Atlassian Corporation Plc - Q1 2018 Financial Summary (Form 6-K)
Business Context and Reporting Period
This filing covers the three-month period ended September 30, 2017 (Q1 of fiscal year 2018). Atlassian Corporation Plc is a UK-incorporated foreign private issuer providing collaboration and productivity software (Jira, Confluence, Trello, Bitbucket, etc.) via cloud and on-premises models. The company operates globally with a self-service, low-touch sales model.
Key Financial Metrics
| Metric (in thousands, except per share) | Q1 2018 (Sep 30, 2017) | Q1 2017 (Sep 30, 2016) |
|---|---|---|
| Total Revenues | $193,818 | $136,787 |
| Gross Profit | $153,728 | $114,225 |
| Gross Margin | 79% | 84% |
| Operating Loss | $(22,325) | $(5,128) |
| Net Loss | $(13,994) | $(2,637) |
| Net Loss Per Share (Diluted) | $(0.06) | $(0.01) |
| Operating Cash Flow | $65,249 | $28,462 |
| Free Cash Flow | $62,685 | $26,071 |
| Cash & Equivalents (End of Period) | $305,871 | $266,745 |
| Short-term Investments | $307,669 | $305,499 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 42% year-over-year to $193.8 million. Subscription revenue grew 69% to $84.4 million, while maintenance revenue grew 24% to $76.3 million.
- Expense Increases: Operating expenses rose 48% to $176.1 million. Research and Development (R&D) increased 41% to $94.9 million, and Marketing and Sales increased 82% to $45.5 million.
- Profitability: The operating loss widened from $5.1 million to $22.3 million, and net loss increased from $2.6 million to $14.0 million. This was driven by significant investments in personnel, share-based compensation ($44.1 million vs. $30.5 million), and amortization of acquired intangibles ($14.3 million vs. $2.4 million).
- Customer Base: Total customers grew to 107,746 (up from 65,673), aided by the Trello acquisition and Bitbucket Cloud pricing changes.
- Cash Flow: Despite the net loss, operating cash flow more than doubled to $65.2 million, driven by non-cash adjustments and a $22.2 million increase in deferred revenue.
Outlook, Risks, and Unusual Items
- Non-IFRS Metrics: Management highlights Non-IFRS operating income of $36.1 million and Non-IFRS net income of $29.9 million, excluding share-based compensation and amortization.
- Future Investments: The company expects continued increases in R&D and cloud infrastructure costs. Capital expenditures are anticipated to rise to support new office facilities, including a new 133,000 sq. ft. lease in Mountain View, CA (signed Oct 2017).
- Accounting Changes: Atlassian plans to adopt IFRS 15 (Revenue from Contracts with Customers) on July 1, 2018, using the full retrospective method. The impact is currently not estimable but may accelerate revenue recognition for term-based licenses.
- Risks: Key risks include intense competition (Microsoft, Google, Slack), reliance on a limited number of products (Jira/Confluence), cybersecurity threats, and foreign currency fluctuations (significant expenses in Australian dollars).
Investor Verification Checklist
- Revenue Mix: Verify the continued shift from perpetual licenses to subscription revenue and its impact on long-term recurring revenue stability.
- Share-Based Compensation: Assess the sustainability of the $44.1 million quarterly expense and its impact on future profitability.
- Customer Retention: Confirm retention rates and expansion revenue, as the company does not track individual customer retention rates explicitly.
- Cloud Transition: Monitor the pace of migration to cloud offerings and associated infrastructure costs.
- IFRS 15 Impact: Review future filings for the specific impact of the new revenue recognition standard on financial statements.