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News & Analysis

Atlassian just had another massive year with $2.2 billion in sales – but it’s still running at a loss

- July 31, 2020 3 MIN READ
Atlassian co-founders and co-CEOs Mike Cannon-Brookes and Scott Farquhar. Photo: supplied
Atlassian Corporation saw revenue in the June quarter jump by 29% on 12 months ago, while total revenue for FY2020 hit US$1.6 billion (A$2.2 bn), up 33% from 2019.

The US-listed (Nasdaq: TEAM) Australian software giant posted total revenue was US$430.5 million for the fourth quarter of fiscal year 2020 alongside an operating loss of US$3.3 million for Q4 FY20. The loss is a major improvement on 2019’s Q4 operating loss of US$32.4 million.

Operating margin was (1)% for the fourth quarter of fiscal 2020, compared with (10)% in the comparative quarter in 2019.

It produced non-GAAP earnings per share (EPS) on revenue of 25 cents, beating market expectations of 21 cents EPS on revenue of US$410.7 million.

On an IFRS (International Financial Reporting Standards) the net loss was $385.2 million for Q4 FY2020, compared with a net loss of $237.5 million for the same quarter in FY19.

The Q4 FY20 loss included a non-cash charge recorded in “other non-operating expense, net” of $382.7 million, compared with a non-cash charge of $156.3 million in the fourth quarter of fiscal 2019, as a result of marking to fair value the exchange feature of Atlassian’s exchangeable senior notes and related capped calls.

The net loss for FY20 had a total non-cash charge in “other non-operating expense, net” of $336 million, compared with $533.9 million the previous year for the same fair value reasons.

In terms of the balance sheet, cash and cash equivalents, and short-term investments at the end of the fourth quarter of fiscal 2020 totalled $2.2 billion, with free cash flow of $574.2 million.

Customers grew on a net basis by 3,046 for the quarter, while subscription revenue for FY20 hit US$257.5 million, up from FY19’s $180.9 million.

Two-thirds of Atlassian’s revenue is generated from its Jira project-tracking tools and Confluence document-collaboration software.

New acquisition

Co-founder and co-CEO Mike Cannon-Brookes also announced that Atlassian had bought Swedish asset tracking and configuration management company Mindville, saying it would strengthen their IT market position.

“Mindville and our recent acquisition of Halp bolster our growing ITSM portfolio and work management offerings for non-technical teams,” Cannon-Brookes said.

In their letter to shareholders, co-founders and co-CEOs Cannon-Brooke and Scott Farquhar said they were proud of our strong fiscal 2020 results.

“We adapted quickly to operate as a fully-remote company in the face of the COVID-19 pandemic, and empowered many customers to do the same through our mission-critical work management products,” they said.

“We delivered value to teams at over 174,000 customers, 150,000 of which are in the cloud. We made significant progress building a strong foundation in our transformation to a cloud-first company. We generated $1.6 billion in revenue, pairing 33% YoY growth with strong non-IFRS profitability and cash flow.”

The duo also said the covid-19 pandemic is “exposing just how fragile our economy, healthcare, and social systems are” as well as singling out the Black Lives Matter movement and the Australian bushfires.

“Fiscal 2021 will be a challenging year. We will lean into the headwinds we face as a business, and be bold as we push through the turbulence. This will lead us to unleash the potential of teams, create massive impact for customers, and continue our transformation into a $5 billion+ global software leader,” they said.

Looking ahead, Atlassian’s guidance for the first quarter of FY21 is revenue of US$430-445 million and an EPS of 26 -27 cents. Operating margin is expected to be approximately 0% on an IFRS basis.

The company was “on the cusp of giving any customer of any size a world-class cloud experience”, the co-CEOs said their letter to shareholders.

“This unlocks massive accessibility and productivity potential. Our commitment to R&D investment and innovation helps us deliver awesome products that empower teams to shape global impact. And we’ll continue to work for social and environmental progress in whatever we do through our sustainability commitment,” they said.

Atlassian shares fell on news of the guidance, with the market expecting higher EPS.

 

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