Business

Atlassian’s losses are outpacing its revenue growth

- August 2, 2024 3 MIN READ
Atlassian, Mike Cannon-Brookes, Scott Farquhar.
Atlassian cofounders Mike Cannon-Brookes and Scott Farquhar.
Atlassian has managed to treble its losses in fourth quarter of the 2024 fiscal year, at the same time revenue grew by 20%.

The Nasdaq-listed (TEAM) Australian workplace software giant posted a US$196.9 million net loss for the quarter, up from a $59 million loss for the same period last year.

Quarterly revenue hit US$1.132 billion, up 20% on 12 months ago, while subscription revenue grew by 34% to $1.069 billion.

The losses come amid predictions that total revenue growth in FY2025 will slow to 16% in the year ahead, with predicted cloud revenue growth 23%.

The company’s operating margin was also in decline, sitting at 20% for this quarter compared with 22% for the fourth quarter of FY23.

Atlassian’s revenue was up 24% year-on-year, to $US4.4bn to June 30, which was also lower that the 26% growth to $3.5bn in FY23.

The good news on the losses front is that Atlassian’s operating loss (GAAP) for FY24 fell to US$117.1 million, less than half of FY23 US$345.2m loss. The net loss sat at US$300.5m  in FY24, down from a loss of US$486.8m in FY23.

In 23 years, Atlassian has never finished a financial year in the black. That’s in part due to how debt in the business is structured in the US.

The business closed out the financial year with operating income of US$1.01 billion, up from $722.6 million in FY23, delivering free cash flow of $1.42bn for the year.

Gross profit for FY24 hit US$3.55bn, up from $2.9bn the previous year.

Cofounder Scott Farquhar, speaking as co-CEO for the final time, said he looks back on that period “filled with pride at what two mates from Australia built”.

“We created a global company with over 12,000 employees, tens of thousands of champions across the Atlassian ecosystem, and over 300,000 customers,” he said.

“And yet our best days are still ahead. I leave the co-CEO role knowing Atlassian is incredibly well-positioned to capitalise on the huge opportunities ahead and live its mission of unleashing the potential of every team. I look forward to continuing along the journey, albeit from a slightly different seat.”

Also watching from a different seat will be chief sales officer, Kevin Egan, who departs at the end of August “to pursue other opportunities” after three years. The business is also on the hunt for a Chief Revenue Officer “with a strong track record of leading enterprise sales transformations”.

Atlassian is nonetheless bullish on its prospects claiming it “has line of sight to surpass US$10 billion in annual revenue within the next five years”.

Cofounder, Mike Cannon-Brookes, who’ll continue as sole CEO, said they’d “once again proved to ourselves that we can accomplish big things” over the past 12 months.

“We grew revenue to $4.4 billion, generated free cash flow of over $1.4 billion, and surged past 300,000 customers,” he said.

“We announced transformative innovations for our customers like Rovo, the latest human-AI technology reshaping the way we work. We achieved significant milestones like FedRAMP’s “In Process” status, a huge step towards supporting the U.S. public sector in the cloud, and we wound down support for Server.”

Atlassian predicted total revenue in the first quarter of FY25 to be in the range of US$1.149bn to $1.157bn, alongside 27% YoY growth in cloud revenue and data centre revenue growth of 35%.

The company has also welcomed Scott Belsky, chief strategy officer and executive VP, design & emerging products at Adobe, to its board.

However, market reaction to Atlassian’s results was broadly disappointing and the company’s share price fell on the news, cutting the personal wealth of both Farquhar and Cannon-Brookes, who together own around 40% of the company, by around A$2 billion each.

Atlassian finds is share price down around 4.6% on 12 months ago, alongside a drop of around 3.6% over the past week to US$173.24.

Atlassian’s Q4 and FY24 balance sheet. Source: Atlassian

 

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