Form 6-K Atlassian Corp Plc For: Oct 27
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
October 27, 2016
Commission File Number 001-37651
Atlassian Corporation Plc
(Translation of registrant’s name into English)
Exchange House
Primrose Street
London EC2A 2EG
c/o Herbert Smith Freehills LLP
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F:
Form 20-F x Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
Results of Operations and Financial Condition.
On October 27, 2016, Atlassian Corporation Plc (the “Company”) issued a press release announcing its results for the fiscal quarter ended September 30, 2016. A copy of the press release is attached as Exhibit 99.1 to this report on Form 6-K and is incorporated by reference herein. The Company also issued a letter to its shareholders announcing its financial results for the quarter ended September 30, 2016 (the “Shareholder Letter”). The full text of the Shareholder Letter is attached as Exhibit 99.2 to this report on Form 6-K and is incorporated by reference herein.
The information in this report on Form 6-K and the exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: | October 27, 2016 | Atlassian Corporation Plc | |
(Registrant) | |||
/S/ MURRAY J. DEMO | |||
Murray J. Demo Chief Financial Officer (Principal Financial and Accounting Officer) | |||
Exhibit Index
Exhibit Number | Exhibit Title |
99.1 | Press Release dated October 27, 2016. |
99.2 | Shareholder Letter, dated October 27, 2016. |
Atlassian Announces First Quarter Fiscal Year 2017 Results
Quarterly revenue of $136.8 million, up 34% year-over-year
Quarterly IFRS operating loss of $5.1 million and non-IFRS operating income of $27.8 million
Quarterly free cash flow of $26.1 million
SAN FRANCISCO (October 27, 2016) — Atlassian Corporation Plc (NASDAQ: TEAM), a leading provider of team collaboration and productivity software, today announced financial results for the first quarter of fiscal 2017 ended September 30, 2016, and released a shareholder letter on the Investor Relations section of its website at https://investors.atlassian.com.
“We had a great start to fiscal 2017, highlighted by Atlassian Summit, our annual user conference," said Scott Farquhar, Atlassian’s co-CEO and co-founder. "This was our largest Summit to date, with over 3,200 attendees from 35 countries. Summit showcased innovation across our product stack, with highlights including new JIRA Service Desk capabilities for external customer service and support use cases, real-time collaborative editing for Confluence and several firsts for our data center platform, including the introduction of AWS support for JIRA Software Data Center and Bitbucket Data Center, and the beta launch of HipChat Data Center.”
First Quarter Fiscal Year 2017 Financial Highlights:
On an IFRS basis, Atlassian reported:
• | Revenue: Total revenue was $136.8 million for the first quarter of fiscal 2017, up 34% from $101.8 million for the first quarter of fiscal 2016. |
• | Operating Loss: Operating loss was $5.1 million for the first quarter of fiscal 2017, compared with operating income of $7.1 million for the first quarter of fiscal 2016. |
• | Net Loss and Net Loss Per Diluted Share: Net loss was $2.6 million for the first quarter of fiscal 2017, compared with net income of $5.1 million for the first quarter of fiscal 2016. Net loss per diluted share was $0.01 for the first quarter of fiscal 2017, compared with net income per diluted share of $0.03 for the first quarter of fiscal 2016. |
• | Balance Sheet: Cash and cash equivalents and short-term investments at the end of the first quarter of fiscal 2017 totaled $754.3 million. |
On a non-IFRS basis, Atlassian reported:
• | Operating Income: Operating income was $27.8 million for the first quarter of fiscal 2017, compared with $22.9 million for the first quarter of fiscal 2016. |
• | Net Income and Net Income Per Diluted Share: Net income was $22.7 million for the first quarter of fiscal 2017, compared with $18.4 million for the first quarter of fiscal 2016. Net income per diluted share was $0.10 for the first quarter of fiscal 2017, compared with $0.11 per diluted share for the first quarter of fiscal 2016. |
• | Free Cash Flow: Cash flow from operations for the first quarter of fiscal 2017 was $28.5 million, while capital expenditures totaled $2.4 million, leading to free cash flow of $26.1 million, an increase of 216% year-over-year. |
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 first quarter of fiscal 2017 with a total customer count on an active subscription or maintenance agreement basis of 65,673, a 27% increase over September 30, 2015. Atlassian added 4,723 net new customers during the quarter. Net new customers during the quarter were higher than typical as we benefited from a one-time increase in customers following our acquisition of StatusPage this quarter. Excluding StatusPage, Atlassian ended the first quarter of fiscal 2017 with a total customer count of 64,246, a 24% increase over September 30, 2015. Net new customers during the quarter excluding StatusPage were approximately 3,296. |
• | Atlassian Marketplace: With over 2,000 add-ons designed to enhance Atlassian products, the Atlassian Marketplace is one of the largest enterprise software marketplaces and passed a new milestone, surpassing more than $200 million in lifetime sales since its inception in 2012. |
• | JIRA Service Desk for external customer support: Atlassian expanded the reach of JIRA Service Desk beyond internal service organizations by introducing features designed to support external customers. These include features such as increased support for customer organizations, enabling end users within the same company to share and collaborate on each other's support tickets, and enhanced branding and customization of emails to support customers' communications with their customers. |
Financial Targets:
Atlassian is providing its financial targets for the second quarter and full fiscal year 2017. The company’s financial targets are as follows:
• | Second Quarter Fiscal Year 2017: |
• | Total revenue is expected to be in the range of $142.5 million to $144.5 million. |
• | Gross margin is expected to be approximately 82% on an IFRS basis and approximately 84% on a non-IFRS basis. |
• | Operating margin is expected to be approximately (8%) on an IFRS basis and approximately 16% on a non-IFRS basis. |
• | Weighted-average share count is expected to be in the range of 234 million to 236 million shares on a fully diluted basis. |
• | Net loss per diluted share is expected to be approximately ($0.03) on an IFRS basis, and net income per diluted share is expected to be approximately of $0.08 on a non-IFRS basis. |
• | Fiscal Year 2017: |
• | Total revenue is expected to be in the range of $597 million to $603 million. |
• | Gross margin is expected to be in the range of 82% to 83% on an IFRS basis and in the range of 84% to 85% on a non-IFRS basis. |
• | Operating margin is expected to be approximately (10%) on an IFRS basis and approximately 16% on a non-IFRS basis. |
• | Weighted-average share count is expected to be in the range of 234 million to 236 million shares on a fully diluted basis. |
• | Net loss per diluted share is expected to be in the range of ($0.18) to ($0.17) on an IFRS basis, and net income per diluted share is expected to be in the range of $0.33 to $0.34 on a non-IFRS basis. |
• | Free cash flow is expected to be in the range of $155 million to $165 million, which factors in capital expenditures that are expected to be approximately $15 million in fiscal 2017. |
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 have 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, October 27, 2016 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 10093166). International callers, please dial 1-412-317-0088 (access code 10093166). |
Atlassian has used, and intends to continue to use, its Investor Relations website at https://investors.atlassian.com as a means of disclosing material non-public information and for complying with its disclosure obligations.
About Atlassian
Atlassian unleashes the potential in every team. Our collaboration software helps teams organize, discuss and complete shared work. Teams at more than 65,000 large and small organizations - including Citigroup, eBay, Coca-Cola, Visa, BMW and NASA - use Atlassian's project tracking, content creation and sharing, real-time communication and service management products to work better together and deliver quality results on time. Learn about products including JIRA Software, Confluence, HipChat, Bitbucket and JIRA Service Desk at https://atlassian.com.
Investor Relations Contact
Ian Lee
Media Contact
Heather Staples
Forward-Looking Statements
This press release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as “may,” “will,” “should,” “might,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that articulate our expectations, strategy, plans or intentions. Forward-looking statements contained in this press release include, but are not limited to, statements about our products, including our investments in products, technology and other key strategic areas and our financial targets such as revenue, share count and IFRS and non-IFRS financial measures including gross margin, operating margin, net income per diluted share and free cash flow.
Atlassian undertakes no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.
The achievement or success of the matters covered by such forward-looking statements involves known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, Atlassian’s results could differ materially from the results expressed or implied by the forward-looking statements we make. You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management’s beliefs and assumptions only as of the date such statements are made.
Further information on these and other factors that could affect Atlassian’s financial results is included in filings it makes with the Securities and Exchange Commission from time to time, including the section titled “Risk Factors” in
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the company’s Form 20-F previously filed with the SEC. These documents are available on the SEC Filings section of the Investor Relations section of Atlassian’s website at: https://investors.atlassian.com.
About Non-IFRS Financial Measures
Our reported results and financial targets include certain non-IFRS financial measures, including non-IFRS gross profit, non-IFRS operating income, non-IFRS net income, non-IFRS net income per diluted share, and free cash flow. Management believes that the use of non-IFRS financial measures provides consistency and comparability with our past financial performance, facilitates period-to-period comparisons of our results of operations, and also facilitates comparisons with peer companies, many of which use similar non-IFRS or non-GAAP financial measures to supplement their IFRS or GAAP results. Non-IFRS results are presented for supplemental informational purposes only to aid in understanding our operating results. The non-IFRS results should not be considered a substitute for financial information presented in accordance with IFRS, and may be different from non-IFRS or non-GAAP measures used by other companies.
Our non-IFRS financial measures reflect adjustments based on the items below:
• | Non-IFRS gross profit. Excludes expenses related to share-based compensation and amortization of acquired intangible assets. |
• | Non-IFRS operating income. Excludes expenses related to share-based compensation and amortization of acquired intangible assets. |
• | Non-IFRS net income and non-IFRS net income per diluted share. Excludes expenses related to share- based compensation, amortization of acquired intangible assets and related income tax effects on these items. |
• | Free cash flow. Free cash flow is defined as net cash provided by operating activities less capital expenditures, which consists primarily of purchases of property and equipment. |
We exclude expenses related to share-based compensation, amortization of acquired intangible assets and income tax effect on these items from certain of our non-IFRS financial measures as we believe this helps investors understand our operational performance. In addition, share-based compensation expense can be difficult to predict and varies from period to period and company to company due to differing valuation methodologies, subjective assumptions and the variety of equity instruments, as well as changes in stock price. Management believes that providing non-IFRS financial measures that exclude share-based compensation expense, amortization of acquired intangible assets and the tax effects of those items allow for more meaningful comparisons between our operating results from period to period.
We include the effect of our outstanding share options and restricted share units (“RSUs”) in weighted-average shares used in computing non-IFRS net income per diluted share. IFRS excludes the impact of the full weighting of these outstanding equity awards until the effectiveness of our initial public offering (“IPO”). We have presented the full weighting impact of these additional shares from previously granted share options and RSUs, as if they were outstanding from the date of grant, in order to provide investors with insight into the full impact of all potentially dilutive awards outstanding and to provide comparability.
Management considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business, making strategic acquisitions and strengthening our statement of financial position.
Management uses non-IFRS gross profit, non-IFRS operating income, non-IFRS net income, non-IFRS net income per diluted share and free cash flow:
• | As measures of operating performance, because these financial measures do not include the impact of items not directly resulting from our core operations; |
• | For planning purposes, including the preparation of our annual operating budget; |
• | To allocate resources to enhance the financial performance of our business; |
• | To evaluate the effectiveness of our business strategies; and |
• | In communications with our board of directors concerning our financial performance. |
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The tables in this press release titled “Reconciliation of IFRS to Non-IFRS Results” and “Reconciliation of IFRS to Non-IFRS Financial Targets” provide reconciliations of non-IFRS financial measures to the most recent directly comparable financial measures calculated and presented in accordance with IFRS.
We understand that although non-IFRS gross profit, non-IFRS operating income, non-IFRS net income, non-IFRS net income per diluted share and free cash flow are frequently used by investors and securities analysts in their evaluation of companies, these measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results of operations as reported under IFRS.
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Atlassian Corporation Plc
Consolidated Statements of Operations
(U.S. $ and shares in thousands, except per share data)
(unaudited)
Three Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Revenues: | |||||||
Subscription | $ | 49,931 | $ | 30,467 | |||
Maintenance | 61,741 | 50,354 | |||||
Perpetual license | 17,501 | 15,501 | |||||
Other | 7,614 | 5,500 | |||||
Total revenues | 136,787 | 101,822 | |||||
Cost of revenues (1) (2) | 22,562 | 16,420 | |||||
Gross profit | 114,225 | 85,402 | |||||
Operating expenses: | |||||||
Research and development (1) | 67,458 | 45,460 | |||||
Marketing and sales (1) (2) | 24,980 | 16,262 | |||||
General and administrative (1) | 26,915 | 16,602 | |||||
Total operating expenses | 119,353 | 78,324 | |||||
Operating income (loss) | (5,128 | ) | 7,078 | ||||
Other non-operating income (expense), net | (63 | ) | (603 | ) | |||
Finance income | 1,322 | 46 | |||||
Finance costs | (7 | ) | (8 | ) | |||
Income (loss) before income tax benefit (expense) | (3,876 | ) | 6,513 | ||||
Income tax benefit (expense) | 1,239 | (1,431 | ) | ||||
Net income (loss) | $ | (2,637 | ) | $ | 5,082 | ||
Net income (loss) per share attributable to ordinary shareholders: | |||||||
Basic | $ | (0.01 | ) | $ | 0.03 | ||
Diluted | $ | (0.01 | ) | $ | 0.03 | ||
Weighted-average shares outstanding used to compute net income (loss) per share attributable to ordinary shareholders: | |||||||
Basic | 218,504 | 144,008 | |||||
Diluted | 218,504 | 145,513 | |||||
(1)Amounts include share-based payment expense, as follows:
Three Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Cost of revenues | $ | 1,339 | $ | 1,206 | |||
Research and development | 16,999 | 5,921 | |||||
Marketing and sales | 3,515 | 2,742 | |||||
General and administrative | 8,670 | 4,227 | |||||
(2)Amounts include amortization of acquired intangible assets, as follows:
Three Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Cost of revenues | $ | 2,202 | $ | 1,745 | |||
Marketing and sales | 196 | 21 | |||||
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Atlassian Corporation Plc
Consolidated Statements of Financial Position
(U.S. $ in thousands)
September 30, 2016 | June 30, 2016 | ||||||
(unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 266,745 | $ | 259,709 | |||
Short-term investments | 487,599 | 483,405 | |||||
Trade receivables | 14,898 | 15,233 | |||||
Current tax receivables | 7,506 | 6,013 | |||||
Prepaid expenses and other current assets | 21,256 | 14,178 | |||||
Total current assets | 798,004 | 778,538 | |||||
Non-current assets: | |||||||
Property and equipment, net | 54,557 | 58,762 | |||||
Deferred tax assets | 147,433 | 127,411 | |||||
Goodwill | 22,697 | 7,138 | |||||
Intangible assets, net | 19,907 | 13,577 | |||||
Other non-current assets | 5,649 | 5,547 | |||||
Total non-current assets | 250,243 | 212,435 | |||||
Total assets | $ | 1,048,247 | $ | 990,973 | |||
Liabilities | |||||||
Current liabilities: | |||||||
Trade and other payables | $ | 48,572 | $ | 57,886 | |||
Current tax liabilities | 2,855 | 286 | |||||
Provisions | 5,169 | 4,716 | |||||
Deferred revenue | 180,603 | 173,612 | |||||
Total current liabilities | 237,199 | 236,500 | |||||
Non-current liabilities: | |||||||
Deferred tax liabilities | 10,248 | 6,639 | |||||
Provisions | 2,197 | 2,170 | |||||
Deferred revenue | 8,313 | 7,456 | |||||
Other non-current liabilities | 9,520 | 6,545 | |||||
Total non-current liabilities | 30,278 | 22,810 | |||||
Total liabilities | $ | 267,477 | $ | 259,310 | |||
Equity | |||||||
Share capital | $ | 22,000 | $ | 21,620 | |||
Share premium | 446,134 | 441,734 | |||||
Other capital reserves | 290,550 | 244,335 | |||||
Other components of equity | 5,448 | 4,699 | |||||
Retained earnings | 16,638 | 19,275 | |||||
Total equity | $ | 780,770 | $ | 731,663 | |||
Total liabilities and equity | $ | 1,048,247 | $ | 990,973 | |||
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Atlassian Corporation Plc
Consolidated Statements of Cash Flows
(U.S. $ in thousands)
(unaudited)
Three Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Operating activities | |||||||
Income (loss) before income tax | $ | (3,876 | ) | $ | 6,513 | ||
Adjustments to reconcile income (loss) before income tax to net cash provided by operating activities: | |||||||
Depreciation and amortization | 8,042 | 4,534 | |||||
Gain on sale of other assets | (342 | ) | — | ||||
Net unrealized foreign currency loss (gain) | (93 | ) | 564 | ||||
Share-based payment expense | 30,523 | 14,096 | |||||
Interest income | (1,322 | ) | (46 | ) | |||
Changes in assets and liabilities: | |||||||
Trade receivables | 627 | 1,278 | |||||
Prepaid expenses and other assets | (5,186 | ) | (4,124 | ) | |||
Trade and other payables, provisions and other non-current liabilities | (8,534 | ) | (10,708 | ) | |||
Deferred revenue | 7,688 | 6,701 | |||||
Interest received | 2,296 | 83 | |||||
Income tax paid, net of refunds | (1,361 | ) | (4,487 | ) | |||
Net cash provided by operating activities | 28,462 | 14,404 | |||||
Investing activities | |||||||
Business combinations, net of cash acquired | (18,295 | ) | — | ||||
Purchases of property and equipment | (2,391 | ) | (6,155 | ) | |||
Proceeds from sale of other assets | 342 | — | |||||
Purchases of investments | (151,736 | ) | (4,400 | ) | |||
Proceeds from maturities of investments | 34,850 | 19,582 | |||||
Proceeds from sales of investments | 111,882 | — | |||||
Payment of deferred consideration | (185 | ) | (1,025 | ) | |||
Net cash provided by (used in) investing activities | (25,533 | ) | 8,002 | ||||
Financing activities | |||||||
Proceeds from exercise of share options, including early exercised options | 3,717 | 1,211 | |||||
Deferred offering costs | — | (1,745 | ) | ||||
Net cash provided by (used in) financing activities | 3,717 | (534 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 390 | (634 | ) | ||||
Net increase in cash and cash equivalents | 7,036 | 21,238 | |||||
Cash and cash equivalents at beginning of period | 259,709 | 187,094 | |||||
Cash and cash equivalents at end of period | $ | 266,745 | $ | 208,332 | |||
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Atlassian Corporation Plc
Reconciliation of IFRS to Non-IFRS Results
(U.S. $ and shares in thousands, except per share data)
(unaudited)
Three Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Gross profit | |||||||
IFRS gross profit | $ | 114,225 | $ | 85,402 | |||
Plus: Share-based payment expense | 1,339 | 1,206 | |||||
Plus: Amortization of acquired intangible assets | 2,202 | 1,745 | |||||
Non-IFRS gross profit | $ | 117,766 | $ | 88,353 | |||
Operating income | |||||||
IFRS operating income (loss) | $ | (5,128 | ) | $ | 7,078 | ||
Plus: Share-based payment expense | 30,523 | 14,096 | |||||
Plus: Amortization of acquired intangible assets | 2,398 | 1,766 | |||||
Non-IFRS operating income | $ | 27,793 | $ | 22,940 | |||
Net income | |||||||
IFRS net income (loss) | $ | (2,637 | ) | $ | 5,082 | ||
Plus: Share-based payment expense | 30,523 | 14,096 | |||||
Plus: Amortization of acquired intangible assets | 2,398 | 1,766 | |||||
Less: Income tax effects and adjustments | (7,564 | ) | (2,565 | ) | |||
Non-IFRS net income | $ | 22,720 | $ | 18,379 | |||
Net income per share | |||||||
IFRS net income (loss) per share - basic | $ | (0.01 | ) | $ | 0.03 | ||
Plus: Share-based payment expense | 0.13 | 0.11 | |||||
Plus: Amortization of acquired intangible assets | 0.01 | 0.01 | |||||
Less: Income tax effects and adjustments | (0.03 | ) | (0.02 | ) | |||
Non-IFRS net income per share - basic | $ | 0.10 | $ | 0.13 | |||
IFRS net income (loss) per share - diluted | $ | (0.01 | ) | $ | 0.03 | ||
Plus: Share-based payment expense | 0.13 | 0.09 | |||||
Plus: Amortization of acquired intangible assets | 0.01 | 0.01 | |||||
Less: Income tax effects and adjustments | (0.03 | ) | (0.02 | ) | |||
Non-IFRS net income per share - diluted | $ | 0.10 | $ | 0.11 | |||
Weighted-average diluted shares outstanding | |||||||
Weighted-average shares used in computing diluted IFRS net income (loss) per share | 218,504 | 145,513 | |||||
Dilution from share options and RSUs (1) | 15,609 | — | |||||
Dilution from share options and RSUs granted in periods prior to IPO (2) | — | 18,018 | |||||
Weighted-average shares used in computing diluted non-IFRS net income per share | 234,113 | 163,531 | |||||
Free cash flow | |||||||
IFRS net cash provided by operating activities | $ | 28,462 | $ | 14,404 | |||
Less: Capital expenditures | (2,391 | ) | (6,155 | ) | |||
Free cash flow | $ | 26,071 | $ | 8,249 | |||
(1) The effects of these dilutive securities were not included in the IFRS calculation of diluted net loss per share for the three months ended September 30, 2016 because the effect would have been anti-dilutive.
(2) Gives effect to share options and RSUs in periods prior to our IPO for comparability.
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Atlassian Corporation Plc
Reconciliation of IFRS to Non-IFRS Financial Targets
(U.S. $)
Three Months Ending December 31, 2016 | Fiscal Year Ending June 30, 2017 | ||||
Revenue | $142.5 million to $144.5 million | $597 million to $603 million | |||
IFRS gross margin | 82% | 82% to 83% | |||
Share-based payment expense | 1 | 1 | |||
Amortization of acquired intangible assets | 1 | 1 | |||
Non-IFRS gross margin | 84% | 84% to 85% | |||
IFRS operating margin | (8%) | (10%) | |||
Share-based payment expense | 22 | 25 | |||
Amortization of acquired intangible assets | 2 | 1 | |||
Non-IFRS operating margin | 16% | 16% | |||
IFRS net loss per share - diluted | ($0.03) | ($0.18) to ($0.17) | |||
Share-based payment expense | 0.13 | 0.62 | |||
Amortization of acquired intangible assets | 0.01 | 0.04 | |||
Income tax effects and adjustments | (0.03 | ) | (0.15 | ) | |
Non-IFRS net income per share - diluted | $0.08 | $0.33 to $0.34 | |||
Weighted-average shares used in computing diluted non-IFRS net income per share | 234 million to 236 million | 234 million to 236 million | |||
IFRS net cash provided by operations | $170 million to $180 million | ||||
Less: Capital expenditures | (15 million) | ||||
Free cash flow | $155 million to $165 million | ||||
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Q4 FY2016
Q1 FY2017
October 27, 2016
Q1 FY2017
Photocopies. Email. Status meetings. When Atlassian was founded, these were
the tools of workplace collaboration. Today, the problems teams are solving have
become increasingly complex, and the teams themselves increasingly distributed.
It's no surprise then that more and more teams are turning to Atlassian to improve
how they work. What started 15 years ago with a $10,000 credit card has
grown into a business helping teams at over 65,000 companies worldwide unleash
their potential. Today we're excited to share highlights from a strong
first quarter of our fiscal 2017.
Atlassian Summit 2016 unites our customer community
Earlier this month, over 3,200 attendees from 35 countries came together for our 8th
annual user conference, Atlassian Summit. Attendance was up 25% over last year
and thousands more participated in the livestream. The event offered customers four
days of training, best practices, and the opportunity to learn about new
developments across the Atlassian product portfolio.
In addition to a number of product announcements highlighted below, we also
unveiled the Atlassian Team Playbook, our guide to making teamwork work. We
believe great teamwork is the sum of incredible people, tools and practices.
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Business highlights
The Team Playbook provides step-by-step guides for tracking team health and
executing plays that address common pain points like conflicting priorities or a lack
of shared direction. We received incredible feedback from Summit attendees who
are excited to combine the power of our software with proven processes for high-
performing teams.
Finally, this year's Summit included a celebration of those who give back. Over
60 Atlassian partners joined the Pledge 1% movement we founded in 2014 with
Salesforce – up from 11 last year. Participating companies commit to donating
1% of equity, product, employee time, and/or profit to causes of their choosing. It's
rewarding to see our ecosystem join us in our effort to change the face of
corporate philanthropy.
Mike Cannon-Brookes
Co-founder and CEO
Scott Farquhar
Co-founder and CEO
Q1 FY20173
• For project planning and tracking, we have seen rapid adoption of JIRA Core by
non-technical teams. Among our attendees at Summit this year, over half use
JIRA Core, representing significant growth since its launch just one year ago.
• We furthered our momentum in the code management and collaboration space
with the launch of Bitbucket Pipelines, a cloud-based continuous delivery
offering. This new feature supports the continuous delivery approach
increasingly preferred by software teams to build, test, and release software on
a frequent basis. Supporting the collaboration needs of software teams remains
a strong growth area for us with Bitbucket Cloud now hosting code from over
five million developers, representing over 900,000 professional teams.
Serving all teams with full collaboration stack
There are over 800 million knowledge workers globally, and the most important
aspect of productivity is how well they work together. That's why it's our mission to
unleash the potential in every team through our full portfolio of team collaboration
products. We continue to see momentum across our business as we deliver better
ways for a wide variety of teams to organize, discuss, and complete work.
• In the fast-growing team messaging space we continued to pioneer new
capabilities with the launch of group video for HipChat to support the distributed
nature of today's teams. We also introduced the public beta of HipChat Data
Center to serve customers requiring an on-premise messaging service as their
companies scale upwards of 5,000 users. The easy-to-use attributes of HipChat
are attracting more teams than ever, generating approximately one billion
messages every seven weeks. By comparison, when we first launched HipChat
in 2010, it took us three years to reach our first billion messages.
• Confluence, our content collaboration product, is used by more than 30,000 of
our customers across every type of team. At Summit, we heard how HR teams
create on-boarding materials for new hires, marketing teams draft blog posts,
plans, and campaign documents, and IT and customer service teams set up
and collaborate on self-service knowledge bases all within Confluence.
Q1 FY20174
high demand for AWS support among our enterprise customers who are eager
to spend less energy maintaining their own networks, but are not yet ready to
move to a cloud-based hosted service.
• Zero-downtime capabilities for JIRA Software Data Center. Now administrators
can upgrade to a new version of the software without interrupting their
company's access to JIRA.
• Support for SAML 2.0, which enables single sign-on across all our Data Center
products. This is essential for organizations adopting SAML as their corporate
identity standard.
Momentum in the Atlassian Marketplace
The developer ecosystem around Atlassian continues to grow and flourish, with
more than 2,000 add-ons in the Atlassian Marketplace and more than 10,000
developers in our ecosystem. Approximately 40% of our customers have
purchased an add-on from the Atlassian Marketplace.
We are excited to announce that the Marketplace reached a new milestone:
$200 million in sales since its inception in 2012. It took us three years to hit the first
$100 million but only a little over a year to hit the second $100 million. The
success of the Marketplace demonstrates the tremendous value our customers
find in integrating our products with other services and applications.
JIRA Service Desk expands to external customer support and
incident management
Since launching three years ago as a way to help IT and business teams manage
internal service requests, more than 20,000 organizations have adopted JIRA
Service Desk. And as we’ve expanded across internal IT and business team use
cases, we’ve heard increasing demand to use JIRA Service Desk for external
customer service and support. We responded to this demand by adding several new
external service and support capabilities, expanding both the reach of the product
into the fast-growing external support desk market and the value the product can
deliver to our customers.
We also made it easier for internal and external customers to see information about
incidents and downtime through an improved integration between JIRA Service Desk
and StatusPage, the status and incident management product we acquired
in July of this year. Customers can access this information directly from the
company's customer service portal, deflecting customer contacts so the response
team stays focused on fixing the problem.
New offerings and capabilities for large enterprises
Atlassian seeks to serve teams of all sizes. As we grow our product portfolio and
expand to more teams within our customer base, our products become increasingly
mission critical. We introduced the Data Center product line in 2014 to better serve
the scaling and high-availability needs of large customers. We continue to invest in
this growth area and introduced several improvements this past quarter:
• Official support for running the Data Center versions of JIRA Software and
Bitbucket on the Amazon Web Services (AWS) platform. This lets us meet the
Q1 FY20175
Customer highlights
Customers: We define the number of customers at the end of any particular
period as the number of organizations with unique domains that have at least
one active and paid license or subscription of our products for which they paid
more than $10 per month. While a single customer may have distinct
departments, operating segments or subsidiaries with multiple active licenses
or subscriptions of our products, if the product deployments share a unique
domain name, we only include the customer once for purposes of calculating
this metric. We define active licenses as those licenses that are under an active
maintenance or subscription contract as of period end.
We finished the first quarter of fiscal 2017 with 65,673 customers, a 27% year-
over-year increase. We added 4,723 net new customers during the quarter. Net
new customers during the quarter were higher than is typical because of a one-
time increase in customers following our acquisition of StatusPage. Excluding
StatusPage, we ended the quarter with a total customer count of 64,246, a 24%
year-over-year increase, and 3,296 net new customers.
Our customers represent diverse industries and geographies as our highly
automated sales model allows us to target the Fortune 500,000 – not just the
Fortune 500. A few of our more than 4,700 new customers during the quarter
include utility software solutions provider SEDC, luggage manufacturer Samsonite,
mobile device manufacturer ZTE, pet insurance administrator Petsure, luxury
automotive manufacturer Bentley, asset management firm Russell Investments,
organic food delivery firm Green Chef, and the Munich Airport.
Customers are using our products in all sorts of ways, across many types of
teams. Here are just a handful of the myriad examples.
Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17
65,673
60,950
57,431
54,262
51,636
48,622
45,640
42,780
40,070
37,250
Customers
Period ended
Lufthansa Systems
Lufthansa Systems, a leading provider of IT solutions in the aviation industry
that serves more than 300 airlines worldwide, uses JIRA Software, JIRA
Service Desk, JIRA Core, Confluence, FishEye, and Crucible to standardize
its processes on Atlassian products and now has over 8,000 users across the
company.
To highlight just one product, JIRA Core helps Lufthansa Systems' teams, from HR
to marketing to information security to customer service, work smarter through
project management and improved processes, ultimately delivering better service to
customers. For instance, Lufthansa Systems' service delivery improvement team is
made up of 30 people who need to be able to work cross-functionally with their
production team and service delivery managers. Prior to using JIRA Core, the
members of the team were working in a very individual way: sending direct email or
having telephone calls. JIRA Core transformed the way the team works, letting them
run projects collaboratively while streamlining and simplifying their processes.
Q1 FY20176
Rockwell Collins
Another example where we've seen our products spread like wildfire is at Rockwell
Collins, a provider of avionics and IT systems to aircraft manufacturers and
governmental agencies. Its usage of Atlassian tools began with a single
engineering team in 2011. Today, over 20,000 employees are taking advantage of
JIRA Software, Confluence, Bamboo, Bitbucket, FishEye, and Crucible.
The engineering team uses JIRA Software for configuration control and process
tracking as they develop avionic systems for new jets. Designers use Confluence
for collaborative design work and reporting, as well as documenting team best
practices. And the power and ease-of-use of our products has inspired teams in
management, support, program office, marketing, and operations to use
Confluence pages and JIRA Software kanban boards to manage their work more
effectively.
Kabbage
Kabbage, an online financial technology company, uses Atlassian products to
develop its platform for personal and business loans, as well as push updates to
its website six times a day on average. Kabbage's engineering and IT departments
first adopted Atlassian products in 2011 and now use HipChat, Confluence, JIRA
Software, JIRA Service Desk, Bamboo, and Bitbucket. In 2015, Kabbage moved
the whole company to HipChat, migrating then-disjointed teams off the grab-bag
assortment of communication tools being used at the time. Today the entire
company uses HipChat, Confluence, and JIRA Software to better collaborate,
document, and manage processes.
Teams throughout Kabbage – including engineering, change management,
user experience, finance, infrastructure facilities and marketing — use JIRA
Software to manage over 30 projects. Meanwhile, Kabbage's partner support,
internal support, product operations, risk operations, fraud operations, and facilities
teams use JIRA Service Desk to manage tickets and tasks efficiently.
And Kabbage Cares, the company's employee volunteering program, uses
Confluence to rally participants and share their stories, as well as JIRA Software to
track employee volunteer hours.
Kabbage even uses Atlassian products to facilitate work with external
teams. They recently created a Confluence instance for a financial partner
who uses its platform to underwrite loans. Confluence lets Kabbage and
the partner document all transactions and related notes, ending what they
describe as the "torture of wading through 60+ emails in one thread" during
the underwriting process.
Q1 FY2017
Revenue
Total revenue for the first quarter of fiscal 2017 was $136.8 million, up 34%
year-over-year. Our revenue by line item for the quarter is as follows:
• Subscription revenue primarily relates to fees earned from sales of our cloud
products. A small portion of this revenue also relates to sales of our Data Center
products, which are server products sold to our largest enterprise customers on
a subscription basis. We recognize subscription revenue ratably over the term of
the contract. For Q1’17, subscription revenue was $49.9 million, up 64% year-
over-year. The growth in subscription revenue reflects more of our customers
choosing our cloud products, as well as strong growth in our Data Center
offerings during the quarter.
• Maintenance revenue represents fees earned from providing customers
updates, upgrades and technical product support for our perpetual license
products. Maintenance revenue is recognized ratably over the support period,
which is typically 12 months. For Q1’17, maintenance revenue was $61.7
million, up 23% year-over-year.
• License revenue is related to fees earned from the sale of perpetual licenses
for our server or behind-the-firewall products, and is recognized at the time
of sale. For Q1’17, license revenue was $17.5 million, up 13% year-over-year.
7
Financial highlights
Murray Demo
Chief Financial Officer
Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17
$137
$128
$118
$110
$102
$92
45%50%49% 40% 39% 34%
Revenue
USD in millions (Y/Y growth rate in %)
$84
$84
$84
$84
$84
$84
Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17
Subscription Maintenance Perpetual License Other
$92
$102
$110
$118
$137
13%
23%
64%
28%
17%
68%
36%
11%
71%77%
39%
9%
70% 69%
45%
46%
21%
Revenue by type
USD in millions (Y/Y growth rate in %)
20%
$128
• Other revenue includes our portion of the fees received for sales of third-party
add-ons and extensions in the Atlassian Marketplace, and for training services.
For Q1’17, other revenue was $7.6 million, up 38% year-over-year.
Q1 FY20178
Margins and operating expenses
A reconciliation of IFRS to non-IFRS measures is provided within the tables at the end
of this letter, in our earnings press release or posted on our Investor Relations website.
IFRS gross margin for Q1'17 was 83.5%, compared with 83.9% for Q1'16. Non-
IFRS gross margin for Q1'17 was 86.1%, compared with 86.8% for Q1'16. Gross
margin in the quarter was higher than expected as we incurred lower support costs
and lower depreciation expense. The accelerated depreciation expense we
discussed last quarter began later in the quarter than anticipated. Lower
depreciation expense in the first quarter will be offset by higher depreciation
expense in the remaining three quarters of fiscal 2017.
On an IFRS basis, operating expenses were $119.4 million in Q1'17, up 52% from
$78.3 million in Q1'16. On a non-IFRS basis, operating expenses were $90.0
million in Q1'17, up 38% from $65.4 million Q1'16.
• Research & development expense on an IFRS basis was $67.5 million in Q1'17,
compared with $39.5 million in Q1'16. Research & development expense on a
non-IFRS basis was $50.4 million or 36.9% of revenue in Q1'17, compared with
$39.5 million or 38.8% of revenue in Q1’16.
• Marketing & sales expense on an IFRS basis was $25.0 million in Q1'17,
compared with $16.3 million in Q1'16. Marketing & sales expense on a non-
IFRS basis was $21.3 million or 15.5% of revenue in Q1'17, compared with
$13.5 million or 13.3% of revenue in Q1'16.
• General & administrative expense on an IFRS basis was $26.9 million in Q1'17,
compared with $16.6 million in Q1'16. General & administrative expense on a
non-IFRS basis was $18.2 million or 13.3% of revenue in Q1'17, compared with
$12.4 million or 12.2% of revenue in Q1'16.
Total employee headcount was 1,833 at the end of Q1'17. Headcount growth
compared with Q4’16 was across all expense categories, with the majority in
research & development.
IFRS operating loss was $5.1 million for Q1'17, compared with IFRS operating
income of $7.1 million for Q1'16. Non-IFRS operating income was $27.8 million,
or 20.3% of revenue for Q1'17, compared with $22.9 million or 22.5% of revenue
for Q1'16. Operating margin for the quarter was higher than targeted due to higher
revenue and gross margin, as well as lower consulting and headcount related
expenses.
Net income
IFRS net loss was $2.6 million, or ($0.01) per diluted share, for Q1'17 compared
with IFRS net income of $5.1 million, or $0.03 per diluted share, for Q1'16. Non-
IFRS net income was $22.7 million, or $0.10 per diluted share, for Q1'17
compared with $18.4 million, or $0.11 per diluted share, for Q1'16.
Balance sheet
Atlassian finished Q1'17 with $754.3 million in cash, cash equivalents and short-
term investments.
Free cash flow
Free cash flow for Q1'17 was $26.1 million, comprised of cash flow from
operations of $28.5 million, less capital expenditures of $2.4 million. Free cash
flow margin, defined as free cash flow as a percentage of revenue, was 19.1%.
Q1 FY20179
Financial targets
For the full year fiscal 2017, our financial targets are as follows:
• Total revenue is expected to be in the range of $597 million to $603 million.
• Gross margin is expected to be in the range of 82% to 83% on an IFRS basis
and in the range of 84% to 85% on a non-IFRS basis.
• Operating margin is expected to be approximately (10%) on an IFRS basis and
approximately 16% on a non-IFRS basis.
• Weighted-average share count is expected to be in the range of 234 million to
236 million shares on a fully diluted basis.
• Net loss per diluted share is expected to be in the range of ($0.18) to ($0.17) on
an IFRS basis, and net income per diluted share is expected to be in the range
of $0.33 to $0.34 on a non-IFRS basis.
• Free cash flow is expected to be in the range of $155 million to $165 million,
which factors in capital expenditures that are expected to be approximately
$15 million in fiscal 2017.
Financial targets for Second Quarter Fiscal 2017 and Full Year Fiscal 2017
For the second quarter of fiscal 2017, our financial targets are as follows:
• Total revenue is expected to be in the range of $142.5 million to $144.5 million.
• Gross margin is expected to be approximately 82% on an IFRS basis and
approximately 84% on a non-IFRS basis.
• Operating margin is expected to be approximately (8%) on an IFRS basis and
approximately 16% on a non-IFRS basis.
• Weighted-average share count is expected to be in the range of approximately
234 million to 236 million shares on a fully diluted basis.
• Net loss per diluted share is expected to be approximately ($0.03) on an
IFRS basis, and net income per diluted share is expected to be approximately
$0.08 on a non-IFRS basis.
Q1 FY2017
Atlassian Corporation Plc
Consolidated statements of operations
(U.S. $ and shares in thousands, except per share data)
(unaudited)
10
Three Months Ended
September 30,
2016 2015
Revenues:
Subscription $ 49,931 $ 30,467
Maintenance 61,741 50,354
Perpetual license 17,501 15,501
Other 7,614 5,500
Total revenues 136,787 101,822
Cost of revenues (1) (2) 22,562 16,420
Gross profit 114,225 85,402
Operating expenses:
Research and development (1) 67,458 45,460
Marketing and sales (1) (2) 24,980 16,262
General and administrative (1) 26,915 16,602
Total operating expenses 119,353 78,324
Operating income (loss) (5,128) 7,078
Other non-operating income (expense), net (63) (603)
Finance income 1,322 46
Finance costs (7) (8)
Income (loss) before income tax benefit (expense) (3,876) 6,513
Income tax benefit (expense) 1,239 (1,431)
Net income (loss) $ (2,637) $ 5,082
Net income (loss) per share attributable to ordinary shareholders:
Basic $ (0.01) $ 0.03
Diluted $ (0.01) $ 0.03
Weighted-average shares outstanding used to compute net income (loss) per share attributable to
ordinary shareholders:
Basic 218,504 144,008
Diluted 218,504 145,513
(1) Amounts include share-based payment expense, as follows:
Three Months Ended
September 30,
2016 2015
Cost of revenues $ 1,339 $ 1,206
Research and development 16,999 5,921
Marketing and sales 3,515 2,742
General and administrative 8,670 4,227
(2) Amounts include amortization of acquired intangible assets, as follows:
Three Months Ended
September 30,
2016 2015
Cost of revenues $ 2,202 $ 1,745
Marketing and sales 196 21
Q1 FY2017
Atlassian Corporation Plc
Consolidated statements of financial position
(U.S. $ in thousands)
(unaudited)
11
September 30, 2016 June 30, 2016
Assets
Current assets:
Cash and cash equivalents $ 266,745 $ 259,709
Short-term investments 487,599 483,405
Trade receivables 14,898 15,233
Current tax receivables 7,506 6,013
Prepaid expenses and other current assets 21,256 14,178
Total current assets 798,004 778,538
Non-current assets:
Property and equipment, net 54,557 58,762
Deferred tax assets 147,433 127,411
Goodwill 22,697 7,138
Intangible assets, net 19,907 13,577
Other non-current assets 5,649 5,547
Total non-current assets 250,243 212,435
Total assets $ 1,048,247 $ 990,973
Liabilities
Current liabilities:
Trade and other payables $ 48,572 $ 57,886
Current tax liabilities 2,855 286
Provisions 5,169 4,716
Deferred revenue 180,603 173,612
Total current liabilities 237,199 236,500
Non-current liabilities:
Deferred tax liabilities 10,248 6,639
Provisions 2,197 2,170
Deferred revenue 8,313 7,456
Other non-current liabilities 9,520 6,545
Total non-current liabilities 30,278 22,810
Total liabilities $ 267,477 $ 259,310
Equity
Share capital $ 22,000 $ 21,620
Share premium 446,134 441,734
Other capital reserves 290,550 244,335
Other components of equity 5,448 4,699
Retained earnings 16,638 19,275
Total equity $ 780,770 $ 731,663
Total liabilities and equity $ 1,048,247 $ 990,973
Q1 FY2017
Atlassian Corporation Plc
Consolidated statements of cash flows
(U.S. $ in thousands)
(unaudited)
12
Three Months Ended
September 30,
2016 2015
Operating activities
Income (loss) before income tax $ (3,876) $ 6,513
Adjustments to reconcile income (loss) before income tax to net cash provided by operating
activities:
Depreciation and amortization 8,042 4,534
Gain on sale of other assets (342) —
Net unrealized foreign currency loss (gain) (93) 564
Share-based payment expense 30,523 14,096
Interest income (1,322) (46)
Changes in assets and liabilities:
Trade receivables 627 1,278
Prepaid expenses and other assets (5,186) (4,124)
Trade and other payables, provisions and other non-current liabilities (8,534) (10,708)
Deferred revenue 7,688 6,701
Interest received 2,296 83
Income tax paid, net of refunds (1,361) (4,487)
Net cash provided by operating activities 28,462 14,404
Investing activities
Business combinations, net of cash acquired (18,295) —
Purchases of property and equipment (2,391) (6,155)
Proceeds from sale of other assets 342 —
Purchases of investments (151,736) (4,400)
Proceeds from maturities of investments 34,850 19,582
Proceeds from sales of investments 111,882 —
Payment of deferred consideration (185) (1,025)
Net cash provided by (used in) investing activities (25,533) 8,002
Financing activities
Proceeds from exercise of share options, including early exercised options 3,717 1,211
Deferred offering costs — (1,745)
Net cash provided by (used in) financing activities 3,717 (534)
Effect of exchange rate changes on cash and cash equivalents 390 (634)
Net increase in cash and cash equivalents 7,036 21,238
Cash and cash equivalents at beginning of period 259,709 187,094
Cash and cash equivalents at end of period $ 266,745 $ 208,332
Q1 FY2017
Atlassian Corporation Plc
Reconciliation of IFRS to non-IFRS results
(U.S. $ and shares in thousands, except per share data)
(unaudited)
13
Three Months Ended
September 30,
2016 2015
Gross profit
IFRS gross profit $ 114,225 $ 85,402
Plus: Share-based payment expense 1,339 1,206
Plus: Amortization of acquired intangible assets 2,202 1,745
Non-IFRS gross profit $ 117,766 $ 88,353
Operating income
IFRS operating income (loss) $ (5,128) $ 7,078
Plus: Share-based payment expense 30,523 14,096
Plus: Amortization of acquired intangible assets 2,398 1,766
Non-IFRS operating income $ 27,793 $ 22,940
Net income
IFRS net income (loss) $ (2,637) $ 5,082
Plus: Share-based payment expense 30,523 14,096
Plus: Amortization of acquired intangible assets 2,398 1,766
Less: Income tax effects and adjustments (7,564) (2,565)
Non-IFRS net income $ 22,720 $ 18,379
Net income per share
IFRS net income (loss) per share - basic $ (0.01) $ 0.03
Plus: Share-based payment expense 0.13 0.11
Plus: Amortization of acquired intangible assets 0.01 0.01
Less: Income tax effects and adjustments (0.03) (0.02)
Non-IFRS net income per share - basic $ 0.10 $ 0.13
IFRS net income (loss) per share - diluted $ (0.01) $ 0.03
Plus: Share-based payment expense 0.13 0.09
Plus: Amortization of acquired intangible assets 0.01 0.01
Less: Income tax effects and adjustments (0.03) (0.02)
Non-IFRS net income per share - diluted $ 0.10 $ 0.11
Weighted-average diluted shares outstanding
Weighted-average shares used in computing diluted IFRS net income (loss) per share 218,504 145,513
Dilution from share options and RSUs (1) 15,609 —
Dilution from share options and RSUs granted in periods prior to IPO (2) — 18,018
Weighted-average shares used in computing diluted non-IFRS net income per share 234,113 163,531
Free cash flow
IFRS net cash provided by operating activities $ 28,462 $ 14,404
Less: Capital expenditures (2,391) (6,155)
Free cash flow $ 26,071 $ 8,249
(1) The effects of these dilutive securities were not included in the IFRS calculation of diluted net loss per share for the three months ended
September 30, 2016 because the effect would have been anti-dilutive.
(2) Gives effect to share options and RSUs in periods prior to our IPO for comparability.
Q1 FY2017
Atlassian Corporation Plc
Reconciliation of IFRS to non-IFRS
financial targets
(U.S. $)
14
Three Months Ending
December 31, 2016 Fiscal Year Ending June 30, 2017
Revenue $142.5 million to $144.5 million $597 million to $603 million
IFRS gross margin 82% 82% to 83%
Share-based payment expense 1 1
Amortization of acquired intangible assets 1 1
Non-IFRS gross margin 84% 84% to 85%
IFRS operating margin (8%) (10%)
Share-based payment expense 22 25
Amortization of acquired intangible assets 2 1
Non-IFRS operating margin 16% 16%
IFRS net loss per share - diluted ($0.03) ($0.18) to ($0.17)
Share-based payment expense 0.13 0.62
Amortization of acquired intangible assets 0.01 0.04
Income tax effects and adjustments (0.03) (0.15)
Non-IFRS net income per share - diluted $0.08 $0.33 to $0.34
Weighted-average shares used in computing diluted
non-IFRS net income per share 234 million to 236 million 234 million to 236 million
IFRS net cash provided by operations $170 million to $180 million
Less: Capital expenditures (15 million)
Free cash flow $155 million to $165 million
Q1 FY2017
Forward-looking statements
This press release contains forward-looking statements under the Private Securities Litigation
Reform Act of 1995, which statements involve substantial risks and uncertainties. Forward-looking
statements include all statements that are not historical facts and, in some cases, can be identified
by terms such as “may,” “will,” “should,” “might,” “expects,” “plans,” “anticipates,” “could,” “intends,”
“target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or
the negative of these words or other similar terms or expressions that articulate our expectations,
strategy, plans or intentions. Forward-looking statements contained in this press release include,
but are not limited to, statements about our products, including our investments in products,
technology and other key strategic areas, and our financial targets such as revenue, share count
and IFRS and non-IFRS financial measures including gross margin, operating margin, net income
per diluted share and free cash flow.
Atlassian undertakes no obligation to update any forward-looking statements made in this press
release to reflect events or circumstances after the date of this press release or to reflect new
information or the occurrence of unanticipated events, except as required by law.
The achievement or success of the matters covered by such forward-looking statements involves
known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties
materialize or if any of the assumptions prove incorrect, Atlassian’s results could differ materially
from the results expressed or implied by the forward-looking statements we make. You should not
rely upon forward-looking statements as predictions of future events. Forward-looking statements
represent our management’s beliefs and assumptions only as of the date such statements are
made.
Further information on these and other factors that could affect Atlassian’s financial results is
included in filings it makes with the Securities and Exchange Commission from time to time,
including the section titled “Risk Factors” in the company’s Form 20-F previously filed with the SEC.
These documents are available on the SEC Filings section of the Investor Relations section of
Atlassian’s website at: https://investors.atlassian.com.
About non-IFRS financial measures
Our reported results and financial targets include certain non-IFRS financial measures, including
non-IFRS gross profit, non-IFRS operating income, non-IFRS net income, non-IFRS net income per
diluted share, and free cash flow. Management believes that the use of non-IFRS financial
measures provides consistency and comparability with our past financial performance, facilitates
period-to-period comparisons of our results of operations, and also facilitates comparisons with
peer companies, many of which use similar non-IFRS or non-GAAP financial measures to
supplement their IFRS or GAAP results. Non-IFRS results are presented for supplemental
informational purposes only to aid in understanding our operating results. The non-IFRS results
should not be considered a substitute for financial information presented in accordance with IFRS,
and may be different from non-IFRS or non-GAAP measures used by other companies.
Our non-IFRS financial measures reflect adjustments based on the items below:
• Non-IFRS gross profit. Excludes expenses related to share-based compensation and
amortization of acquired intangible assets.
• Non-IFRS operating income. Excludes expenses related to share-based compensation and
amortization of acquired intangible assets.
• Non-IFRS net income and non-IFRS net income per diluted share. Excludes expenses related to
share based compensation, amortization of acquired intangible assets and related income tax
effects on these items.
• Free cash flow. Free cash flow is defined as net cash provided by operating activities less capital
expenditures, which consists primarily of purchases of property and equipment.
We exclude expenses related to share-based compensation, amortization of acquired intangible
assets and income tax effect on these items from certain of our non-IFRS financial measures as we
believe this helps investors understand our operational performance. In addition, share-based
compensation expense can be difficult to predict and varies from period to period and company to
company due to differing valuation methodologies, subjective assumptions and the variety of equity
instruments, as well as changes in stock price. Management believes that providing non-IFRS
financial measures that exclude share-based compensation expense, amortization of acquired
intangible assets and the tax effects of those items allow for more meaningful comparisons
between our operating results from period to period.
15
Q1 FY2017
We include the effect of our outstanding share options and restricted share units (“RSUs”) in
weighted-average shares used in computing non-IFRS net income per diluted share. IFRS
excludes the impact of the full weighting of these outstanding equity awards until the effectiveness
of our IPO. We have presented the full weighting impact of these additional shares from previously
granted share options and RSUs, as if they were outstanding from the date of grant, in order to
provide investors with insight into the full impact of all potentially dilutive awards outstanding and to
provide comparability.
Management considers free cash flow to be a liquidity measure that provides useful information to
management and investors about the amount of cash generated by our business that can be used
for strategic opportunities, including investing in our business, making strategic acquisitions and
strengthening our statement of financial position.
Management uses non-IFRS gross profit, non-IFRS operating income, non-IFRS net income,
non-IFRS net income per diluted share and free cash flow:
• As measures of operating performance, because these financial measures do not include the
impact of items not directly resulting from our core operations;
• For planning purposes, including the preparation of our annual operating budget;
• To allocate resources to enhance the financial performance of our business;
• To evaluate the effectiveness of our business strategies; and
• In communications with our board of directors concerning our financial performance.
The tables in this letter titled “Reconciliation of IFRS to non-IFRS results” and “Reconciliation
of IFRS to non-IFRS financial targets” provide reconciliations of non-IFRS financial measures
to the most recent directly comparable financial measures calculated and presented in accordance
with IFRS.
We understand that although non-IFRS gross profit, non-IFRS operating income, non-IFRS net
income, non-IFRS net income per diluted share and free cash flow are frequently used by investors
and securities analysts in their evaluation of companies, these measures have limitations as
analytical tools, and you should not consider them in isolation or as substitutes for analysis of our
results of operations as reported under IFRS.
16
Q1 FY201717
About Atlasssian
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Investor relations contact: Ian Lee, [email protected]
Media Contact: Heather Staples, [email protected]
Ian Lee
Investor relations contact
Heather Staples
Media contact