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Atlassian’s quarterly revenue is up 24%, but last year’s profit has turned into a $240 million loss

- May 5, 2023 2 MIN READ
Atlassian, Mike Cannon-Brookes, Scott Farquhar.
Atlassian cofounders and co-CEOs Mike Cannon-Brookes and Scott Farquhar.

Atlassian’s March quarter revenue has grown 24% on 12 months ago to $915 million (A$1.365bn), with subscription revenue up 37% to $761 million (A$1.136bn), but last year’s US$32.9 million profit has turned into an operating loss of US$161.6 million (A$240m) for Q3 in FY2023.

The US-listed (NASDAQ: TEAM) Australian workplace software giant released its quarterly results this morning, posting a net loss of US$209 million for the quarter, compared with a net income of $4.7 million for the same period last year. The loss includes restructuring and income tax charges totalling US$139.5 million.

In March the company announced it was cutting its workforce by around 5%, some 500 staff, in what co-CEOs Scott Farquhar and Mike Cannon-Brookes described as a “rebalancing” of the business. The redundancies were predicted at the time to cost around US$70-75 million (A$105-112m), including US$27-29 million in severance and benefits payments,

In their quarterly shareholder letter, Farquhar and Cannon-Brookes said there were “massive growth opportunities in front of us” including cloud migrations, ITSM, and serving enterprise customers in the cloud.

“Our unique business model allows us to move quickly as new technologies emerge. When advances in generative AI exploded onto the scene early this year, we already had years’ worth of experience building AI-powered features,” they said

“Now we can combine large language models (LLMs) with our existing machine learning models, and deliver results tailored for the customer’s context to create entirely new, hyper-customized experiences.”

Atlassian Intelligence was announced at the company’s annual Team 23 conference last month. It’s a virtual teammate built on its machine learning models and technology from OpenAI that creates, summarises and extracts information from a customer’s content in its products.

“With more than 20 years of knowledge reflecting how hundreds of thousands of software, IT, and business teams plan, track, and deliver work, Atlassian Intelligence has a unique understanding of teamwork. We are beyond thrilled about AI’s ability to unleash our customers’ potential and strengthen our competitive advantage,” Cannon-Brookes said.

His cofounder Scott Farquar said the company had a solid solid quarter with its financial results, which exceeded their revenue expectations

“Our customers are turning to Atlassian for help to transform the way work gets done and we’re incredibly excited about the significant opportunities in front of us,” he said.

“We’ve made tough calls and now, looking ahead, we’re laser-focused on executing to drive faster at our largest growth opportunities and strategic initiatives.”

Cash and cash equivalents, plus marketable securities at the end of the Q3 totalled US$2 billion.

Operating income grew by nearly US$20 million to US$197.1 million for Q3, compared with operating income of $177.4m 12 months ago, but Atlassian’s operating margin fell 2% to 22% for this quarter, compared with 24% in 2022.

Cash flow from operations was $352.4 million and free cash flow was $349.7 million for the third quarter of fiscal year 2023. The total active customer subscription or maintenance agreements grew by 6,598 to 259,775 customers during the quarter.

Atlassian predicts fourth quarter revenue of between US$900 million and $920 million. An operating margin loss of 11% on a GAAP basis is expected for the quarter.

The March quarter loss follows a US$99.2 million loss in the December quarter, again a turnaround on a US$23 million profit in the final quarter of 2022.

Atlassian as not yet posted a full-year profit in its 20+ years.

The company’s shares fell nearly 13% in after hours trade following the latest results release to around US$131. Atlassian shares are down 29.5% on 12 months ago.

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