Atlassian’s sales boomed during Covid-19 – and the company’s now worth $75 billion

• Quarterly revenue of US$459.5 million, up 26% YoY
• Q1 IFRS operating margin of 3% and non-IFRS operating margin of 23%
• Q1 net loss of US$21.6m, compared to q1 FY20’s net income of $69.3m

Australian software giant Atlassian has seen revenues jump 26% on 12 months ago in quarterly results for Q1 FY2021 that beat Wall Street expectations.

Revenue for the US-listed (NASDAQ: TEAM) workplace collaboration and productivity software venture hit US$459.5 million, up from US$363.4 million for the first quarter of FY2020. But the company’s fortunes went back into the red for Q1 this year with a net loss was US$21.6 million, compared with net income of $69.3 million in the same quarter 12 months ago.

The net loss for FY2021 included a non-cash charge recorded in “other non-operating income (expense), net” of $27.5 million, compared with a non-cash gain of $82.1 million in Q1 FY20.

Q1 FY21’s net loss per diluted share was $0.09, compared Q1 FY20’s net income per diluted share of $0.28. Earnings, adjusted for one-time gains and costs, sat at 30 cents per share.

Atlassian’s co-founder and co-CEO Mike Cannon-Brookes said the company continued to build momentum in the cloud, and delivered increased value to customers.

“We are laser focused on delivering the best experience to customers in the cloud by building powerful new editions like Cloud Premium and Cloud Enterprise, scaling products like Atlassian Access, and cementing partnerships with best-of-breed SaaS providers such as Slack,” he said.

His co-founder and fellow CEO Scott Farquhar said the business added more than 8,600 net new customers during the quarter for a total of 182,000 customers, including more than 160,000 using Atlassian’s cloud products.

Customer numbers are up 33,000 on 12 months ago.

On a non-IFRS (International Financial Reporting Standards) basis, Atlassian reported operating income of US$105.4 million for Q1 FY21, compared to $85m for the same quarter 12 months ago. Operating margin remained steady at 23%.

To fund its future growth, Atlassian announced a $1 billion five-year senior unsecured delayed draw term loan and a $500 million five-year senior unsecured revolving credit facility.

When it comes to the balance sheet, cash and cash equivalents, and short-term investments at the end of the first quarter of fiscal year 2021 totalled US$2.2 billion.

Move to the cloud

In their letter to investors, Cannon-Brookes and Farquhar said they’d “put in the hard yakka” to build a scalable cloud-native platform

“In fact, over 95% of new customers choose our cloud products because of the instant scalability, streamlined administration, enterprise-grade security, and deep integrations,” they wrote.

“Today, roughly 85% of all customers enjoy these cloud benefits. Yet, approximately 75% of all paying users still use at least one on-premises deployment, creating a massive opportunity to bring them more value in the cloud.”

Previously this month, Atlassian announced it was simplifying it on-premises offerings “in order to double down on cloud” and will stop selling new server licenses beginning in February 2021. In three years it will end maintenance and support for Atlassian server products.

“This is a moment we’ve prepared for over several years. We are in the enviable position of making this transition with a healthy cloud business that accounts for nearly 50% of our total revenue,” the co-CEOs wrote to investors.

“We already see cloud customers adding users faster than server customers, and the cloud only affords us further expansion opportunities. Moving teams from server to cloud products will further enhance the value we create, propelling both our customers and our business to greater success.”

They added: “We play in three interconnected markets: agile software development, ITSM, and work management for all. Together, these markets exceed $125 billion in available revenue, with over one billion users.”

For the second quarter of FY21, Atlassian has predicted :

• Total revenue  in the range of US$460-475 million
• Gross margin of approximately 83% on an IFRS basis and approximately 86% on a non-IFRS basis.
• Operating margin of approximately 1% on an IFRS basis and 24% on a non-IFRS basis.
• Net income (loss) per diluted share in the range of ($0.01) to $0.01 on an IFRS basis, and net income per diluted share is expected to be in the range of $0.30 to $0.32 on a non-IFRS basis.

Last financial year, Atlassian posted total revenue for FY2020 of US$1.6 billion (A$2.2 bn), up 33% from 2019.

The company has also promoted General Counsel Erika Fisher to the role of Chief Administrative Officer. It will hold an investor day on Tuesday, November 17.

Atlassian shares currently sit at around US$210, giving the company a market cap of around US $52.5 billion (AU$75 billion).

Next month will mark five years since Atlassian listed on the NASDAQ at US$21 per share for a valuation of US$4.4 billion