Atlassian (NASDAQ: TEAM) reported Q2 EPS of $0.37, $0.10 better than the analyst estimate of $0.27. Revenue for the quarter came in at $408.7 million versus the consensus estimate of $388.93 million.

On a non-IFRS basis, Atlassian reported:

• Operating Income and Operating Margin: Operating income was $125.4 million for the second quarter of fiscal 2020, compared with operating income of $74.8 million for the second quarter of fiscal 2019. Operating margin was 31% for the second quarter of fiscal 2020, compared with 25% for the second quarter of fiscal 2019.
• Net Income and Net Income Per Diluted Share: Net income was $93.9 million for the second quarter of fiscal 2020, compared with net income of $61.7 million for the second quarter of fiscal 2019. Net income per diluted share was $0.37 for the second quarter of fiscal 2020, compared with net income per diluted share of $0.25 for the second quarter of fiscal 2019.
• Free Cash Flow: Cash flow from operations was $218.4 million and free cash flow was $202.0 million for the second quarter of fiscal 2020. Free cash flow margin for the second quarter of fiscal 2020 was 49%.

“We had a strong quarter, growing revenue 37% year-over-year and generating record profitability and free cash flow,” said Scott Farquhar, Atlassian’s co-founder and co-CEO. “Subscription revenue grew 50% year-over-year, underscoring the progress we continue to make in our cloud-first strategy. This is just another small step on our long-term journey to build an enduring company.”

“This quarter, the Atlassian Marketplace crossed $1 billion in lifetime sales,” said Mike Cannon-Brookes, Atlassian’s co-founder and co-CEO. “We built on that momentum and launched Forge, our new cloud app development platform. Forge reduces the cost and complexity for developers to build cloud apps for their own teams and the broader Atlassian customer base.”

GUIDANCE:

Atlassian sees Q3 2020 EPS of $0.20, versus the consensus of $0.22. Atlassian sees Q3 2020 revenue of $395-399 million, versus the consensus of $397.11 million.

Atlassian sees FY2020 EPS of $1.03, versus the consensus of $1.01. Atlassian sees FY2020 revenue of $1.59-1.6 billion, versus the consensus of $1.57 billion.

Atlassian is providing its financial targets for the third quarter and full fiscal year 2020. The company’s financial targets are as follows:

Third Quarter Fiscal Year 2020:

• Total revenue is expected to be in the range of $395 to $399 million.
• Gross margin is expected to be approximately 82% on an IFRS basis and approximately 85% 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.
• Net loss per diluted share is expected to be approximately ($0.19) on an IFRS basis, and net income per diluted share is expected to be approximately $0.20 on a non-IFRS basis.
• Weighted average share count is expected to be in the range of 244 million to 246 million shares when calculating diluted IFRS net loss per share and in the range of 251 million to 253 million shares when calculating diluted non-IFRS net income per share.

Fiscal Year 2020:

• Total revenue is expected to be in the range of $1,590 million to $1,600 million.
• Gross margin is expected to be in the range of 82.5% to 83% on an IFRS basis and in the range of 85.5% to 86% on a non-IFRS basis.
• Operating margin is expected to be in the range of (2%) to (1%) on an IFRS basis and in the range of 21% to 22% on a non-IFRS basis.
• Net income per diluted share is expected to be in the range of $0.48 to $0.54 on an IFRS basis and in the range of $1.03 to $1.09 on a non-IFRS basis.
• Weighted average share count is expected to be in the range of 252 million to 253 million shares when calculating diluted IFRS and non-IFRS net income per share.
• Cash flow from operations is expected to be in the range of $535 million to $545 million and free cash flow is expected to be in the range of $475 million to $485 million.

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