Atlassian (NASDAQ: TEAM) reported Q3 EPS of $0.10, $0.02 better than the analyst estimate of $0.08. Revenue for the quarter came in at $223.7 million versus the consensus estimate of $218.39 million.

Third Quarter Fiscal Year 2018 Financial Highlights:

On an IFRS basis, Atlassian reported:

• Revenue: Total revenue was $223.7 million for the third quarter of fiscal 2018, up 40% from $159.9 million for the third quarter of fiscal 2017.
• Operating Loss and Operating Margin: Operating loss was $10.9 million for the third quarter of fiscal 2018, compared with $23.1 million for the third quarter of fiscal 2017. Operating margin was (5%) for the third quarter of fiscal 2018, compared with (14%) for the third quarter of fiscal 2017.
• Net Loss and Net Loss Per Diluted Share: Net loss was $14.3 million for the third quarter of fiscal 2018, compared with $17.5 million for the third quarter of fiscal 2017. Net loss per diluted share was $0.06 for the third quarter of fiscal 2018, compared with $0.08 for the third quarter of fiscal 2017.
• Balance Sheet: Cash and cash equivalents and short-term investments at the end of the third quarter of fiscal 2018 totaled $763.9 million.

On a non-IFRS basis, Atlassian reported:

• Operating Income and Operating Margin: Operating income was $38.4 million for the third quarter of fiscal 2018, compared with $24.5 million for the third quarter of fiscal 2017. Operating margin was 17% for the third quarter of fiscal 2018, compared with 15% for the third quarter of fiscal 2017.
• Net Income and Net Income Per Diluted Share: Net income was $24.6 million for the third quarter of fiscal 2018, compared with $18.9 million for the third quarter of fiscal 2017. Net income per diluted share was $0.10 for the third quarter of fiscal 2018, compared with $0.08 per diluted share for the third quarter of fiscal 2017.
• Free Cash Flow: Cash flow from operations for the third quarter of fiscal 2018 was $91.7 million, while capital expenditures totaled $5.3 million, resulting in free cash flow of $86.4 million, an increase of 26% year-over-year.

Financial Targets:

Atlassian is providing its financial targets for the fourth quarter and full fiscal year 2018. The company’s financial targets are as follows:

Fourth Quarter Fiscal Year 2018:

• Total revenue is expected to be in the range of $232 million to $234 million.
• Gross margin is expected to be approximately 81% on an IFRS basis and approximately 85% on a non-IFRS basis.
• Operating margin is expected to be approximately (5%) on an IFRS basis and approximately 19% on a non-IFRS basis.
• Net loss per diluted share is expected to be approximately ($0.05) on an IFRS basis, and net income per diluted share is expected to be approximately $0.12 on a non-IFRS basis.
• Weighted-average share count is expected to be in the range of 234 million to 235 million shares when calculating diluted IFRS net loss per share and in the range of 246 million to 247 million shares when calculating diluted non-IFRS net income per share.

Fiscal Year 2018:

• Total revenue is expected to be in the range of $862 million to $864 million.
• Gross margin is expected to be approximately 80% on an IFRS basis and approximately 84% on a non-IFRS basis.
• Operating margin is expected to be approximately (7%) on an IFRS basis and approximately 19% on a non-IFRS basis.
• Net loss per diluted share is expected to be in the range of ($0.44) to ($0.43) on an IFRS basis, and net income per diluted share is expected to be in the range of $0.47 to $0.48 on a non-IFRS basis.
• Weighted-average share count is expected to be in the range of 231 million to 232 million shares when calculating diluted IFRS net loss per share and in the range of 243 million to 244 million shares when calculating diluted non-IFRS net income per share.
• Free cash flow is expected to be in the range of $265 million to $272 million, which includes capital expenditures that are expected to be approximately $30 million.

GUIDANCE:

Atlassian sees FY2018 EPS of $0.47-$0.48, versus the consensus of $0.48. Atlassian sees FY2018 revenue of $862-864 million, versus the consensus of $856.64 million.

For earnings history and earnings-related data on Atlassian (TEAM) click here.