Atlassian Corporation Plc - Form 6-K Summary
Business Context and Reporting Period
Company: Atlassian Corporation Plc
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Quarter and nine months ended March 31, 2018
Filing Date: May 8, 2018
Business Overview: Atlassian designs, develops, and licenses software for team collaboration, project management, and content creation (e.g., Jira, Confluence, Trello). The company operates a self-service, low-touch distribution model with a mix of cloud subscription and on-premises perpetual license offerings.
Key Financial Metrics
| Metric (in thousands) | 3 Months Ended Mar 31, 2018 | 3 Months Ended Mar 31, 2017 | 9 Months Ended Mar 31, 2018 | 9 Months Ended Mar 31, 2017 |
|---|---|---|---|---|
| Total Revenues | $223,723 | $159,909 | $630,167 | $445,605 |
| Gross Profit | $178,483 | $127,014 | $501,673 | $363,249 |
| Gross Margin | 80% | 79% | 80% | 82% |
| Operating Loss | $(10,880) | $(23,063) | $(48,461) | $(30,830) |
| Net Loss | $(14,266) | $(17,461) | $(93,490) | $(21,796) |
| Net Loss Per Share (Diluted) | $(0.06) | $(0.08) | $(0.41) | $(0.10) |
| Operating Cash Flow | $91,676 | $72,923 | $229,253 | $148,784 |
| Free Cash Flow | $86,383 | $68,300 | $216,846 | $138,863 |
| Cash & Equivalents (Mar 31, 2018) | $393,513 | |||
| Short-term Investments (Mar 31, 2018) | $370,353 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 40% year-over-year (YoY) for the quarter and 41% for the nine-month period. Subscription revenue grew 67% (quarter) and 68% (nine months), now representing 47% of total revenue.
- Operating Expenses: Operating expenses increased significantly due to strategic investments. Research and Development (R&D) rose 32% (quarter) and 39% (nine months). Marketing and Sales expenses rose 33% (quarter) and 56% (nine months), driven by amortization of acquired intangible assets and headcount growth.
- Profitability: While the company remains unprofitable on an IFRS basis, the operating loss narrowed significantly in the quarter (from $23.1M to $10.9M). However, the nine-month net loss widened to $93.5M from $21.8M, primarily due to a $49.4M tax expense.
- Tax Impact: The effective tax rate was negatively impacted by the U.S. Tax Cuts and Jobs Act (revaluation of deferred tax assets) and a write-off of deferred tax assets totaling $53.4M in the nine-month period.
- Customer Base: Total customers grew to 119,158 as of March 31, 2018, up from 85,031 a year prior.
Guidance, Outlook, and Risks
- Subsequent Event (Debt Offering): On April 24, 2018, Atlassian priced a private offering of $850 million in 0.625% Cash Exchangeable Senior Notes due May 1, 2023. On May 2, 2018, the option was exercised for an additional $150 million, bringing the total to $1 billion. Proceeds are for working capital and general corporate purposes.
- Outlook: Management expects continued investment in R&D and cloud infrastructure. They anticipate subscription revenue growth will outpace perpetual license revenue. The company does not expect to achieve IFRS profitability in the near term due to significant investments and share-based compensation.
- Key Risks:
- Competition: Intense competition from large vendors (Microsoft, Google, Salesforce) and point-product competitors.
- Cloud Transition: Risks associated with scaling cloud infrastructure and the potential for lower initial revenue recognition compared to perpetual licenses.
- Regulatory: Compliance with GDPR (effective May 25, 2018) and global data privacy laws.
- Customer Retention: Reliance on customers renewing subscriptions and maintenance plans; no long-term contracts for most customers.
Investor Verification Checklist
- Debt Structure: Verify the terms and potential dilution impact of the $1 billion Cash Exchangeable Senior Notes issued in April/May 2018.
- Tax Provision: Review the specific impact of the U.S. Tax Cuts and Jobs Act and the $53.4M deferred tax asset write-off on future effective tax rates.
- Non-IFRS Metrics: Compare IFRS results with Non-IFRS (Adjusted) metrics, which exclude share-based compensation and amortization, to assess core operational performance.
- Cloud Migration: Monitor the ratio of subscription revenue to total revenue to gauge the success of the transition from on-premises to cloud models.
- Customer Concentration: Confirm that no single customer accounts for more than 1% of revenue, as stated in the filing.