting. With the end of support for Server products coming up in Febru!ry 2024, we’re putting in the h!rd y!kk! removing blockers !nd smoothing the w!y to the cloud. With the help of our recent !nd upcoming hires in R&D, we continue to improve speed, incre!se the sc!le of our offerings, !nd introduce !ddition!l c!p!bilities like d!t! !ccess control vi! API token !nd enh!nced support for HIPPA compli!nce. Our D!t! Center business continues to benefit from ! segment of Server customers who !re choosing D!t! Center !s ! stepping-stone on their w!y to our Cloud products. We’ll continue to develop our D!t! Center offerings even !s we focus the lion’s sh!re of our investments in the cloud. We’ve seen this p!ttern pl!y out over the ye!rs, so we know it’s ! m!tter of when (not if) these customers !rrive in the cloud. To th!t end, we’re delighted to sh!re two new re!sons for customers to get excited !bout Cloud. Atlassian Analytics begins delivering insights to customers ATLASSIAN + SOPHOS “By migrating to Atlassian’s Cloud, we moved away from being pure support to focusing on process enablement and adding value back to the business.” Daniel Cave Senior Infrastructure Engineer at Sophos We celebr!ted !n exciting milestone in Q1 when Atl!ssi!n An!lytics gr!du!ted into open bet! for customers of Jir! Softw!re !nd Jir! Service M!n!gement’s Enterprise edition. Atl!ssi!n An!lytics gives users countless w!ys to visu!lize d!t! from their Atl!ssi!n products !nd integr!ted 3rd-p!rty sources, stored in the underlying Atl!ssi!n D!t! L!ke. The !bility to gle!n holistic insights into how work gets done !cross te!ms is ! powerful new c!p!bility th!t we believe will !cceler!te our migr!tion pipeline !nd f!cilit!te upsell to Cloud Enterprise editions. "
Q1 FY23 4 N!mes like P!yp!l, DISH Network, !nd Yum! Br!nds !re !lre!dy p!rticip!ting in Atl!ssi!n An!lytics’ bet! progr!m – with more signing up every week. We’re keen to consult with our bet! customers over the coming months !nd incorpor!te their feedb!ck. A gener!l !v!il!bility l!unch is pl!nned for l!ter this fisc!l ye!r. Smart Links make the app explosion less taxing In ! world where knowledge workers flip between !pplic!tions ! st!ggering 1,200 times a day on average, the “toggle t!x” is re!l. Rese!rchers estim!te th!t the time it t!kes to reorient oneself !fter e!ch switch !dds up to roughly four hours every week – ne!rly 10% of their time on the job! Th!t’s why we built Sm!rt Links: ! gre!t ex!mple of how our pl!tform investments e!se customers’ p!in points tod!y !nd into the future (bec!use the C!mbri!n explosion of !pps isn’t likely to fizzle out !ny time soon). Sm!rt Links !llow customers to find, view, !nd edit work items !cross products. Whether it’s ! designer embedding ! Figm! file in ! Jir! Softw!re issue or ! m!rketer ch!nging the st!tus on !n Atl!s project without le!ving the Confluence p!ge they’re working on, te!ms get better visibility !cross the org!niz!tion !nd e!sier !ccess to work reg!rdless of where it h!ppens. Market deep-dive: work management Sm!rt Links !re rooted in our principle of helping te!ms work differently, together. They’re !v!il!ble tod!y in Atl!s, Confluence, Trello, Bitbucket, Jir! Softw!re, Jir! Service M!n!gement, !nd Jir! Work M!n!gement, where users c!n embed content from 40+ 3rd-p!rty p!rtners like Google, Microsoft, Miro, Loom, Figm!, !nd S!lesforce. It’s one more w!y our Cloud pl!tform’s extensibility brings more v!lue to customers, f!ster th!n ever. Every te!m h!s work th!t complements their cr!ft such !s pl!nning, tr!cking, providing upd!tes, !nd m!king decisions. So when we look !t the m!ssive work m!n!gement m!rket comprising !n estim!ted 2.2 million comp!nies (those with more th!n 10 knowledge workers), we see virtu!lly endless opportunities for Atl!ssi!n products like Confluence, Jir! Work M!n!gement, Trello, !nd Atl!s. Atlassian’s addressable markets are interconnected, so we typically address all three in each shareholder letter. Starting this quarter, in line with our market- focused strategy, we’re changing up the format to offer a deeper look at just one market at a time.
Q1 FY23 5 Tod!y, te!ms !t over 150,000 org!niz!tions worldwide use Atl!ssi!n’s work m!n!gement products. Where!s Jir! Softw!re tr!dition!lly w!s the product we’d l!nd with, customers !re incre!singly coming to Atl!ssi!n bec!use of Trello !nd Confluence !s well. And l!st month, we g!ve comp!nies one more re!son to look our w!y: Atlas h!s gr!du!ted into gener!l !v!il!bility. Atlas launches into general availability! Atl!s is the new comp!ny-wide te!mwork directory customers use to connect the dots between people, projects, objectives, !nd upd!tes – now !v!il!ble to !ll Cloud customers. Te!ms register their “big rock” go!ls in Atl!s, !s well !s the projects !nd people contributing to them, giving le!ders (or !nyone else interested) !n e!sy w!y to keep t!bs on the comp!ny’s most import!nt objectives. OKR scoring – Ide!l for te!ms th!t use the Objectives and Key Results fr!mework, go!l scoring !llows users to !ssign ! projected score b!sed on how confident they !re th!t the te!m will meet ! go!l by the t!rget d!te. Kudos! – Recognizing gre!t work with ! “kudos” e-c!rd sent to their Atl!s feed is ! simple, fun, !nd person!l w!y to th!nk peers who go !bove !nd beyond. We’re gr!teful to our e!rly !ccess progr!m customers who helped us refine Atl!s’ fe!ture set in prep!r!tion for the gener!l !v!il!bility l!unch. Te!ms of up to 35,000 c!n use b!sic Atl!s fe!tures free of ch!rge. Te!ms th!t need !dv!nced fe!tures, !ddition!l stor!ge, or 24/7 support c!n upgr!de to our St!nd!rd or Premium editions. Introducing Atlassian Together In September, we !nnounced the l!unch of Atl!ssi!n Together: ! single subscription to our entire collection of work m!n!gement products (Trello, Confluence, Jir! Work M!n!gement, !nd Atl!s). It !lso includes Access, our enterprise-gr!de identity !nd !ccess m!n!gement solution. Since its introduction, customers in Atl!s’ e!rly !ccess progr!m h!ve benefited from new fe!tures, including: Priv!cy controls – Atl!s now supports priv!te projects, which lets users restrict viewing !nd editing to specific individu!ls !nd te!ms.
Q1 FY23 6 In other news… Our “Te!m Anywhere” progr!m, which gives employees the option to live !nd work just !bout !nywhere in !ny country where we oper!te, continues to be ! m!ssive !sset for hiring !nd ret!ining the best t!lent. We now h!ve Atl!ssi!ns in seven Austr!li!n territories, 26 Indi!n regions, 46 U.S. st!tes (plus the District of Columbi!), four E.U. countries, !nd other countries for ! tot!l of 13 countries !round the globe. L!st month we l!unched ! new recruiting vehicle – liter!lly. The “Atl!ssiV!n” # is ! br!nded RV th!t m!de its w!y !ll !round Austr!li! with members of our recruiting te!m t!king !pplic!tions !nd interviewing c!ndid!tes on the spot. Through this c!mp!ign, we’re t!king !dv!nt!ge of the opportunity to become !n even more geogr!phic!lly diverse comp!ny, !s well !s demonstr!te Atl!ssi!n’s commitment to m!king distributed te!mwork work. Atl!ssi!n Together brings the ide! of “working differently, together” to life. It provides ! complete, connected toolset so te!ms c!n choose the best tool for their needs while ensuring !lignment !cross the org!niz!tion. We’ve priced Atl!ssi!n Together !t just $11 per user, f!r less th!n wh!t m!ny of our competitors ch!rge for ! single point product. ATLASSIAN + SALESFORCE “As a manager, it’s my job to ensure everyone works exactly the way they want to and are thriving… Atlassian gives us a central location to store our knowledge and make it easily accessible to people working in different timezones, working with different personal requirements.” Deepa Aswani Director of Content at Salesforce We !lso just rele!sed our Fiscal Year 2022 Sustainability Report, highlighting our str!tegies !nd !chievements rel!ted to clim!te ch!nge, hum!n rights, diversity, equity !nd inclusion (DEI), !nd soci!l imp!ct. We !re !he!d of our go!ls in reducing emissions directly linked to our oper!tions !nd !re now working with our top suppliers on setting their own t!rgets. Our investment in exp!nding our DEI te!m !nd focus on recruitment p!rtnerships is p!ying off, with hiring r!tes incre!sing for underrepresented groups. And we’re incredibly proud of the imp!ct our !m!zing Atl!ssi!ns m!de this ye!r, contributing over 45,000 hours of volunteer time to non-profits in their communities.$ Source: video shown at Atlassian Presents: Work Life in September, 2022.
Q1 FY23 7 Unlike Jir! issues, sust!in!bility never moves to the “done” column. We’re not yet where we w!nt to be on emissions or equit!ble represent!tion !mong our st!ff, but we’re excited to build on this progress !s we believe th!t underst!nding the connections between people, customers, communities, !nd the pl!net is essenti!l for building ! 100-ye!r comp!ny. We enter Q2 with immense gr!titude to our customers for continuing to build ! vibr!nt community !round Atl!ssi!n; to our p!rtners for ensuring our customers’ success; !nd to our glob!l te!m of 9,800 for st!ying focused on delivering innov!tive products th!t en!ble our customers to do the best work of their lives. Here’s to the ro!d !he!d, !nd to unle!shing the potenti!l of every te!m. Mike Cannon-Brookes Co-founder and co-CEO Scott Farquhar Co-founder and co-CEO MIKE & SCOT T The bottom line ‣ Atl!ssi!n is not immune to the bro!der m!croeconomic environment. 1) We continued to see ! slower r!te of Free inst!nces converting to p!id pl!ns; !nd 2) we st!rted to see ! slower r!te of growth in p!id se!ts from existing customers !s comp!nies slowed their p!ce of hiring. We're not seeing !ny ch!nges in our competitive position or in the inherent dem!nd for our products. Looking !cross our customer b!se of 249,000+, there h!s been no over!ll decre!se in us!ge or ch!nge in churn. ‣ We rem!in ste!df!st in our conviction th!t we h!ve the right le!ders, products, !nd str!tegies to pl!y offense !nd strengthen our m!rket position during this downturn. We will b!l!nce our continued investments with the over!ll growth of our business !nd be responsive to the current m!croeconomic environment. ‣ Pl!tform innov!tions like Atl!ssi!n An!lytics !nd Sm!rt Links exemplify the unp!r!lleled v!lue our Cloud products offer, !nd we continue to deliver innov!tive w!ys to help our customers with new offerings like Atl!ssi!n Together !nd Atl!s.
Q1 FY23 8 We !dded 6,550 new customers this qu!rter, bringing our tot!l to 249,173. As mentioned !bove, conversions of Free inst!nces to p!id products continue to be !ffected by the m!croeconomy. Import!ntly though, the number of te!ms coming to our site !nd trying Free editions of our products continues to grow. Our Free editions serve !s ! key step in our s!les funnel !nd !re !n import!nt driver of long-term growth for Atl!ssi!n. Although we keep our m!rketing budget le!ner th!n !ny of our peers, we’ll continue to iter!te on our GTM t!ctics !nd m!ke t!rgeted investments th!t get users into our products with !s little friction !s possible. L!st month we took !nother step in our GTM evolution when Accenture expanded their partnership with Atlassian. (Welcome, Accenture! ) We believe this p!rtnership will strengthen our str!tegic position with enterprise customers !nd give them the opportunity to work with ! p!rtner they !lre!dy know !nd trust. Customer highlight reel Cameron Deatsch Chief Revenue Officer Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 249,173242,623234,575226,521 216,500 204,754 188,033 174,948166,180159,433 Customers: We define the number of customers at the end of any particular period as unique domains that have at least one active and paid product license or subscription, with 2 or more seats, excluding starter licenses/subscriptions. For each period ended Customers ATLASSIAN + ACCENTURE “Through our strategic collaboration with Atlassian, we are bringing comprehensive enterprise agility solutions to our clients, which aren’t only critical for the technology organization, but for modernizing the way all teams will work in the future.” Greg Douglass Senior Managing Director and Global Lead for Technology Strategy & Advisory at Accenture
Q1 FY23 9 Getting face-time with customers, one market at a time The reviews !re in: Atl!ssi!n’s first m!rket-specific event w!s ! hit. We g!thered with p!rtners !nd customers like S!lesforce, Sprout Soci!l, Hubspot, !nd DISH Network for !n !fternoon of product !nnouncements, le!rning !bout the l!test trends in work m!n!gement, !nd networking !t the Ch!se Center in S!n Fr!ncisco. Thous!nds of !ttendees joined us virtu!lly through live stre!ms !nd on-dem!nd content. For me, the best p!rt w!s meeting f!ce-to-f!ce with le!ders from some of our l!rgest customer org!niz!tions. We s!t down !s ! group to discuss their thorniest coll!bor!tion ch!llenges, sw!p ide!s, sh!re lessons le!rned, !nd t!ke in their feedb!ck on Atl!ssi!n’s products !nd services. We’re honored by their p!rticip!tion !nd continued trust in Atl!ssi!n !s ! str!tegic p!rtner for their business. Looking !he!d, we’re thrilled to invite customers !nd p!rtners to our next event, this time focused on ITSM. We’ll be fe!turing product demos, ! fireside ch!t with customers, !nd bre!kout sessions designed to help IT te!ms work !t high velocity. – C!meron I’ll be in London for this event on December 8th !nd would love to see you there. Whether you join us in person or t!ke !dv!nt!ge of the live stre!ms !nd on-dem!nd content, I hope you’ll m!ke the most of this opportunity to see how Atl!ssi!n is unle!shing the potenti!l of IT te!ms everywhere.
Q1 FY23 10 As ! reminder, during Q1, we completed the redomicili!tion of Atl!ssi!n’s p!rent comp!ny from the United Kingdom to the United St!tes. As ! result, we h!ve tr!nsitioned our !ccounting st!nd!rds for reporting purposes from IFRS to GAAP. The prim!ry fin!nci!l imp!cts of this tr!nsition !re det!iled below !nd in supplemental materials on our Investor Rel!tions website. First quarter fiscal year 2023 financial summary (U.S. $ in thousands, except percentages and per share data) A reconcili!tion of GAAP to non-GAAP me!sures is provided within the t!bles !t the end of this letter !s well !s in our e!rnings press rele!se, !nd on our Investor Rel!tions website. Financial highlights Joe Binz Chief Financial Officer 2IQRS PTAQSEQ NF FIRCA ( () FIMAMCIA RTLLAQ O IP TBOET F DF FS TIBSF EB B BOE FSDFO B F QEE NMS R 1MDED EOSEL EQ ) $ ( (( ( (' 3 : ERT SR FWFO F . - ) ( , ( 7SPTT SPG ,,. - -,. 7SPTT NBS O % FSB O ODPNF MPTT ) (- , -- FSB O NBS O % % F MPTT ) - ( F MPTT FS TIBSF $ E M FE % %,) 3BTI GMP GSPN P FSB POT ( ( , 8NM%3 : ERT SR 7SPTT SPG ,. ) ( )- 7SPTT NBS O ) % FSB O ODPNF - , ). FSB O NBS O %) F ODPNF ( - F ODPNF FS TIBSF $ E M FE %), %)- 6SFF DBTI GMP - , . (
Q1 FY23 11 First quarter fiscal year 2023 highlights We were ple!sed with our ste!dy fin!nci!l perform!nce !nd strong execution in !n incre!singly ch!llenging m!croeconomic environment. Our Cloud migr!tion progress continues to tr!ck well with our expect!tions, !nd we !re m!king consistent progress tow!rds the long-term go!ls we l!id out !t our 2022 Investor Day. Despite the ne!r-term m!cro he!dwinds, we rem!in !s excited !s ever !bout the long-term opportunities !he!d of us. Highlights for Q1’23 include: • Subscription revenue grew by 50% ye!r-over-ye!r. Cloud revenue grew by 49% ye!r-over-ye!r !nd D!t! Center revenue grew by 54% ye!r-over-ye!r. • We continue to execute well tow!rds our str!tegy of hiring !nd ret!ining the best t!lent !round the world, !nd believe hiring in this current m!croeconomic environment is to our !dv!nt!ge. During the qu!rter we !dded 989 net new Atl!ssi!ns, prim!rily in R&D, of which !pproxim!tely 200 were new college gr!du!tes. As discussed by Mike !nd Scott !bove, we encountered two prim!ry revenue he!dwinds during the qu!rter from ch!nges in the m!croeconomic environment: 1) We s!w ! more pronounced continu!tion of the trend discussed l!st qu!rter, where fewer Free inst!nces converted to p!id pl!ns; !nd 2) we !lso s!w the growth of p!id users from existing customers slow in the second h!lf of Q1, l!rgely due to customers slowing their r!te of hiring. The imp!ct these he!dwinds will h!ve on our future revenue growth is det!iled in the Fisc!l 2023 Outlook section below. Over!ll, the underlying fund!ment!ls of our business rem!in he!lthy. We continue to focus on hiring gre!t t!lent, t!king sh!re, delivering strong progress in customer Cloud migr!tions, building enterprise c!p!bilities, !nd investing for long-term success !cross our three !ddress!ble m!rkets.
Q1 FY23 As a reminder, we primarily bill our customers in U.S. dollars, and therefore our revenue results in EMEA reflect the impact of the strengthening U.S. dollar. 12 Q4’21 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 $807.4 $759.8$740.5 $688.5 $614.0 $559.5 Total revenue (U.S. $ in millions, year-over-year growth rate in %) 37%34% 30%30% 36% 31% (U.S. $ in thousands, except percentage data) Revenue 2IQRS PTAQSEQ NF FIRCA ( () QE EMTE QERT SR O IP TBOET F DF FSDFO B F Y ' () ' (( EAQ%N EQ% EAQ GQN S E EMTER OE CTDS PO , . ) ( , :B O FOBODF ) , ) ) IFS ( . ) . ). P BM SFWFO FT . - ) ( , ( ) Y ' () ' (( EAQ%N EQ% EAQ GQN S E EMTER 0EO N LEMS 3MP E - ) ) - ) 4B B 3FO FS - ((. FSWFS ) . ) ) - . :BSLF MBDF BOE TFSW DFT - ) . )- P BM SFWFO FT . - ) ( , ( ) Y ' () ' (( EAQ%N EQ% EAQ GQN S E EMTER 3 1NFS DBT ( ) . -( )) 5:51 ) (-. () ( 1T B BD G D ) ) - (., )) P BM SFWFO FT . - ) ( , ( )
Q1 FY23 13 Year-over-year growth % Q4’21 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Cloud 47% 53% 58% 60% 55% 49% Data Center 62% 68% 83% 59% 60% 54% Marketplace and services 13% 26% 20% (4%) 24% 4% Server (2%) (7%) (12%) (19%) (16%) (18%) Total revenues 30% 34% 37% 30% 36% 31% Included in Server is perpetual license revenue. Perpetual license revenue is captured as other revenue on the Condensed Consolidated Statements of Operations. (1) Included in Marketplace and services is premier support revenue. Premier support is a subscription-based arrangement for a higher level of support across different deployment options. Premier support is recognized as subscription revenue on the Condensed Consolidated Statements of Operations as the services are delivered over the term of the arrangement. (2) (U.S. $ in millions, except percentage data) Revenues by deployment $807.4 $759.8$740.5 $688.5 $614.0 $559.5 Q4’21 Q1’22 Q2’22 Q3’22 Q4’22 Q1'23 $113.8 $117.6 $132.3 $135.5 $139.5 $140.3 $47.3 $49.3 $57.6 $49.8 $45.4 $39.9 $171.2 $158.9 $151.1 $139.1 $111.2 $99.1 $475.0$434.0$399.5$364.1$317.9$280.2 Cloud Data Center Marketplace and services Server (2) (1) Note: revenue totals may not foot due to rounding
Q1 FY23 14 2IQRS PTAQSEQ NF FIRCA ( () 8ES 4MCNLE O IP TBOET F DF FS TIBSF EB B ' () ' (( 3 : ERT SR F MPTT ) - ( F MPTT FS TIBSF $ E M FE % %,) 8NM%3 : ERT SR F ODPNF ( - F ODPNF FS TIBSF $ E M FE %), %)- 2IQRS PTAQSEQ NF FIRCA ( () 2QEE AR 2 N O IP TBOET F DF FSDFO B F ' () ' (( 2QEE CAR F N 711 OF DBTI SPW EFE C P FSB O BD W FT ( ( , 9FTT0 3B BM F FOE SFT , , , .. 6SFF DBTI GMP - , . ( 2 525 0 3.7.16.4 % % Free cash flow (U. . $ in thousands, except percentage data) 2IQRS PTAQSEQ NF FIRCA ( () 8ES 4MCNLE O IP TBOET F DF FS TIBSF EB B ' () ' (( 3 : ERT R F MPTT ) - ( F MPTT FS TIBSF $ E M FE % %,) 8NM%3 : ERT SR F ODPNF ( - F ODPNF FS TIBSF $ E M FE %), %)- 2IQRS PTAQSEQ NF FIRCA ( () 2QEE AR 2 N O IP TBOET F DF FSDFO B F ' () ' (( 2QEE CAR F N 711 OF DBTI SPW EFE C P FSB O BD W FT ( ( , 9FTT0 3B BM F FOE SFT , , , .. 6SFF DBTI GMP - , . ( 2 525 0 3.7.16.4 ( Net income (loss) (U.S. $ in thousands, except per share data) Net income (loss) includes losses from the m!rk-to-m!rket !ccounting of the comp!ny’s str!tegic investment portfolio of $11.5 million in Q1’23 !nd $31.4 million in Q1’22. These losses resulted in he!dwinds, on ! GAAP !nd non-GAAP net income (loss) per diluted sh!re b!sis, of $0.05 !nd $0.04 in Q1’23, respectively, !nd $0.12, on both ! GAAP !nd non-GAAP b!sis, in Q1’22. As ! reminder, we experience se!son!lity in our free c!sh flow results, with Q1 typic!lly h!ving the lowest free c!sh flow due to the timing of employee bonus p!yments. We !lso s!w !n imp!ct from the timing of c!sh t!x p!yments of !pproxim!tely $17 million th!t shifted into Q1 from Q2. (U.S. $ in thousands, except percentage data) Margins, operating expenses, and operating income 2IQRS PTAQSEQ NF FIRCA ( () LAQGIMR AMD NOEQASIMG EWOEMRE RTLLAQ O IP TBOET F DF FS TIBSF EB B BOE FSDFO B F Y ' () ' (( 3QNRR LAQGIM 711 SPTT NBS O .(%- . %) PO$711 SPTT NBS O . %. .,%( NSA NOEQASIMG EWOEMRER 711 P FSB O F FOTFT - ( (- , ( PO$711 P FSB O F FOTFT ), ),) ), EREAQC AMD DE E NOLEMS EWOEMRER 711 SFTFBSDI BOE EFWFMP NFO F FOTFT ) , (-( PO$711 SFTFBSDI BOE EFWFMP NFO F FOTFT (.. -.) ( - -, 2 525 0 3.7.16.4 ( AQJESIMG AMD RA ER EWOEMRER 711 NBSLF O BOE TBMFT F FOTFT , (. )( PO$711 NBSLF O BOE TBMFT F FOTFT ) (. .( , 2 525 0 3.7.16.4 ) ) 3EMEQA AMD ADLIMIRSQASI E EWOEMRER 711 FOFSBM BOE BEN O T SB WF F FOTFT ( . ) . .(( PO$711 FOFSBM BOE BEN O T SB WF F FOTFT ) -) , . 2 525 0 3.7.16.4 % OEQASIMG IMCNLE 711 P FSB O ODPNF MPTT ) (- , -- PO$711 P FSB O ODPNF - , ). 2 525 0 3.7.16.4 %)
Q1 FY23 15 Fiscal 2023 outlook Our revenue outlook f!ctors in the current m!cro-rel!ted trends we !re seeing in our business. We h!ve !ssumed the current m!croeconomic conditions rem!in unch!nged !nd the trends we s!w in Q1 !round new customer conversions !nd p!id se!t exp!nsion within existing customers persist through the rest of fisc!l 2023. In terms of costs, consistent with our m!n!gement philosophy !nd !ppro!ch, we pl!n to b!l!nce sust!ined str!tegic investments !cross our three core m!rkets !nd pl!tform to drive long-term growth, with responsiveness to the current environment. We pl!n to do this through focused oper!tion!l excellence !nd execution, prioritized investment decision m!king, !nd disciplined m!n!gement of our cost structure. We see the ch!llenging m!croeconomic environment !s !n opportunity to t!ke sh!re !nd continue to invest in str!tegic high-growth !re!s – !ll with the go!l of strengthening our competitive position. Revenue In FY23, we expect to see the following trends: SUBSCRIPTION REVENUE • Cloud revenue • B!sed on the m!cro he!dwinds described !bove, we !re lowering our Cloud revenue growth outlook to ! r!nge of !pproxim!tely 40% to 45% ye!r-over-ye!r for FY23. • We continue to expect !pproxim!tely 10 points of this growth to be driven by migr!tions. • D!t! Center revenue • We continue to expect D!t! Center revenue growth to moder!te on ! ye!r-over-ye!r b!sis over the rem!ining three qu!rters of FY23, driven by event-driven dem!nd in the prior ye!r resulting from price incre!ses !nd the reduction of loy!lty discounts. 2IMAMCIA AQGESR 3 : Y QEE NMS R 1MDIMG 0ECEL EQ )'$ ( (( FWFO F .) N MM PO P . N MM PO 7SPTT NBS O . P . FSB O NBS O ( 8NM%3 : Y QEE NMS R 1MDIMG 0ECEL EQ )'$ ( (( 7SPTT NBS O .) P . FSB O NBS O ) Financial targets (U.S. $)
Q1 FY23 16 • As ! reminder, for D!t! Center revenue, ! portion is recognized up-front in subscription revenue in the period th!t the subscription begins, while the rem!inder is recognized r!t!bly over the term of the contr!ct. This m!y !dd qu!rter-to-qu!rter vol!tility in D!t! Center growth r!tes. MAINTENANCE REVENUE • In line with our !nnounced Server end-of-life, we expect m!inten!nce revenue to continue to slowly contr!ct over the course of FY23 to !pproxim!tely $75 million in Q4’23. • As ! reminder, we will no longer provide m!inten!nce !nd support for our Server offerings !s of Febru!ry 2024. OTHER REVENUE We continue to expect: • Other revenue to be slightly down rel!tive to FY22. • M!rketpl!ce revenue will be imp!cted by the ongoing mix shift of third-p!rty !pp s!les from Server !nd D!t! Center to Cloud. S!les of third-p!rty Cloud !pps h!ve ! lower M!rketpl!ce t!ke r!te rel!tive to Server !nd D!t! Center, which is designed to incentivize further Cloud !pp development. Our focus rem!ins on driving ! growth r!te on s!les of third-p!rty Cloud !pps gre!ter th!n th!t of our own products. As ! reminder: • Perpetu!l license revenue, which is recognized in other revenue, will be $0 in FY23 !nd tot!led !pproxim!tely $30 million in FY22. • Revenue on the s!le of third-p!rty M!rketpl!ce !pps is recognized in the period the product is purch!sed. Profitability We continue to expect the following dyn!mics to imp!ct our m!rgins in FY23: • Gross m!rgin will decre!se modestly in FY23 due to the continued business mix shift to the cloud !nd investments we !re m!king to support cloud migr!tions. • Oper!ting m!rgin will be in the mid-teens % for FY23, consistent with our previously issued t!rget, despite the m!croeconomic he!dwinds !nd !djustments to our revenue outlook. • Free c!sh flow is expected to be imp!cted, on ! comp!r!tive b!sis, due to the lower oper!ting m!rgin in FY23 versus FY22. Addition!lly, free c!sh flow m!y be imp!cted !s ! result of the continued business mix shift to the Cloud. M!inten!nce contr!cts for our Server products !nd subscription contr!cts for our D!t! Center products !re only offered on !nnu!l terms, while we offer subscriptions for our Cloud products on both !nnu!l !nd monthly terms. In the short term, the shift to the Cloud !nd the potenti!l mix ch!nge in billing terms m!y cre!te ! he!dwind for free c!sh flow. Over the long term, !s more enterprise customers migr!te to the Cloud, we expect !ny such he!dwind to subside.
Q1 FY23 17 Given our tr!nsition to GAAP from IFRS, we !re required to recognize unre!lized g!ins !nd losses on our str!tegic investments portfolio in other income (expense), which c!n cre!te qu!rter-to- qu!rter vol!tility !nd !re inherently difficult to forec!st. As ! result, we will focus our future profit!bility t!rgets on oper!ting m!rgins !nd discontinue EPS t!rgets. Share count In FY23, we expect !n !pproxim!tely 2% ye!r-over-ye!r incre!se in diluted sh!re count. Conversion from IFRS to GAAP Effective September 30, 2022, we completed the redomicili!tion of Atl!ssi!n’s p!rent comp!ny from the United Kingdom to the United St!tes. As ! result, we tr!nsitioned our !ccounting st!nd!rds from IFRS to GAAP. We h!ve published m!teri!ls on our Investor Rel!tions website summ!rizing the prim!ry imp!cts of the tr!nsition !nd historic!l fin!nci!l results under IFRS !nd GAAP. The following !re!s !re !ffected: • Stock-b!sed compens!tion – GAAP utilizes “str!ight-line” r!t!ble expense recognition inste!d of “gr!ded” front-lo!ded expense recognition under IFRS. • Le!ses – Under GAAP, tot!l le!se expense is recognized on ! str!ight-line b!sis over the le!se term. Under IFRS, the expense recognition method results in ! higher portion of the tot!l le!se expense recognized e!rlier in the le!se term. • Str!tegic investments – Under GAAP, qu!rterly m!rk-to m!rket f!ir v!lue movements of equity investments !re recorded in other income (expense) on our Condensed Consolid!ted St!tements of Oper!tions, while under IFRS, it is recognized in other comprehensive income (loss), ! component of equity, on the Consolid!ted St!tements of Fin!nci!l Position. This ch!nge introduces qu!rterly fluctu!tions on our Condensed Consolid!ted St!tements of Oper!tions. • Exch!nge!ble senior notes – The !mortiz!tion of the debt discount !nd issu!nce costs rel!ting to our exch!nge!ble senior notes, which were fully settled in Q2’22, follow different timing recognition rules under GAAP. This difference resulted in ! portion of !mortiz!tion shifting from FY21 to FY22. • Recl!ssific!tions – • Under GAAP, we will ch!r!cterize cert!in c!sh interest p!yments on fin!ncing !rr!ngements !s oper!ting c!sh flows, while IFRS !llowed for these to be cl!ssified !s fin!ncing c!sh flows. This difference imp!cts c!sh flow from oper!tions !nd free c!sh flow. • Under GAAP, implied interest rel!ted to le!ses is recognized in cost of revenues !nd oper!ting expenses on the Condensed Consolid!ted St!tements of Oper!tions inste!d of c!tegorized !s interest expense under IFRS. This difference incre!ses cost of revenues !nd oper!ting expenses !nd decre!ses non-oper!ting expenses.
Q1 FY23 18 ATLASSIAN CORPORATION Condensed consolidated statements of operations (U.S. $ and shares in thousands, except per share data) (unaudited) Y QEE NMS R 1MDED EOSEL EQ ) $ Y ( (( ( (' FWFO FT0 CTDS PO , . ) ( , :B O FOBODF ) , ) IFS ( . ) . ). P BM SFWFO FT . - ) ( , ( 3PT PG SFWFO FT ( ) ) ( , ( , 7SPTT SPG ,,. - -,. FSB O F FOTFT0 FTFBSDI BOE EFWFMP NFO ( ) , (-( :BSLF O BOE TBMFT ( , (. )( 7FOFSBM BOE BEN O T SB WF ( . ) . .(( P BM P FSB O F FOTFT - ( (- , ( FSB O ODPNF MPTT ) (- , -- IFS ODPNF F FOTF OF ( (. . 8O FSFT ODPNF ) (-- 8O FSFT F FOTF , ( . 9PTT CFGPSF ODPNF B FT - , ,. SPW T PO GPS ODPNF B FT . ( ,), F MPTT ) - ( F MPTT FS TIBSF0 2BT D % %,) 4 M FE % %,) AF I FE$BWFSB F TIBSFT TFE O DPN O OF MPTT FS TIBSF0 2BT D ( ,- ( ( , 4 M FE ( ,- ( ( , 1NP O T ODM EF T PDL$CBTFE DPN FOTB PO BT GPMMP T0 QEE NMS R 1MDED EOSEL EQ ) $ ( (( ( (' 3PT PG SFWFO FT , ) - FTFBSDI BOE EFWFMP NFO ( , (.( :BSLF O BOE TBMFT () 7FOFSBM BOE BEN O T SB WF ( , , ( ( 1NP O T ODM EF BNPS B PO PG BDR SFE O BO CMF BTTF T BT GPMMP T0 QEE NMS R 1MDED EOSEL EQ ) $ ( (( ( (' 3PT PG SFWFO FT , - ,. FTFBSDI BOE EFWFMP NFO :BSLF O BOE TBMFT ( ( (-
Q1 FY23 19 ATLASSIAN CORPORATION Condensed consolidated balance sheets (U.S. $ in thousands) (unaudited) EOSEL EQ ) $ ( (( 5TME ) $ ( (( RRESR 3 SSFO BTTF T0 3BTI BOE DBTI FR WBMFO T ,. - ). (, :BSLF BCMF TFD S FT )- -) ( 1DDP O T SFDF WBCMF OF ( , -. ) . (- 1TTF T IFME GPS TBMF , (, SF B E F FOTFT BOE P IFS D SSFO BTTF T , - ( NSA CTQQEMS ARRESR .,, ... . , ) PO$D SSFO BTTF T0 SP FS BOE FR NFO OF ) )), ,,( FSB O MFBTF S I $PG$ TF BTTF T (,, .. (-- (-, SB F D OWFT NFO T () )() , 8O BO CMF BTTF T OF ( . 7PPE MM -( ( -(( .). 4FGFSSFE B BTTF T - )) IFS BTTF T - , . .,( NSA ARRESR ) )- )( ) )(, .) IA I ISIER AMD SNCJ N DEQR 1PTIS 3 SSFO M BC M FT0 1DDP O T B BCMF , . (( 1DDS FE F FOTFT BOE P IFS D SSFO M BC M FT (- -- , ) 4FGFSSFE SFWFO F D SSFO PS PO ,, ,, FSB O MFBTF M BC M FT D SSFO PS PO ), ,). NSA CTQQEMS IA I ISIER - ,. , PO$D SSFO M BC M FT0 4FGFSSFE SFWFO F OF PG D SSFO PS PO , - , ,( FSB O MFBTF M BC M FT OF PG D SSFO PS PO (,- )-) (- ) FSN MPBO GBD M ,) 4FGFSSFE B M BC M FT ). ) ( IFS OPO$D SSFO M BC M FT . ( , , NSA IA I ISIER ( . . ( . SNCJ N DEQR EPTIS 3PNNPO T PDL ( ( 1EE POBM B E$ O DB BM ( ) ( .( ), 1DD N MB FE P IFS DPN SFIFOT WF ODPNF - ) ) ., 1DD N MB FE EFG D ..( -- ., ) P BM T PDLIPMEFST FR . , ) )(- )-( NSA IA I ISIER AMD RSNCJ N DEQR EPTIS ) )- )( ) )(, .)
Q1 FY23 20 ATLASSIAN CORPORATION Condensed consolidated statements of cash flows (U.S. $ in thousands) (unaudited) QEE NMS R 1MDED EOSEL EQ ) $ ( (( ( (' AR F N R FQNL NOEQASIMG ACSI ISIER- F MPTT ) - ( 1E T NFO T P SFDPOD MF OF MPTT P OF DBTI SPW EFE C P FSB O BD W FT0 4F SFD B PO BOE BNPS B PO ,( ) ) PDL$CBTFE DPN FOTB PO -) ,) - 4FGFSSFE ODPNF B FT (( , F MPTT PO F DIBO F EFS WB WF BOE DB FE DBMM SBOTBD POT ( .( 1NPS B PO PG EFC E TDP O BOE TT BODF DPT . . F MPTT PO T SB F D OWFT NFO T ) ) (( F GPSF O D SSFOD B O ) ,( , ) . 7B O PO B OPO$DBTI TBMF PG B DPO SPMM O O FSFT PG B T CT E BS ) ( IFS , 3IBO FT O P FSB O BTTF T BOE M BC M FT0 1DDP O T SFDF WBCMF OF , ) ) ( SF B E F FOTFT BOE P IFS BTTF T (( ,-- ( . 2 ) - (() 1DDS FE F FOTFT BOE P IFS M BC M FT . ) . , 4FGFSSFE SFWFO F . ) 8ES CAR OQN IDED NOEQASIMG ACSI ISIER ( ( , AR F N R FQNL 4M ERSIMG ACSI ISIER- 2 T OFTT DPNC OB POT OF PG DBTI BDR SFE , ). SDIBTFT PG SP FS BOE FR NFO , , , .. SDIBTFT PG T SB F D OWFT NFO T . ) ) SDIBTFT PG NBSLF BCMF TFD S FT ( ) SPDFFET GSPN NB S FT PG OWFT NFO T (. ) ..- SPDFFET GSPN TBMFT PG NBSLF BCMF TFD S FT ., (,( 2 2 2 5 2 2 8ES CAR OQN IDED TRED IM IM ERSIMG ACSI ISIER , (). . (- AR F N R FQNL FIMAMCIMG ACSI ISIER- SPDFFET GSPN FSN MPBO GBD M , F B NFO PG F DIBO FBCMF TFO PS OP FT ) ) SPDFFET GSPN TF MFNFO PG DB FE DBMM SBOTBD POT ) -. SPDFFET GSPN P IFS G OBOD O BSSBO FNFO T -( IFS G OBOD O BD W FT -, 8ES CAR OQN IDED FIMAMCIMG ACSI ISIER ) , ),, ,, 5GGFD PG GPSF O F DIBO F SB F DIBO FT PO DBTI DBTI FR WBMFO T BOE SFT S D FE DBTI ) ( 8ES IMCQEARE IM CAR $ CAR EPTI A EMSR$ AMD QERSQICSED CAR .( ,, .- ,.. AR $ CAR EPTI A EMSR$ AMD QERSQICSED CAR AS EGIMMIMG NF OEQIND )., ,., ) () F EFDSFBTF O DBTI BOE DBTI FR WBMFO T ODM EFE O BTTF T IFME GPS TBMF , ( ( AR $ CAR EPTI A EMSR$ AMD QERSQICSED CAR AS EMD NF OEQIND , ( )
Q1 FY23 21 ATLASSIAN CORPORATION Reconciliation of GAAP to non-GAAP results (U.S. $ and shares in thousands, except per share data) (unaudited) Y QEE NMS R 1MDED EOSEL EQ ) $ Y ( (( ( (' 3QNRR OQNFIS 711 SPTT SPG ,,. - -,. M T0 PDL$CBTFE DPN FOTB PO , ) - M T0 1NPS B PO PG BDR SFE O BO CMF BTTF T , - ,. PO$711 SPTT SPG ,. ) ( )- OEQASIMG IMCNLE 711 P FSB O ODPNF MPTT ) (- , -- M T0 PDL$CBTFE DPN FOTB PO -) ,) - M T0 1NPS B PO PG BDR SFE O BO CMF BTTF T . ( , . PO$711 P FSB O ODPNF - , ). 8ES IMCNLE 711 OF MPTT ) - ( M T0 PDL$CBTFE DPN FOTB PO -) ,) - M T0 1NPS B PO PG BDR SFE O BO CMF BTTF T . ( , . M T0 PO$DP PO N BD SFMB FE P F DIBO FBCMF TFO PS OP FT BOE DB FE DBMMT )) -) 9FTT0 7B O PO B OPO$DBTI TBMF PG B DPO SPMM O O FSFT PG B T CT E BS ) 9FTT0 8ODPNF B FGGFD T )( . )- )( PO$711 OF ODPNF ( - 8ES IMCNLE OEQ R AQE 711 OF MPTT FS TIBSF $ E M FE % %,) M T0 PDL$CBTFE DPN FOTB PO %,. % M T0 1NPS B PO PG BDR SFE O BO CMF BTTF T % ) % ) M T0 PO$DP PO N BD SFMB FE P F DIBO FBCMF TFO PS OP FT BOE DB FE DBMMT %- 9FTT0 7B O PO B OPO$DBTI TBMF PG B DPO SPMM O O FSFT PG B T CT E BS % - 9FTT0 8ODPNF B FGGFD T % ) % PO$711 OF ODPNF FS TIBSF $ E M FE %), %)- EIG SED%A EQAGE DI TSED R AQER NTSRSAMDIMG AF I FE$BWFSB F TIBSFT TFE O DPN O E M FE 711 OF MPTT FS TIBSF ( ,- ( ( , M T0 4 M PO GSPN E M WF TFD S FT ) (. AF I FE$BWFSB F TIBSFT TFE O DPN O E M FE OPO$711 OF ODPNF FS TIBSF ( , ( . ( ) 2QEE CAR F N 711 OF DBTI SPW EFE C P FSB O BD W FT ( ( , 9FTT0 3B BM F FOE SFT , , , .. 6SFF DBTI GMP - , . ( IF FGGFD T PG IFTF E M WF TFD S FT FSF OP ODM EFE O IF 711 DBMD MB PO PG E M FE OF MPTT FS TIBSF GPS IF ISFF NPO IT FOEFE F FNCFS ) ( (( BOE ( ( CFDB TF IF FGGFD P ME IBWF CFFO BO $E M WF%
Q1 FY23 22 ATLASSIAN CORPORATION Reconciliation of GAAP to non-GAAP financial targets (U.S. $) Y QEE NMS R 1MDIMG 0ECEL EQ )'$ ( (( E EMTE ,) LI INM SN , LI INM 3 : GQNRR LAQGIM , SN ,' M T0 PDL$CBTFE DPN FOTB PO ( M T0 1NPS B PO PG BDR SFE O BO CMF BTTF T 8NM%3 : GQNRR LAQGIM ,) SN , 3 : NOEQASIMG LAQGIM ( M T0 PDL$CBTFE DPN FOTB PO )( M T0 1NPS B PO PG BDR SFE O BO CMF BTTF T 8NM%3 : NOEQASIMG LAQGIM ')
Q2 FY22 23 FORWARD-LOOKING STATEMENTS This shareholder letter contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. In some cases, you can identify these statements by forward-looking words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” “estimate,” or “continue,” and similar expressions or variations, but these words are not the exclusive means for identifying such statements. All statements other than statements of historical fact could be deemed forward looking, including risks and uncertainties related to statements about our products, customers, partnerships, sustainability initiatives, macroeconomic environment, anticipated growth, outlook, technology and other key strategic areas, and our financial targets such as revenue and GAAP and non-GAAP financial measures including gross margin and operating margin. We undertake no obligation to update any forward-looking statements made in this shareholder letter to reflect events or circumstances after the date of this shareholder letter or to reflect new information or the occurrence of unanticipated events, except as required by law. The achievement or success of the matters covered by such forward-looking statements involves known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management’s beliefs and assumptions only as of the date such statements are made. Further information on these and other factors that could affect our financial results is included in filings we make with the Securities and Exchange Commission (the “SEC”) from time to time, including the section titled “Risk Factors” in our most recently filed Forms 20-F and 6-K (reporting our quarterly results), as well as Forms 10-K and 10-Q. These documents are available on the SEC Filings section of the Investor Relations section of our website at: https://investors.atlassian.com. ABOUT NON-GAAP FINANCIAL MEASURES In addition to the measures presented in our condensed consolidated financial statements, we regularly review other measures that are not presented in accordance with GAAP, defined as non-GAAP financial measures by the SEC, to evaluate our business, measure our performance, identify trends, prepare financial forecasts and make strategic decisions. The key measures we consider are non-GAAP gross profit, non-GAAP operating income, non-GAAP net income, non-GAAP net income per diluted share and free cash flow (collectively, the “Non-GAAP Financial Measures”). These Non-GAAP Financial Measures, which may be different from similarly titled non-GAAP measures used by other companies, provide supplemental information regarding our operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or that occur relatively infrequently and/or that management considers to be unrelated to our core operations. Management believes that tracking and presenting these Non-GAAP Financial Measures provides management, our board of directors, investors and the analyst community with the ability to better evaluate matters such as: our ongoing core operations, including comparisons between periods and against other companies in our industry; our ability to generate cash to service our debt and fund our operations; and the underlying business trends that are affecting our performance. Our Non-GAAP Financial Measures include: • Non-GAAP gross profit. Excludes expenses related to stock-based compensation and amortization of acquired intangible assets. • Non-GAAP operating income. Excludes expenses related to stock-based compensation and amortization of acquired intangible assets. • Non-GAAP net income and non-GAAP net income per diluted share. Excludes expenses related to stock-based compensation, amortization of acquired intangible assets, non-coupon impact related to exchangeable senior notes and capped calls, gain on a non-cash sale of a controlling interest of a subsidiary and the related income tax effects on these items. • Free cash flow. Free cash flow is defined as net cash provided by operating activities less capital expenditures, which consists of purchases of property and equipment. We understand that although these Non-GAAP Financial Measures are frequently used by investors and the analyst community in their evaluation of our financial performance, these measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. We compensate for such limitations by reconciling these Non-GAAP Financial Measures to the most comparable GAAP financial measures. We encourage you to review the tables in this shareholder letter titled “Reconciliation of GAAP to Non-GAAP Results” and “Reconciliation of GAAP to Non-GAAP Financial Targets” that present such reconciliations. ABOUT ATLASSIAN Atlassian unleashes the potential of every team. Our agile & DevOps, IT service management and work management software helps teams organize, discuss, and complete shared work. The majority of the Fortune 500 and over 240,000 companies of all sizes worldwide - including NASA, Kiva, Deutsche Bank, and Salesforce - rely on our solutions to help their teams work better together and deliver quality results on time. Learn more about our products, including Jira Software, Confluence, Jira Service Management, Trello, Bitbucket, and Jira Align at https://atlassian.com. Investor relations contact: Martin Lam, IR@atlassian.com Media contact: M-C Maple, press@atlassian.com