Atlassian’s revenue jumps 38%, but it’s still far from profitable

- May 2, 2021 3 MIN READ
Atlassian, Mike Cannon-Brookes, Scott Farquhar.
Atlassian co-founders and co-CEOs Mike Cannon-Brooke and Scott Farquhar.
Global software company Atlassian Corporation has seen revenue jump by 38% in the third-quarter financial year results posted today, to US$568.7 million.

The bump in revenue was partly driven by customers taking on on-premise licenses ahead of price changes as the business pushes them to a subscription model. Total revenue for the first nine months of FY21 now sits at US$1.529 billion

But the Sydney-based, US-listed tech unicorn (NASDAQ: TEAM) is still a low way away from profitability, 19 years after it was founded by co-CEOs Mike Cannon-Brookes and Scott Farquhar.

The company posted net income of US$159.8 million (A$205m) in a dramatic turnaround from a $158.8m loss in the March quarter in 2020. That profit reduced the company’s loss for FY21 to US$483 million with one quarter to go.

Q3 net income included a gain of $150.7 million recorded in “other non-operating income (expense), net,” compared with a charge of $141.8 million 12 months earlier relating to Atlassian’s exchangeable senior notes and related capped calls.

Of that amount, a gain of $161.3 million is related to marking to fair value the exchange feature of the notes and related capped calls that remain outstanding as of quarter end. On top of athat net loss of $10.6 million is related to the net impact of repurchasing a portion of the notes and unwinding of the related capped calls during this quarter.

R&D rose US$40m on 12 months ago to $244 million, but the business has trimmed the sails on sales and marketing on 12 months ago, with the quarterly costs down more than $600,000 for Q3 to $2.28 million, and for the financial year-to-date, down more than $3.6m on the first nine months of FY20 to $6.9 million.

There are positive signs for the March quarter. Operating margin was 12% for the third quarter of fiscal year 2021, compared with -5% for the prior corresponding period. Operating income was US$69.5 million for Q3 FY21, a turnaround on FY20 Q3’s US$19.9m loss.

Atlassian finished Q3 FY21 with US$1.6 billion in cash, cash equivalents, and short-term investments, $500 million less than the $2.1 billion it had on June 30, 2020. Total current assets sit at US$2bn.

During Q3, Atlassian used $591.6 million in cash to repurchase a portion of the notes in privately negotiated transactions and received $63.3 million in cash from the unwinding of the related capped calls. The net impact resulted in cash outflows of $528.2 million, which is reflected in cash used in financing activities on our statements of cash flows.

Earlier this week the company announced it was expanding its Jira teams software to more work teams beyond dev ops.

Atlassian also launched the Point A program focused on fast tracking new products to drive the future of teamwork, including five cloud-based Point A products, all built on its cloud platform.

It also announced the acquisition of Brisbane-based ThinkTilt, maker of ProForma, a no-code/low-code form builder for Jira, as well as Chartio, a cloud-based visualisation and analytics solution.

In their letter to shareholders, co-founders and co-CEOs Cannon-Brookes and Scott Farquhar wrote: “Atlassian posted strong results in Q3, driven by the confluence of the discontinuation of new server license sales and price changes to on-premises products that went into effect during the quarter.While these short-term dynamics drove outperformance at both the top and bottom line, we’re seizing this opportunity to drive additional investment in R&D that will fuel our flywheel of continuous innovation and sustain our momentum for years to come.”

Farquhar said in a statement that: “We are most proud of how we continue to create lasting value for teams and customers in the cloud through initiatives like Open DevOps and the recent acquisitions of ThinkTilt and Chartio.”

Atlassian’s earnings, adjusted for one-time gains and costs, were US48 cents per share, beating the average market expectations of 29 cents..

The results surpassed Wall Street expectations. The average estimate of 10 analysts surveyed by Zacks Investment Research was for earnings of 29 cents per share.

The company posted revenue of $568.7 million in the period, falling short of Street forecasts. Four analysts surveyed by Zacks expected $569.2 million.

Going into Thursday’s close, shares hit US$228.12, up 49% in a year.

Atlassian added 18,473 net new customers during Q3 for a total 212,807 customers. Nearly a third, 5,658 of the net new customers are single-user Trello accounts.

The company forecast revenue for the fourth quarter of US$513 million to $528 million.

Net loss per diluted share is expected to be approximately ($0.08) on an IFRS basis.