Atlassian Announces Second Quarter Fiscal Year 2019 Results

Quarterly Revenue of $299.0 Million, up 39% Year-Over-Year

Atlassian Corporation Plc, a leading provider of team collaboration and productivity software, announced financial results for its second quarter of fiscal 2019 ended December 31, 2018 and released a shareholder letter on the Investor Relations section of its website at https://investors.atlassian.com. All financial results and targets are based on the new revenue recognition standard IFRS 15, which the company adopted on July 1, 2018.

“The second quarter of fiscal 2019 capped off a fantastic 2018, as we eclipsed $1 billion in calendar year revenue for the first time,” said Scott Farquhar, Atlassian’s co-CEO and co-founder. “The quarter also highlighted the growing demand for Atlassian products to drive digital transformation in businesses large and small. Our flagship product, Jira Software, surpassed 65,000 customers, and we ended the quarter with more than 138,000 total customers, underscoring the growth opportunity for Jira just within our installed base.”

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Second Quarter Fiscal Year 2019 Financial Highlights:

On an IFRS basis, Atlassian reported:

• Revenue: Total revenue was $299.0 million for the second quarter of fiscal 2019, up 39% from $214.6 million for the second quarter of fiscal 2018.
• Operating Loss and Operating Margin: Operating loss was $3.2 million for the second quarter of fiscal 2019, compared with $13.0 million for the second quarter of fiscal 2018. Operating margin was (1%) for the second quarter of fiscal 2019, compared with (6%) for the second quarter of fiscal 2018.
• Net Income/Loss and Net Income/Loss Per Diluted Share: Net income was $45.2 million for the second quarter of fiscal 2019, compared with a net loss of $64.2 million for the second quarter of fiscal 2018. Net income per diluted share was $0.18 for the second quarter of fiscal 2019, compared with a net loss per diluted share of $0.28 for the second quarter of fiscal 2018.
  Net income for the second quarter of fiscal 2019 included a non-cash gain recorded in “other non-operating income” of $31.3 million, as a result of marking to fair value the exchange feature of Atlassian’s exchangeable senior notes and the related capped calls.
• Balance Sheet: Cash and cash equivalents, and short-term investments at the end of the second quarter of fiscal 2019 totaled $1.6 billion.

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On a non-IFRS basis, Atlassian reported:

• Operating Income and Operating Margin: Operating income was $74.8 million for the second quarter of fiscal 2019, compared with $46.7 million for the second quarter of fiscal 2018. Operating margin was 25% for the second quarter of fiscal 2019, compared with 22% for the second quarter of fiscal 2018.
• Net Income and Net Income Per Diluted Share: Net income was $61.7 million for the second quarter of fiscal 2019, compared with $32.0 million for the second quarter of fiscal 2018. Net income per diluted share was $0.25 for the second quarter of fiscal 2019, compared with $0.13 per diluted share for the second quarter of fiscal 2018.
• Free Cash Flow: Cash flow from operations for the second quarter of fiscal 2019 was $130.4 million, while capital expenditures totaled $7.8 million, resulting in free cash flow of $122.6 million, an increase of 81% year-over-year. Free cash flow margin for the second quarter of fiscal 2019 was 41%.

A reconciliation of IFRS to non-IFRS financial measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below, under the heading “About Non-IFRS Financial Measures.”

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Recent Business Highlights:

• Customer growth: Atlassian ended the second quarter of fiscal 2019 with a total customer count, on an active subscription or maintenance agreement basis, of 138,235. Atlassian added 6,551 net new customers during the quarter; this number benefited from an increase of 1,396 customers as a result of our acquisition of Opsgenie during the quarter. Excluding Opsgenie, Atlassian added 5,155 net new customers during the quarter.
• Opsgenie acquisition closing: On October 1, 2018, Atlassian closed its acquisition of Opsgenie, whose technology enables companies to better plan for and respond to IT service disruptions. When outages occur, Opsgenie’s technology quickly routes alerts to the appropriate IT teams, speeding diagnosis and resolution, and reducing downtime. The acquisition was valued at approximately $295 million, of which approximately $259 million was paid in cash and the remainder in Atlassian restricted shares subject to continued vesting provisions.
• Acquisition of Butler for Trello: In December, Atlassian announced the acquisition of one of Trello’s most popular integrations, Butler for Trello, bringing the power of workplace automation to Trello boards. Trello will incorporate Butler’s automation technology to allow teams of all kinds, such as HR, marketing, and finance, to codify business processes. With Butler’s technology, Trello users can take tasks that might require multiple manual steps and automate them into one click.
• Investor session at Atlassian Summit 2019 – April 10, 2019: Atlassian will hold its Summit user conference in Las Vegas for the first time, at the Mandalay Bay South Convention Center, from April 9-11, 2019. The company will host an Investor session at Summit 2019 on April 10. General information on Atlassian Summit 2019 can be found at https://www.atlassian.com/company/events/summit.

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Financial Targets:

Atlassian is providing its financial targets for the third quarter and full fiscal year 2019. The company’s financial targets are as follows:

• Third Quarter Fiscal Year 2019:
  • Total revenue is expected to be in the range of $303 million to $305 million.
  • Gross margin is expected to be approximately 82% on an IFRS basis and approximately 86% on a non-IFRS basis.
  • Operating margin is expected to be approximately (10%) on an IFRS basis and approximately 17% on a non-IFRS basis.
  • Net loss per diluted share is expected to be approximately ($0.14) on an IFRS basis, and net income per diluted share is expected to be approximately $0.18 on a non-IFRS basis.
  • Weighted average share count is expected to be in the range of 238 million to 239 million shares when calculating diluted IFRS net loss per share and in the range of 248 million to 250 million shares when calculating diluted non-IFRS net income per share.
• Fiscal Year 2019:
  • Total revenue is expected to be in the range of $1,195 million to $1,199 million.
  • Gross margin is expected to be approximately 83% on an IFRS basis and approximately 86% on a non-IFRS basis.
  • Operating margin is expected to be in the range of (6%) to (5.5%) on an IFRS basis and in the range of 20% to 20.5% on a non-IFRS basis.
  • Net loss per diluted share is expected to be in the range of ($1.07) to ($1.06) on an IFRS basis, and net income per diluted share is expected to be in the range of $0.81 to $0.82 on a non-IFRS basis.
  • Weighted average share count is expected to be in the range of 238 million to 240 million shares when calculating diluted IFRS net loss per share and in the range of 248 million to 250 million shares when calculating diluted non-IFRS net income per share.
  • Cash flow from operations is expected to be in the range of $410 million to $420 million and free cash flow is expected to be in the range of $370 million to $380 million, which includes capital expenditures that are expected to be approximately $40 million.

With respect to Atlassian’s expectations under “Financial Targets” above, a reconciliation of IFRS to non-IFRS gross margin, operating margin, net income per diluted share, and free cash flow has been provided in the financial statement tables included in this press release.

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Shareholder Letter and Webcast/Conference Call Details

A detailed shareholder letter is available on the Investor Relations section of Atlassian’s website at: https://investors.atlassian.com. Atlassian will host a webcast and conference call to answer questions today:

• When: Thursday, January 17, 2019 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time).
• Webcast: A live webcast of the call can be accessed from the Investor Relations section of Atlassian’s website at: https://investors.atlassian.com. Following the call, a replay will be available on the same website.
• Dial in: To access the call via telephone in North America, please dial 1-888-346-0688. For international callers, please dial 1-412-902-4250. Participants should request the “Atlassian call” after dialing in.
• Audio replay: An audio replay of the call will be available via telephone for seven days, beginning two hours after the call. To listen to the replay in North America, please dial 1-877-344-7529 (access code 10127151). International callers, please dial 1-412-317-0088 (access code 10127151).

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