Atlassian’s long history of financial losses continues into the company’s 21st year, despite strong revenue growth, posting quarterly revenue of US$939 million, up 24% on 12 months ago, in the fourth quarter of the 2023 financial year to June 30.
The tech giant’s (NASDAQ: TEAM) quarterly operating loss grew too, up from US$42.3 million in Q4 FY22 to US$50.4 million for this quarter.
The net loss was US$59 million in Q4 FY23, an improvement on a US$90.6 million quarterly net loss 12 months earlier.
Atlassian posted quarterly cash flow from operations of US$273m and free cash flow of US$270m.
Atlassian shares just by more than 20% in after-hours trading on the news, with the results beating analyst expectations for earnings (US57c per share) and revenue, as co-CEOs Scott Farquhar and Mike Cannon-Brookes told shareholders they expect operating margins to improve by the middle of next year.
“Starting in FY25, we expect operating margins to expand from the FY24 guidance we’re providing today and begin trending towards the historical margins Atlassian is known for, driven by durable revenue growth combined with moderating investment in areas we’ve accelerated over the past two years, like cloud migrations,” they wrote in their letter to shareholders.
In the financial year ahead, the company is predicts a gross margin is expected to be approximately 81% on a GAAP (generally accepted accounting principles) basis.
On a GAAP basis, Atlassian reported total revenue of US$3.5 billion for FY23, up 26% from 12 months ago, but that also came with an operating loss of US$345.2 million (A$526m) in the 2023 fiscal year, compared with operating income of US$70.1 million for FY22. Operating margin was (10)% for fiscal year 2023, compared with 3% for fiscal year 2022.
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,
After 11 years with the business, including the last three as chief revenue officer, Cameron Deatsch, will leave Atlassian at the end of December. Cameron joined Atlassian almost 11 years ago, and during that time has built out its customer-facing teams, served a, and led Atlassian’s go-to-market functions as Chief Revenue Officer over the past three years. Cameron will leave behind a team that has helped shape one of the most unique enterprise software business models with a customer-oriented flywheel built for scale, complemented by higher-touch motions to deepen relationships with enterprise customers.
Farquhar paid tribute to Cameron saying he “made an immeasurable contribution”, having also been head of server & data centre product teams.
“His impact is widespread and will live on through the teams and leaders he’s developed, the customer obsession he’s championed, and the culture he’s instilled,” he said.
“Mike and I thank him for an incredible decade, and wish him the very best.”
Farquhar said they ended the financial year with more than 260,000 customers, with cloud revenue growth in the year ahead expected to be 25% to 30%.
“We closed out a challenging year with strong momentum in cloud migrations, enterprise sales, and within the ITSM market, reinforcing our conviction in our strategy which has positioned us well for fiscal year 2024 and beyond,” he said.
Atlassian generated more than US$2 billion in cloud revenue last financial year.
His cofounder and co-CEO, Cannon-Brookes, said their continued investment in R&D helped deliver innovation that take advantage of the next generation of AI.
“By leveraging the latest advancements in large language models, combined with each customer’s own data and two decades of our data-driven insights into how teams work, we’re able to help each of our customers unleash their potential,” he said.
The business offered Q1 FY24 guidance for total revenue in the range of US$950m-$970m, with cloud revenue growth year-over-year in the range of 25% to 27%, and gross margin of around 81% on a GAAP basis.
But the losses are expected to continue with the operating margin guidance at negative 8%.
The duo said their guidance assumes the macroeconomic environment continues to negatively impact growth in paid seat expansion at existing customers and free-to-paid conversion rates,