Form 6-K Atlassian Corp Plc For: Dec 31
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
January 27, 2022
Commission File Number 001-37651
Atlassian Corporation Plc
(Exact name of Registrant as specified in its charter)
Not Applicable
(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 January 27, 2022, Atlassian Corporation Plc (the “Company”) issued a press release announcing its results for the quarter ended December 31, 2021. 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 published a letter to its shareholders announcing its financial results for the quarter ended December 31, 2021 (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.
Departure of Certain Officers.
The Company also announced that Sri Viswanath will be leaving as its Chief Technology Officer at the end of fiscal year 2022.
The information in this report on Form 6-K under the sections titled “Results of Operations and Financial Condition” and “Departure of Certain Officers” 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, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: | January 27, 2022 | Atlassian Corporation Plc | |||||||||
| /s/ James Beer | |||||||||||
| James Beer Chief Financial Officer | |||||||||||
Exhibit Index
| Exhibit Number | Exhibit Title | |||||||
Press Release dated January 27, 2022. | ||||||||
Shareholder Letter dated January 27, 2022. | ||||||||
Atlassian Announces Second Quarter Fiscal Year 2022 Results
Quarterly revenue of $689 million, up 37% year-over-year
Quarterly subscription revenue of $509 million, up 64% year-over-year
Quarterly IFRS operating margin of (10)% and non-IFRS operating margin of 26%
Quarterly cash flow from operations of $222 million and free cash flow of $197 million
TEAM, Anywhere/SAN FRANCISCO (January 27, 2022) — Atlassian Corporation Plc (NASDAQ: TEAM), a leading provider of team collaboration and productivity software, today announced financial results for its second quarter of fiscal year 2022 ended December 31, 2021 and released a shareholder letter available on Atlassian’s Work Life blog at http://atlassian.com/blog/announcements/shareholder-letter-q2fy22. The shareholder letter was also posted to the Investor Relations section of Atlassian’s website at https://investors.atlassian.com.
“Q2 was another strong quarter for Atlassian with over 10,000 net new customers this quarter, 98% of which were in the Cloud,” said Scott Farquhar, Atlassian’s co-founder and co-CEO. “We also saw subscription revenue grow 64% year-over-year, which reflects our continued investment in our Cloud platform and the strong focus and effort we have put in to helping our customers seamlessly move to Cloud.”
“The Atlassian Marketplace continues to go from strength to strength surpassing $2 billion in sales and shows no signs of slowing down,” said Mike Cannon-Brookes, Atlassian’s co-founder and co-CEO. “We recognise that the opportunities for Atlassian, our customers and our partners have never been greater as companies accelerate their future of work transformations, and we’re incredibly proud of this partner ecosystem which is fuelling innovation and helping to deliver on our mission to unleash the potential of every team.”
Second Quarter Fiscal Year 2022 Financial Highlights:
On an IFRS basis, Atlassian reported:
•Revenue: Total revenue was $688.5 million for the second quarter of fiscal year 2022, up 37% from $501.4 million for the second quarter of fiscal year 2021.
•Operating Income (Loss) and Operating Margin: Operating loss was $66.7 million for the second quarter of fiscal year 2022, compared with an operating income of $27.7 million for the second quarter of fiscal year 2021. Operating margin was (10)% for the second quarter of fiscal year 2022, compared with 6% for the second quarter of fiscal year 2021.
•Net Loss and Net Loss Per Diluted Share: Net loss was $77.5 million for the second quarter of fiscal year 2022, compared with a net loss of $621.5 million for the second quarter of fiscal year 2021. Net loss per diluted share was $0.31 for the second quarter of fiscal year 2022, compared with a net loss per diluted share of $2.49 for the second quarter of fiscal year 2021.
•Balance Sheet: Cash and cash equivalents plus short-term investments at the end of the second quarter of fiscal year 2022 totaled $986.0 million.
During the second quarter of fiscal year 2022, Atlassian drew $350.0 million from its term loan facility, used $1.2 billion in cash to settle the remaining portion of its outstanding exchangeable senior notes and received $104.5 million in cash from the unwinding of the related capped calls. The net impact resulted in cash outflows of $779.9 million, which is reflected in net cash used in financing activities on our Consolidated Statements of Cash Flows.
On a non-IFRS basis, Atlassian reported:
•Operating Income and Operating Margin: Operating income was $178.3 million for the second quarter of fiscal year 2022, compared with operating income of $143.2 million for the second quarter of fiscal year 2021. Operating margin was 26% for the second quarter of fiscal year 2022, compared with 29% for the second quarter of fiscal year 2021.
1
•Net Income and Net Income Per Diluted Share: Net income was $127.3 million for the second quarter of fiscal year 2022, compared with $95.3 million for the second quarter of fiscal year 2021. Net income per diluted share was $0.50 for the second quarter of fiscal year 2022, compared with $0.37 for the second quarter of fiscal year 2021.
•Free Cash Flow: Cash flow from operations was $221.7 million and free cash flow was $197.5 million for the second quarter of fiscal year 2022. Free cash flow margin for the second quarter of fiscal year 2022 was 29%.
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.”
Recent Business Highlights:
•Atlassian Marketplace Surpasses $2 Billion in Lifetime Sales: During the second quarter of fiscal 2022, the Atlassian Marketplace surpassed $2 billion in lifetime sales since its inception in 2012. Atlassian’s 1,250+ Marketplace Partners help deliver additional value to the tens of thousands of customers that utilize a Marketplace app.
•Leader in Forrester Wave for Enterprise Service Management: Atlassian was named a Leader in The Forrester Wave™: Enterprise Service Management, Q4 2021. In addition, Atlassian’s strategy for enterprise service management (ESM) received the highest score of all vendors in this report. Over 35,000 customers trust Jira Service Management to deliver exceptional service experiences for internal and external customers.
•Strategic Investments in Miro and Clockwise: Atlassian deepened its partnership with Miro, a visual collaboration company, by participating in their Series C funding round earlier this month. Miro’s virtual whiteboarding product integrates with Jira and Confluence to drive customer innovation. Atlassian also invested in Clockwise, a scheduling optimization app provider. Clockwise’s focus on team productivity aligns with Atlassian’s mission to unleash the potential of every team. These investments showcase Atlassian Ventures’ focus on driving customer value and expanding the economy around Atlassian.
•Percept.ai Acquisition: Atlassian announced today the acquisition of Percept.ai, an AI-powered virtual agent technology provider which will expand frontline support capabilities in Jira Service Management. The acquisition builds on Atlassian’s previous investments in AI and machine learning, and will help customers efficiently deliver great employee and customer support experiences at high velocity.
•Atlassian Team ’22: Atlassian will hold its flagship customer event in Las Vegas, at the Venetian Convention and Expo Center, from April 5 through April 7, 2022. Virtual attendance and global viewing parties will also be available from April 6 through April 7, 2022. Thousands of customers will discover Atlassian solutions, skills, and ideas to transform how their teams collaborate, power digital transformation, and drive cultural change. General information on Team ’22 can be found at https://events.atlassian.com/team22/home.
•Customer Growth: Atlassian ended its second quarter of fiscal year 2022 with a total customer count, on an active subscription or maintenance agreement basis, of 226,521 customers, adding 10,021 net new customers during the quarter.
CTO transition:
Atlassian announced today that Sri Viswanath will transition his CTO responsibilities at the end of June 2022. Sri joined as CTO in January 2016, shortly after Atlassian’s initial public offering. When Sri joined Atlassian, the company had approximately 800 employees in R&D and 54,000 customers. Sri has been instrumental in transforming the architecture of Atlassian’s platform and products to establish the foundation of its cloud-first business. As of the end of the second quarter of fiscal year 2022, the company had nearly 4,000 Atlassians under Sri’s leadership, supported more than 226,000 customers, and quarterly Cloud revenue had grown approximately 13x over his time at the company.
“To say Sri has been instrumental in this tremendous growth and scale would be an understatement. Particularly in our shift to cloud and building a world-class cloud platform,” said Mike Cannon-Brookes, Atlassian’s co-founder and co-CEO. “He is a respected and inspiring leader as well as a natural mentor, nurturing the careers of countless Atlassians during his tenure. While Scott and I are sad to see him go, we are thankful for the huge impact he has had
2
on our customers, our growth, and our culture. We look forward to cheering him on in his next chapter — whatever that may be.”
Financial Targets:
Atlassian is providing its financial targets for the third quarter of fiscal year 2022 as follows:
Third Quarter Fiscal Year 2022:
•Total revenue is expected to be in the range of $690 million to $705 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 in the range of (10%) to (9%) on an IFRS basis and in the range of 17% to 18% on a non-IFRS basis.
•Net loss per diluted share is expected to be in the range of ($0.33) to ($0.31) on an IFRS basis, and net income per diluted share is expected to be in the range of $0.29 to $0.31 on a non-IFRS basis.
•Weighted average share count is expected to be in the range of 253 million to 254 million shares when calculating diluted IFRS net loss per share and in the range of 257 million to 258 million shares when calculating diluted non-IFRS net income per share.
For additional commentary regarding financial targets, please see Atlassian’s second quarter fiscal year 2022 shareholder letter dated January 27, 2022.
With respect to Atlassian’s expectations under “Financial Targets” above, a reconciliation of IFRS to non-IFRS gross margin, operating margin, and net income (loss) per diluted share, has been provided in the financial statement tables included in this press release.
Shareholder Letter and Webcast Details:
A detailed shareholder letter is available on Atlassian’s Work Life blog at http://atlassian.com/blog/announcements/shareholder-letter-q2fy22, and the Investor Relations section of Atlassian’s website at: https://investors.atlassian.com. Atlassian will host a webcast to answer questions today:
•When: Thursday, January 27, 2022 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.
Atlassian has used, and will continue to use, its Investor Relations website at https://investors.atlassian.com as a means of making material information public and for complying with its disclosure obligations.
About Atlassian
Atlassian unleashes the potential of every team. Our team collaboration and productivity software helps teams organize, discuss, and complete shared work. Teams at more than 225,000 customers, across large and small organizations - including Bank of America, Redfin, NASA, Verizon, and Dropbox - use Atlassian’s project tracking, content creation and sharing, and service management products to work better together and deliver quality results on time. Learn more about our products, including Jira Software, Confluence, Jira Service Management, Trello, Bitbucket, and Jira Align at https://atlassian.com/.
Investor Relations Contact
Martin Lam
IR@atlassian.com
Media Contact
M-C Maple
press@atlassian.com
3
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. All statements other than statements of historical fact could be deemed forward looking, including risks and uncertainties related to statements about our products, customers, anticipated growth, sustainability, Atlassian Marketplace, partnerships, acquisitions, strategic investments, outlook, 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, and net income (loss) per diluted share.
We undertake 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, our 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 our financial results is included in filings we make with the Securities and Exchange Commission from time to time, including the section titled “Risk Factors” in our most recent Forms 20-F and 6-K (reporting our quarterly results). These documents are available on the SEC Filings section of the Investor Relations section of our 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 these 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 results of operations. 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 include:
•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, non-coupon impact related to exchangeable senior notes and capped calls, the related income tax effects on these items, and discrete tax impact resulting from a non-recurring transaction.
•Free cash flow. Free cash flow is defined as net cash provided by operating activities less capital expenditures, which consists of purchases of property and equipment, and payments of lease obligations.
Our non-IFRS financial measures reflect adjustments based on the items below:
•Share-based compensation.
•Amortization of acquired intangible assets.
•Non-coupon impact related to exchangeable senior notes and capped calls:
◦Amortization of notes discount and issuance costs.
◦Mark to fair value of the exchangeable senior notes exchange feature.
◦Mark to fair value of the related capped call transactions.
◦Net loss on settlements of exchangeable senior notes and capped call transactions.
•The related income tax effects on these items and discrete tax impact resulting from a non-recurring transaction.
4
•Purchases of property and equipment and payments of lease obligations.
We exclude expenses related to share-based compensation, amortization of acquired intangible assets, non-coupon impact related to exchangeable senior notes and capped calls, the related income tax effects on these items, and discrete tax impact resulting from a non-recurring transaction 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, non-coupon impact related to exchangeable senior notes and capped calls, the related income tax effects on these items, and discrete tax impact resulting from a non-recurring transaction allow for more meaningful comparisons between our results of operations from period to period.
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.
•In communications with our Board of Directors and investors concerning our financial performance.
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.
5
Atlassian Corporation Plc
Consolidated Statements of Operations
(U.S. $ and shares in thousands, except per share data)
(unaudited)
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Subscription | $ | 508,987 | $ | 310,675 | $ | 944,283 | $ | 588,639 | |||||||||||||||
| Maintenance | 127,059 | 131,276 | 257,649 | 258,970 | |||||||||||||||||||
| Other | 52,480 | 59,408 | 100,618 | 113,256 | |||||||||||||||||||
| Total revenues | 688,526 | 501,359 | 1,302,550 | 960,865 | |||||||||||||||||||
| Cost of revenues (1) (2) | 115,161 | 79,482 | 213,179 | 153,166 | |||||||||||||||||||
| Gross profit | 573,365 | 421,877 | 1,089,371 | 807,699 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development (1) (2) | 374,976 | 241,064 | 654,822 | 473,299 | |||||||||||||||||||
| Marketing and sales (1) (2) | 134,659 | 77,151 | 237,587 | 147,437 | |||||||||||||||||||
| General and administrative (1) | 130,448 | 75,949 | 224,034 | 147,318 | |||||||||||||||||||
| Total operating expenses | 640,083 | 394,164 | 1,116,443 | 768,054 | |||||||||||||||||||
| Operating income (loss) | (66,718) | 27,713 | (27,072) | 39,645 | |||||||||||||||||||
| Other non-operating expense, net | (319) | (545,749) | (425,252) | (572,020) | |||||||||||||||||||
| Finance income | 77 | 2,112 | 357 | 4,702 | |||||||||||||||||||
| Finance costs | (6,078) | (91,448) | (13,189) | (104,023) | |||||||||||||||||||
| Loss before income tax expense | (73,038) | (607,372) | (465,156) | (631,696) | |||||||||||||||||||
| Income tax expense | (4,434) | (14,156) | (12,418) | (11,386) | |||||||||||||||||||
| Net loss | $ | (77,472) | $ | (621,528) | $ | (477,574) | $ | (643,082) | |||||||||||||||
| Net loss per share attributable to ordinary shareholders: | |||||||||||||||||||||||
| Basic | $ | (0.31) | $ | (2.49) | $ | (1.89) | $ | (2.59) | |||||||||||||||
| Diluted | $ | (0.31) | $ | (2.49) | $ | (1.89) | $ | (2.59) | |||||||||||||||
| Weighted-average shares outstanding used to compute net loss per share attributable to ordinary shareholders: | |||||||||||||||||||||||
| Basic | 252,960 | 249,188 | 252,533 | 248,601 | |||||||||||||||||||
| Diluted | 252,960 | 249,188 | 252,533 | 248,601 | |||||||||||||||||||
(1)Amounts include share-based payment expense, as follows:
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Cost of revenues | $ | 13,631 | $ | 6,801 | $ | 21,476 | $ | 12,057 | |||||||||||||||
| Research and development | 147,233 | 73,085 | 219,835 | 134,536 | |||||||||||||||||||
| Marketing and sales | 35,812 | 11,666 | 54,188 | 18,450 | |||||||||||||||||||
| General and administrative | 40,334 | 16,140 | 60,486 | 28,380 | |||||||||||||||||||
(2)Amounts include amortization of acquired intangible assets, as follows:
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Cost of revenues | $ | 5,599 | $ | 5,413 | $ | 11,288 | $ | 10,832 | |||||||||||||||
| Research and development | 93 | 42 | 187 | 83 | |||||||||||||||||||
| Marketing and sales | 2,266 | 2,317 | 4,537 | 4,616 | |||||||||||||||||||
6
Atlassian Corporation Plc
Consolidated Statements of Financial Position
(U.S. $ in thousands)
| December 31, 2021 | June 30, 2021 | ||||||||||
| (unaudited) | |||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 899,394 | $ | 919,227 | |||||||
| Short-term investments | 86,629 | 313,001 | |||||||||
| Trade receivables | 241,682 | 173,473 | |||||||||
| Tax receivables | 11,337 | 2,332 | |||||||||
| Derivative assets | 1,785 | 127,486 | |||||||||
| Prepaid expenses and other current assets | 61,982 | 48,322 | |||||||||
| 1,302,809 | 1,583,841 | ||||||||||
| Assets held for sale | 51,826 | 43,665 | |||||||||
| Total current assets | 1,354,635 | 1,627,506 | |||||||||
| Non-current assets: | |||||||||||
| Property and equipment, net | 71,155 | 66,221 | |||||||||
| Deferred tax assets | 28,622 | 36,174 | |||||||||
| Goodwill | 724,899 | 725,758 | |||||||||
| Intangible assets, net | 108,578 | 124,590 | |||||||||
| Right-of-use assets, net | 276,021 | 205,300 | |||||||||
| Strategic investments | 163,102 | 122,159 | |||||||||
| Other non-current assets | 33,601 | 37,636 | |||||||||
| Total non-current assets | 1,405,978 | 1,317,838 | |||||||||
| Total assets | $ | 2,760,613 | $ | 2,945,344 | |||||||
| Liabilities | |||||||||||
| Current liabilities: | |||||||||||
| Trade and other payables | $ | 255,741 | $ | 266,497 | |||||||
| Tax liabilities | 1,817 | 42,051 | |||||||||
| Provisions | 32,253 | 25,148 | |||||||||
| Deferred revenue | 913,889 | 812,943 | |||||||||
| Lease obligations | 41,893 | 42,446 | |||||||||
| Derivative liabilities | 14,208 | 772,127 | |||||||||
| Exchangeable senior notes, net | — | 348,799 | |||||||||
| Total current liabilities | 1,259,801 | 2,310,011 | |||||||||
| Non-current liabilities: | |||||||||||
| Deferred tax liabilities | 16,538 | 26,625 | |||||||||
| Provisions | 13,580 | 12,435 | |||||||||
| Deferred revenue | 61,589 | 84,652 | |||||||||
| Term loan facility, net | 999,332 | — | |||||||||
| Lease obligations | 284,824 | 214,103 | |||||||||
| Other non-current liabilities | 1,324 | 2,604 | |||||||||
| Total non-current liabilities | 1,377,187 | 340,419 | |||||||||
| Total liabilities | 2,636,988 | 2,650,430 | |||||||||
| Equity | |||||||||||
| Share capital | 25,335 | 25,164 | |||||||||
| Share premium | 461,020 | 461,016 | |||||||||
| Other capital reserves | 1,872,524 | 1,516,609 | |||||||||
| Other components of equity | 55,027 | 104,832 | |||||||||
| Accumulated deficit | (2,290,281) | (1,812,707) | |||||||||
| Total equity | 123,625 | 294,914 | |||||||||
| Total liabilities and equity | $ | 2,760,613 | $ | 2,945,344 | |||||||
7
Atlassian Corporation Plc
Consolidated Statements of Cash Flows
(U.S. $ in thousands)
(unaudited)
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Operating activities | |||||||||||||||||||||||
| Loss before income tax expense | $ | (73,038) | $ | (607,372) | $ | (465,156) | $ | (631,696) | |||||||||||||||
| Adjustments to reconcile loss before income tax expense to net cash provided by operating activities: | |||||||||||||||||||||||
| Depreciation and amortization | 12,153 | 13,807 | 25,317 | 27,218 | |||||||||||||||||||
| Depreciation of right-of-use assets | 11,053 | 9,378 | 21,132 | 18,592 | |||||||||||||||||||
| Share-based payment expense | 237,010 | 107,692 | 355,985 | 193,423 | |||||||||||||||||||
| Net loss on exchange derivative and capped call transactions | — | 539,102 | 424,482 | 566,598 | |||||||||||||||||||
| Amortization of debt discount and issuance cost | 118 | 87,854 | 3,840 | 97,027 | |||||||||||||||||||
| Interest income | (77) | (2,112) | (357) | (4,702) | |||||||||||||||||||
| Interest expense | 5,960 | 3,594 | 9,349 | 6,996 | |||||||||||||||||||
| Net unrealized foreign currency loss (gain) | (5,258) | 4,874 | (11,656) | 10,441 | |||||||||||||||||||
| Net unrealized loss on investments | — | 750 | 500 | 750 | |||||||||||||||||||
| Loss (gain) on sale of investments, disposal of assets and other | 298 | 51 | (317) | 299 | |||||||||||||||||||
| Changes in assets and liabilities: | |||||||||||||||||||||||
| Trade receivables | (54,992) | (37,145) | (68,203) | (45,523) | |||||||||||||||||||
| Prepaid expenses and other assets | 4,585 | 4,057 | (15,713) | (7,361) | |||||||||||||||||||
| Trade and other payables, provisions and other non-current liabilities | 61,863 | 32,823 | (4,162) | (14,561) | |||||||||||||||||||
| Deferred revenue | 64,429 | 61,297 | 77,884 | 83,933 | |||||||||||||||||||
| Interest received | 191 | 3,298 | 1,086 | 7,454 | |||||||||||||||||||
| Income tax paid, net | (42,611) | (21,486) | (53,941) | (28,961) | |||||||||||||||||||
| Net cash provided by operating activities | 221,684 | 200,462 | 300,070 | 279,927 | |||||||||||||||||||
| Investing activities | |||||||||||||||||||||||
| Business combinations, net of cash acquired | — | (9,700) | — | (42,164) | |||||||||||||||||||
| Purchases of property and equipment | (12,581) | (9,548) | (19,462) | (17,365) | |||||||||||||||||||
| Purchases of investments | (42,000) | (36,013) | (116,003) | (69,265) | |||||||||||||||||||
| Proceeds from maturities of investments | 7,600 | 120,627 | 61,487 | 195,304 | |||||||||||||||||||
| Proceeds from sales of investments | — | 40,607 | 186,262 | 47,694 | |||||||||||||||||||
| Change in restricted cash | 11,119 | (2,162) | 11,119 | (2,162) | |||||||||||||||||||
| Payment of deferred consideration | (2,701) | — | (3,839) | (185) | |||||||||||||||||||
| Net cash provided by (used in) investing activities | (38,563) | 103,811 | 119,564 | 111,857 | |||||||||||||||||||
| Financing activities | |||||||||||||||||||||||
| Proceeds from exercise of share options | 4 | 225 | 5 | 1,147 | |||||||||||||||||||
| Payments of lease obligations | (11,626) | (11,139) | (23,812) | (22,235) | |||||||||||||||||||
| Payment of issuance costs for debt | — | (4,445) | — | (4,445) | |||||||||||||||||||
| Interest paid | (3,603) | (3,294) | (4,802) | (3,294) | |||||||||||||||||||
| Repayment of exchangeable senior notes | (1,234,376) | (671,489) | (1,548,686) | (671,497) | |||||||||||||||||||
| Proceeds from settlement of capped call transactions | 104,519 | 72,776 | 135,497 | 72,776 | |||||||||||||||||||
| Proceeds from term loan facility | 350,000 | — | 1,000,000 | — | |||||||||||||||||||
| Net cash used in financing activities | (795,082) | (617,366) | (441,798) | (627,548) | |||||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (245) | 4,546 | (2,353) | 7,510 | |||||||||||||||||||
| Net decrease in cash and cash equivalents | (612,206) | (308,547) | (24,517) | (228,254) | |||||||||||||||||||
| Cash and cash equivalents at beginning of period | 1,507,418 | 1,560,262 | 919,227 | 1,479,969 | |||||||||||||||||||
| Net decrease in cash and cash equivalents included in assets held for sale | 4,182 | — | 4,684 | — | |||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 899,394 | $ | 1,251,715 | $ | 899,394 | $ | 1,251,715 | |||||||||||||||
8
Atlassian Corporation Plc
Revenues by Deployment Options
(U.S. $ in thousands)
(unaudited)
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Cloud | $ | 364,099 | $ | 230,412 | $ | 682,002 | $ | 437,733 | |||||||||||||||
| Data Center | 139,108 | 76,060 | 250,303 | 142,410 | |||||||||||||||||||
| Server (1) | 135,519 | 153,399 | 275,066 | 303,230 | |||||||||||||||||||
| Marketplace and services (2) | 49,800 | 41,488 | 95,179 | 77,492 | |||||||||||||||||||
| Total revenues | $ | 688,526 | $ | 501,359 | $ | 1,302,550 | $ | 960,865 | |||||||||||||||
(1) Included in Server is perpetual license revenue. Perpetual license revenue is captured as other revenue on the Consolidated Statements of Operations.
(2) Included in Marketplace and services is premier support revenue. Premier support is a subscription-based arrangement for a higher level of support across different deployment options. Premier support is recognized as subscription revenue on the Consolidated Statements of Operations as the services are delivered over the term of the arrangement.
9
Atlassian Corporation Plc
Reconciliation of IFRS to Non-IFRS Results
(U.S. $ and shares in thousands, except per share data)
(unaudited)
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| IFRS gross profit | $ | 573,365 | $ | 421,877 | $ | 1,089,371 | $ | 807,699 | |||||||||||||||
| Plus: Share-based payment expense | 13,631 | 6,801 | 21,476 | 12,057 | |||||||||||||||||||
| Plus: Amortization of acquired intangible assets | 5,599 | 5,413 | 11,288 | 10,832 | |||||||||||||||||||
| Non-IFRS gross profit | $ | 592,595 | $ | 434,091 | $ | 1,122,135 | $ | 830,588 | |||||||||||||||
| Operating income | |||||||||||||||||||||||
| IFRS operating income (loss) | $ | (66,718) | $ | 27,713 | $ | (27,072) | $ | 39,645 | |||||||||||||||
| Plus: Share-based payment expense | 237,010 | 107,692 | 355,985 | 193,423 | |||||||||||||||||||
| Plus: Amortization of acquired intangible assets | 7,958 | 7,772 | 16,012 | 15,531 | |||||||||||||||||||
| Non-IFRS operating income | $ | 178,250 | $ | 143,177 | $ | 344,925 | $ | 248,599 | |||||||||||||||
| Net income | |||||||||||||||||||||||
| IFRS net loss | $ | (77,472) | $ | (621,528) | $ | (477,574) | $ | (643,082) | |||||||||||||||
| Plus: Share-based payment expense | 237,010 | 107,692 | 355,985 | 193,423 | |||||||||||||||||||
| Plus: Amortization of acquired intangible assets | 7,958 | 7,772 | 16,012 | 15,531 | |||||||||||||||||||
| Plus: Non-coupon impact related to exchangeable senior notes and capped calls | — | 626,956 | 427,853 | 663,625 | |||||||||||||||||||
| Less: Income tax effects and adjustments | (40,172) | (25,581) | (76,639) | (57,415) | |||||||||||||||||||
| Non-IFRS net income | $ | 127,324 | $ | 95,311 | $ | 245,637 | $ | 172,082 | |||||||||||||||
| Net income per share | |||||||||||||||||||||||
| IFRS net loss per share - diluted | $ | (0.31) | $ | (2.49) | $ | (1.89) | $ | (2.59) | |||||||||||||||
| Plus: Share-based payment expense | 0.93 | 0.44 | 1.40 | 0.78 | |||||||||||||||||||
| Plus: Amortization of acquired intangible assets | 0.03 | 0.04 | 0.06 | 0.07 | |||||||||||||||||||
| Plus: Non-coupon impact related to exchangeable senior notes and capped calls | — | 2.48 | 1.69 | 2.63 | |||||||||||||||||||
| Less: Income tax effects and adjustments | (0.15) | (0.10) | (0.30) | (0.21) | |||||||||||||||||||
| Non-IFRS net income per share - diluted | $ | 0.50 | $ | 0.37 | $ | 0.96 | $ | 0.68 | |||||||||||||||
| Weighted-average diluted shares outstanding | |||||||||||||||||||||||
| Weighted-average shares used in computing diluted IFRS net loss per share | 252,960 | 249,188 | 252,533 | 248,601 | |||||||||||||||||||
| Plus: Dilution from share options and RSUs (1) | 4,018 | 5,357 | 4,028 | 5,457 | |||||||||||||||||||
| Weighted-average shares used in computing diluted non-IFRS net income per share | 256,978 | 254,545 | 256,561 | 254,058 | |||||||||||||||||||
| Free cash flow | |||||||||||||||||||||||
| IFRS net cash provided by operating activities | $ | 221,684 | $ | 200,462 | $ | 300,070 | $ | 279,927 | |||||||||||||||
| Less: Capital expenditures | (12,581) | (9,548) | (19,462) | (17,365) | |||||||||||||||||||
| Less: Payments of lease obligations | (11,626) | (11,139) | (23,812) | (22,235) | |||||||||||||||||||
| Free cash flow | $ | 197,477 | $ | 179,775 | $ | 256,796 | $ | 240,327 | |||||||||||||||
(1) The effects of these dilutive securities were not included in the IFRS calculation of diluted net loss per share for the three and six months ended December 31, 2021 and 2020 because the effect would have been anti-dilutive.
10
Atlassian Corporation Plc
Reconciliation of IFRS to Non-IFRS Financial Targets
(U.S. $)
| Three Months Ending March 31, 2022 | |||||
| Revenue | $690 million to $705 million | ||||
| IFRS gross margin | 82% to 83% | ||||
| Plus: Share-based payment expense | 2 | ||||
| Plus: Amortization of acquired intangible assets | 0 | ||||
| Non-IFRS gross margin | 84% to 85% | ||||
| IFRS operating margin | (10%) to (9%) | ||||
| Plus: Share-based payment expense | 26 | ||||
| Plus: Amortization of acquired intangible assets | 1 | ||||
| Non-IFRS operating margin | 17% to 18% | ||||
| IFRS net loss per share - diluted | ($0.33) to ($0.31) | ||||
| Plus: Share-based payment expense | 0.70 | ||||
| Plus: Amortization of acquired intangible assets | 0.03 | ||||
| Less: Income tax effects and adjustments | (0.11) | ||||
| Non-IFRS net income per share - diluted | $0.29 to $0.31 | ||||
| Weighted-average shares used in computing diluted IFRS net loss per share | 253 million to 254 million | ||||
| Dilution from share options and RSUs (1) | 4 million | ||||
| Weighted-average shares used in computing diluted non-IFRS net income per share | 257 million to 258 million | ||||
(1) The effects of these dilutive securities are not included in the IFRS calculation of diluted net loss per share for the three months ending March 31, 2022 because the effect would be anti-dilutive.
11
Q2 FY22 | January 27, 2022 Shareholder Letter
Q2 FY22 Fellow shareholders, Each new year prompts us to pause and take stock. More than anything, we’re grateful for our customers, staff, and stakeholders. Their determination and resilience inspire us to bring our best, most energetic selves to work every day. Customers look to Atlassian for innovative products that take the “work” out of teamwork, and we’re committed to coming through for them. We’re building a cloud platform that lets us ship new capabilities and products quickly, as we’re beginning to see with Point A. By anticipating the trends in our three addressable markets, investing heavily in R&D, playing the long game with our uniquely efficient GTM model, and staying true to our values, Atlassian is delivering a metric tonne of value. Coming off a solid start to the fiscal year, the Atlassian flywheel kept our momentum high and delivered a bonza Q2. We landed over 10,000 net new customers this quarter, 98% of whom chose Cloud, and made steady progress migrating our on-premises customers. Total revenue grew 37% year-over-year, driven by subscription revenue, which grew 64% year-over-year. Atlassian doesn’t need to reinvent itself every January 1st. We play the long game. As a dedicated team of over 7,000 (and growing!), we march forward with our eyes on the horizon, shaping and living the future of work every single day so our customers are equipped for whatever comes next. Hey! You! Get off of onto my cloud! ⛅ 🎸 Along with the obvious benefits like hosted infrastructure and unified user management, many long-time customers are discovering that migrating to our Cloud products also offers a chance to streamline the way they configure their Atlassian products and maximize the value they get. Marty Hagewood, a software development manager at EMC Insurance Companies, experienced this first-hand. When EMC decided to move from their Data Center deployments to Cloud, they saw a unique chance to make long-lasting improvements. “We said, ‘Let’s not just move it over. Let’s rearrange the blocks a little bit and challenge ourselves to ask questions,'” he recalls. Those questions prompted them to simplify. We think Marie Kondo would approve. Between migrations, customers expanding their footprint in the Cloud, strong adoption of Premium editions, and new customer additions driven by Free editions, Cloud Q2 revenue was up 58% year-over-year. Of note: approximately one-third of total Cloud migrations in Q2 came from Data Center. As you’ll see below, continuous improvements to our platform allow us to welcome even our largest and most regulated customers to Atlassian Cloud. We still have more work ahead of us, but we’re happy with the progress we’re making. From the CEOs 2 🇦🇺
Q2 FY22 Wins for enterprise customers When we talk to our largest customers, they tell us they’re excited to move to Cloud. And each quarter we make it easier for them to do so. This quarter we satisfied a requirement for many of our regulated customers by achieving compliance for the financial services industry in EMEA. Cloud Enterprise editions of our products now meet some of the most stringent compliance standards in the world, including those of the European Banking Authority (EBA) and Germany’s Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). This win comes on the heels of delivering data residency for EMEA and Australia back-to-back in Q4 FY21 and Q1 of this fiscal year. Stay tuned for more region- and industry-specific security and compliance capabilities in the coming quarters. Long-term investments in our platform are paying consistent dividends. Centralized platform capabilities like scalable infrastructure and a steady cadence of security enhancements help us attract enterprise customers without upending our unique business model. While it’s still early days for our Cloud Enterprise editions, we’re seeing solid initial traction as we strengthen these offerings further. Large companies’ needs are becoming more complex due to emerging regulations around privacy and security. Atlassian stands ready to shoulder that burden on our customers' behalf so they can focus on their core objectives. 3 🔐
Q2 FY22 Creating value for partners Partners are critical to our long-term success. What’s more, they see Atlassian Cloud as being critical to their success and are embracing the new opportunities around migrations, sales, and app development it provides. And the numbers bear this out: Cloud sales from our Channel Partners in Q2 were up 131% year-over-year. Customers add roughly 28,000 apps to their Atlassian products each week. In fact, adoption of our Cloud apps is growing faster than adoption of our Cloud products themselves – a sign of a thriving ecosystem with room to expand. Cloud apps now account for nearly 50% of Atlassian Marketplace listings overall, with over 70% of Jira and Confluence Cloud customers having at least one app installed. Apps are tightly correlated with customer loyalty because of the additional value they help customers realize. We’ll continue to make the right moves to grow our offerings and invest in the success of our 1,250+ Marketplace Partners. Meeting notes app-maker Hugo is a great example of the impact the Atlassian ecosystem has for our partners. Soon after starting their company, Hugo’s founders built integrations for their app that let users turn action items into Jira tickets and sync meeting notes with Confluence pages. “Those integrations got us into the Atlassian Marketplace,” says co-founder and COO Darren Chait. “That’s been driving traffic and sign-ups ever since. It’s a great source of customer acquisition and ultimately, revenue growth.” We’re incredibly proud of our ecosystem and its momentum. After the Marketplace’s inception in 2012, it took seven years to reach $1 billion in lifetime sales. Now we’ve surpassed $2 billion, just two years later. It’s been an honor and a pleasure to pay out over $1.5 billion in revenue share to our global network of app developers, fueling their growth . Here’s to the next $1.5 billion, and beyond! Our platform enables us to expand our partnerships in ways we’ve only begun to explore. Capabilities like unified billing and enterprise-grade security make it easy for other innovators out there to plug in and become part of our ecosystem. They know Atlassian is the central hub that moves work forward and recognize the industry-leading scale at which we operate, thanks to our diverse and rapidly growing customer base. We’re excited to create new ways of working as a team with partners for the benefit of our customers. We’re also leveraging Atlassian Ventures as another mechanism to expand the economy around Atlassian. When visual collaboration company Miro approached us about contributing to their Series C funding round, we jumped at the chance. Similarly, Clockwise, a time orchestration provider that helps teams free up more focus time, recognized our shared focus on teams and turned to Atlassian Ventures. Our venture investments, from Marketplace vendors to partners like Miro and Clockwise, ensure we’re driving alignment and customer value across the board. 4 💸
Q2 FY22 Shaping the future of work across three global markets🔮 Today’s teams are tackling ever-more complex problems. Solving them takes cross-functional collaboration. In a recent study we conducted in partnership with Forrester Research, 83% of tech leaders said open, interdepartmental collaboration is critical to their organization’s success. That’s why Atlassian delivers a portfolio of powerful, seamlessly integrated products that reach across entire organizations. And our three-pronged approach is delivering more value than just the sum of its parts. Work management for all Products like Confluence, Trello, Jira Work Management, and Team Central are key players in our mission to unleash the potential of every team. Among these, Confluence is the unsung hero. It quietly powers cross-functional collaboration for more than 75,000 customers, drives hundreds of millions in revenue annually, and continues to grow at a rapid clip. Confluence picks up where chat tools leave off. It serves as the digital watercooler where the whole company shares updates about their work, their team, and themselves. As any Atlassian will tell you, Confluence helps the whole company feel connected on both a professional and personal level. Confluence is the lifeblood of business teams like HR and marketing, allowing them to collaborate on long-form content like reports, company policies, project plans, and blog posts. (We even draft our earnings reports in Confluence!) And because it’s long been the go-to place for technical teams to create knowledge bases and design docs, Confluence facilitates cross- functional collaboration like a champ. 5 ATLASSIAN + NEXTIVA “Confluence went from a tool used just by the technology organization to an enterprise tool used by the entire company. It’s given us a central place to document, track, and collaborate within and across Nextiva. We’re able to share the same platform and can work more efficiently.” Catherine White Atlassian Solutions Specialist at Nextiva
Q2 FY22 6 This quarter, we shipped a new home screen inside Confluence that helps users dive back into their work, catch up on relevant activity, and discover what’s happening around them. Users can now jump straight to pages they’ve been following or working on and see real-time updates from the people they work with most often. And speaking of digital watercoolers, the Popular feed highlights the most trafficked and commented pages, making it easy to see what the company is buzzing about and join the conversation. We also gave users new ways to add pages. Confluence customers of all sizes tell us that bringing different data sources together to create robust, structured content is a massive challenge. So we introduced 40 new page templates, added support for images to all templates, and made it easier to pull in excerpts from other pages. The new Confluence home screen: part personal dashboard, part company bulletin board
Q2 FY22 IT Service Management (ITSM) Three years ago, we declared our intention to double down on IT teams. Since then, we’ve delivered a steady stream of innovation and, powered by our platform, launched Jira Service Management last fiscal year. Its unique blend of ITSM capabilities is helping customers deliver great employee and customer support quickly – a critical capability in today’s digital-first, remote-friendly world. ATLASSIAN + GINKGO BIOWORKS “All Atlassian’s ITSM competitors are monolithic solutions that start at half a million dollars and need an army of consultants to get started. We needed something that would scale with us today. And we don’t have to change our business to use Jira Service Management. That’s really different from the rest of the products on the market.” Dave Treff Head of Digital Operations at Ginkgo Bioworks 7 Jira Service Management’s 35,000+ customer base speaks for itself. And this quarter, Forrester joined the conversation when it recognized Jira Service Management as a Leader in its Enterprise Service Management wave. Not only that, but Forrester also recognized Atlassian’s strategy for enterprise service management with the highest possible score. But we’re not stopping there. We recently added Percept.ai to the Atlassian family, bolstering our investments in automation and machine learning. As part of Jira Service Management, Percept.ai’s virtual agent technology will automate day-to-day support interactions. Its AI engine analyzes intent, sentiment, and context to personalize interactions, and when necessary, seamlessly transitions conversations to human agents. With the robots taking the rote aspects of their job , support staff can focus on process improvements and other forward-looking work. The Forrester Wave Enterprise Service Management Q4 2021 *A gray bubble or open dot indicates a nonparticipating vendor. Source: Forrester Research, Inc. Unauthorized reproduction, citation, or distribution prohibited. 🤖 🏅
Q2 FY22 8 Agile development Software development tools power a broad array of operations on the journey from concept to code to customer. But teams don’t want to be forced into an all-in-one solution that may or may not suit their needs. Flexibility is vital to their success, so we focus on being the beating heart that keeps development work flowing. Our Open DevOps framework extends the power of Jira, Bitbucket, Opsgenie, and Confluence with best-of-breed third-party integrations that let teams build custom toolchains with Atlassian at the center, coordinating it all. Take test management, for example. We don’t try to cover every technical nook and cranny on our own. Instead, we use our open integrations strategy to bring this capability to customers. Atlassian partnered with companies like Xray, SmartBear, and Mabl so teams can manage their automated tests without leaving Jira. The DevOps tool market evolves quickly, with whole new categories emerging on a regular basis. Through it all, customers consistently turn to Atlassian. With Open DevOps, we can anticipate their needs so they can carry on building great software for their customers. Invite all of the team to Open DevOps.
Q2 FY22 9 Flexibility is our strength 🧘 🏋 The past two years have underscored the importance of scaling efficiently and flexibly. With our “TEAM Anywhere” program, we can offer employees the option to live anywhere within countries where we have a legal entity (hello, Australian Antarctic Territory! ) and work from just about any other location on a temporary basis. We believe this has helped shield Atlassian from the massive employee attrition many other companies are experiencing. It also means Atlassian is recruiting the most talented people to support our goals, even if they don’t turn up to an office every day. Over 40% of the new Atlassians hired in calendar 2021 live more than two hours away from the nearest Atlassian office. That number will keep growing as we ramp up the pace of hiring over the next several quarters. Hiring is the key to Atlassian’s future and our top priority – full stop. We deeply believe in the massive market opportunities in front of us, and investing in people is our path to seize these opportunities. It’s also our biggest challenge. Behind every headline about the “Great Resignation” are a hundred companies duking it out for the best talent. We believe Atlassian can, and will, win the right people on the strength of our award-winning culture, compelling mission, competitive compensation, and flexible work environment. TEAM Anywhere lets us adapt quickly when we need to. We’ll continue to evolve these practices day by day as we build toward 10,000 employees globally. We’re proud to share our lessons learned (warts and all! ) through our blog, customer events, and other forums. It’s all part of our mission to unleash the potential of every team. 😳 🇦🇶
Q2 FY22 A fond farewell 👋 After six incredible years leading Atlassian’s Engineering team, our CTO Sri Viswanath has decided to move on. This will see him transition CTO responsibilities to a to-be-determined successor at the end of FY22. Sri joined as Atlassian’s first CTO in January 2016, shortly after our initial public offering. At the time, we had approximately 800 employees in R&D and 54,000 customers. Sri has been instrumental in transforming the architecture of our platform and products to establish the foundation of our cloud-first business. Today, there are nearly 4,000 Atlassian under Sri’s leadership. We now support more than 226,000 customers, and Cloud revenue has grown approximately 13x during his tenure. Sri is a respected and inspiring leader as well as a natural mentor, nurturing the careers of countless Atlassians. While we are sad to see him go, we are thankful for the huge impact he has had on our customers, our growth, and our culture. 💙 We look forward to cheering him on in his next chapter – whatever that may be. We look forward to discussing all of the above and answering your questions on our earnings call. 10 Mike Cannon-Brookes Co-founder and co-CEO Scott Farquhar Co-founder and co-CEO MIKE & SCOT T The bottom line ‣ Atlassian’s ecosystem is creating heaps of value for partners and customers alike. A thriving ecosystem is critical to our success and we’ll continue to look for ways to expand it even further. ‣ Hiring remains our top priority. Thanks to our award-winning culture, mission, and “TEAM Anywhere” program, we’re well positioned to ramp up hiring over the coming quarters as we seize the massive market opportunities in front of us. ‣ Our cloud platform continues to evolve, unlocking migration opportunities for more customers every quarter, particularly those in regulated industries. We’re pleased with the steady progress we’re making on our journey as a cloud-first company.
Q2 FY22 Over 10,000 net new customers from a wide range of industries came on board in Q2, and over 50,000 in calendar year 2021. To give you an idea of the momentum we’ve built, it took 13 years to reach 50,000 customers total. These incredible numbers are due to the growing demand for our products that address ongoing digital and cultural transformations within businesses, as well as our unique go-to-market machine that optimizes each step in the customer journey. While I don’t play favorites with Atlassian products, Jira Service Management is near the top of my list. The reality is that the entire ITSM market desperately needs a different approach to tooling, and Jira Service Management is precisely the right product at the right time. There’s a lot of talk out there about breaking down organizational silos, and Jira Service Management actually helps companies walk the walk. It brings IT, development, and operations teams together in a way no other product can beat. Whether it’s enterprises like CBS and mid-Western grocery giant Hy-Vee, or Valemas, a small marketing consultancy in Bogatá, we’ve struck a chord that will be music to customers’ ears for years to come. Customer highlights ⭐ 11 Cameron Deatsch, Chief Revenue Officer Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 226,521 216,500 204,754 188,033 174,948 166,180159,433156,863151,731147,445 In Q1’22, we refined our definition of a customer to capture unique domains that have at least one active and paid product license or subscription, with 2 or more seats, excluding starter licenses/subscriptions. The primary difference between the customer count under the prior and updated definition is that we are no longer including Trello single-user accounts in the customer count. For each period ended Customers
Q2 FY22 12 Customers took center stage at the “High Velocity” virtual event in November, sharing how Jira Service Management drives exceptional service experiences for both customers and employees at scale. For the IT leaders from around the globe who attended, the event was a smash hit. Encore, please! For now, however, we’re turning our attention to our flagship event of the year: Team ’22. And we’re heading back to Vegas! We’re preparing for a three-day live event, April 5 - 7, that will include keynotes, breakout sessions, training, an expo floor, and networking events. We’ll complement the in-person activities with live streams of the keynote and breakout sessions, extending the experience to an even larger group and empowering teams to attend in whatever way works best for them. As with everything we do, we’ll stay nimble and adapt plans for Team ’22 as the situation warrants. We’ll also be holding our next Investor Day at Team ’22 on April 7, with plans for both on-site and virtual sessions – more details to follow. We hope to see you there! Anyone can log a new service request with Jira Service Management – not just IT staff 🤘
Q2 FY22 13 Financial highlights James Beer, Chief Financial Officer Second quarter fiscal 2022 We recorded excellent financial performance in Q2’22 and I am pleased to see the results of past investments come to fruition in the current quarter. Our Cloud and Data Center products continue to be in strong demand and we were pleased with the number of net new Cloud customer additions. Furthermore, our Cloud migration progress is encouraging. Highlights for Q2’22 include: • Subscription revenue grew 64% year-over-year. Specifically, Cloud revenue grew 58% year- over-year while Data Center revenue grew 83% year-over-year. • Strong free cash flow generation of $197.5 million, representing a 29% free cash flow margin. • Hiring remains a top priority and we continue to execute well against our ambitious plans. In Q2’22, we added 476 net new Atlassians and expect this momentum to build in the remainder of FY22 and beyond. We will continue to invest in top-tier talent wherever they are around the globe to drive durable growth and expand our reach across our three core markets. A reconciliation of IFRS to non-IFRS measures is provided within tables at the end of this letter, in our earnings press release or posted on our Investor Relations website. GE OF R CS GS TECM )')) OCOE CM T NNCS P WUCPFU G EGR RGT U CTG FC C CPF RGTEGP CIG JSGG O JT 4OFGF 3GEGNDGS ($ Y O JT 4OFGF 3GEGNDGS ($ )')( )')' )')( )')' 75 GT M T G GPWG ,.. (, ) ) ( , ., 7T UU RT -) ), ( .-- . )- . - , 7T UU OCTI P ) RGTC PI PE OG N UU ,, - . (- - ) (- -( ) , RGTC PI OCTI P ( ( % G N UU -- -( ,( (. -- - , ) .( G N UU RGT U CTG $ F NW GF %) (% %. (% 3CU N T O RGTC PU (( ,. ( ,( ) - (- (- O%75 GT M T 7T UU RT ( ) (( ) .) .. 7T UU OCTI P ) ) ) ) ) RGTC PI PE OG -. ( ) -- ) ( ( . RGTC PI OCTI P %( % ) %) ( %( G PE OG (- )( ) ( ,)- -( .( G PE OG RGT U CTG $ F NW GF % %)- % , %,. 6TGG ECU N - -- - -- ( , - , ( )(- Second quarter fiscal 2022 financial summary (in thousands, except per share data)
Q2 FY22 14 Pricing changes and end of upgrades for Server licenses We recently announced price changes to certain Data Center and Server products. We also reminded customers that we are ending both user tier upgrades for Server licenses and new Server feature development, effective February 15, 2022. Pricing changes We notified a number of our Data Center and Server customers that they would see price changes to certain products. These price changes only impact existing customers that are on legacy pricing plans (“advantaged pricing plans”) and vary depending on product and user tier. The significant majority of Data Center and Server customers are on these advantaged pricing plans. The increases will gradually bring these customers to our list prices over time. For Data Center deployments, the increases equate to approximately 13-15% across Jira Software, Jira Service Management, and Confluence. For Server deployments, the increases will be approximately 10-25%, across all tiers of Jira Software, Confluence and Jira Work Management with the largest tiers seeing the greatest increase. This most recent announcement does not impact Cloud pricing. As a reminder, last September, we announced pricing changes on certain Cloud products that went into effect in mid-October. Below is a summary of the primary FY22 price changes: 29% Data Center Server Cloud Deployment model ~13-15% increase Price change ~10-25% increase ~5% increase Feb. 15, 2022 Effective date Feb. 15, 2022 Oct. 12, 2021
Q2 FY22 End of Server license upgrades and Server feature development As previously communicated in October 2020, customers on any Server license will no longer be able to upgrade their user tier after February 15, 2022. On this date, we will also end new Server feature development and only commit to providing security bug fixes for critical vulnerabilities until we withdraw support for Server products in February 2024. The timeline for the Server end-of-life (EOL) and recent price changes is as follows: Additional details and resources are available on our Migration Center. 15 We are here FY21 FY24 Oct. 16, 2020 Feb. 2, 2021 Oct. 12, 2021 Price changes for Cloud products effective Price changes for on-premises customers on advantaged pricing plans announced Price changes for Cloud products announced Jan. 13, 2022 Feb. 15, 2022 Sep. 9, 2021 Feb. 2, 2024 End support for all Server products Price changes for on-premises customers on advantaged pricing plans effective, and end of upgrades for Server licenses FY22 EOL of Server and on-premises price changes announced End of new Server license sales and on-premises price changes effective
Q2 FY22 16 33% 29% GE OF R CS GS TECM )')) SGWGO G SGT M T P WUCPFU G EGR RGTEGP CIG ) )) ) )( GCS% WGS% GCS IS J GWGO GT D QG WDUET R P . .- ) ,- ) :C P GPCPEG (- ) (-, GT ( . . % CN TG GPWGU ,.. (, ) ) )) ) )( GCS% WGS% GCS IS J GWGO GT D 3GQM NGO 3N WF ), () ( . 4C C 3GP GT ) . -, , .) GT GT ) ) ) ( :CTMG RNCEG CPF UGT EGU . .. ( CN TG GPWGU ,.. (, ) )- GE OF R CS GS TECM )')) G 7OE NG P WUCPFU G EGR RGT U CTG FC C ) )) ) )( 75 GT M T G N UU -- -( ,( (. G N UU RGT U CTG $ F NW GF %) (% O%75 GT M T G PE OG (- )( ) G PE OG RGT U CTG $ F NW GF % %)- GE OF R CS GS TECM )')) 5SGG 2CTJ 5M P WUCPFU G EGR RGTEGP CIG ) )) ) )( 5SGG ECTJ M 86 PG ECU RT FGF D RGTC PI CE GU (( ,. ( ,( 9GUU0 3CR CN G RGPF WTGU ( . . 9GUU0 C OGP U NGCUG DN IC PU ,(, ) 6TGG ECU N - -- - -- 2 525 0 3.7.16.4 ( ), GE OF R CS GS TECM )')) SGWGO G SGT M T P WUCPFU G EGR RGTEGP CIG ) )) ) )( GCS% WGS% GCS IS J GWGO GT D QG WDUET R P . .- ) ,- ) :C P GPCPEG (- ) (-, GT ( . . % CN TG GPWGU ,.. (, ) ) )) ) )( GCS% WGS% GCS IS J G GO GT D 3GQM NGO 3N WF ), () ( . 4C C 3GP GT ) . -, , .) GT GT ) ) ) ( :CTMG RNCEG CPF UGT EGU . .. ( CN TG GPWGU ,.. (, ) )- GE OF R CS GS TECM )')) G 7OE NG P WUCPFU G EGR RGT U CTG FC C ) )) ) )( 75 GT M T G N UU -- -( ,( (. G N UU RGT U CTG $ F NW GF %) (% O%75 GT M T G PE G (- )( ) G PE OG RGT U CTG $ F NW GF % %)- GE OF R CS GS TECM )')) 5SGG 2CTJ 5M P WUCPFU G EGR RGTEGP CIG ) )) ) )( 5SGG ECTJ M 86 PG ECU RT FGF D RGTC PI CE GU (( ,. ( ,( 9GUU0 3CR CN G RGPF WTGU ( . . 9GUU0 C OGP U NGCUG DN IC PU ,(, ) 6TGG ECU N - -- - -- 2 525 0 3.7.16.4 ( ), Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 $689 $614 $560$569 $501 $460 Total revenue U.S. $ in millions (Y/Y growth rate in %) 34% 26% 30% 37% 23% 38% Revenue (in thousands)
Q2 FY22 $688.5 $614.0 $559.5$568.7 $501.4 $459.5 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 $135.5 $139.5 $140.3$164.2 $153.4 $149.8 $49.8 $45.4 $39.9 $59.9 $41.5 $36.0 $139.1 $111.2 $99.1 $94.7 $76.1 $66.3 $364.1 $317.9$280.2$249.9$230.4$207.3 Cloud Data Center Marketplace and services Server 17 33% 29% By quarter, U.S. $ in millions Revenue by deployment Year-over year growth % Q1'21 Q2'21 Q3'21 Q4'21 Q1’22 Q2’22 Cloud 37% 36% 35% 47% 53% 58% Data Center 49% 42% 75% 62% 68% 83% Marketplace and services 11% 5% 86% 13% 26% 20% Server 11% 5% 17% (2%) (7%) (12%) Total revenues 26% 23% 38% 30% 34% 37% (2) (1) (4) (3) Note: revenue totals may not foot due to rounding In Q2’22, Server revenue includes approximately $8 million of perpetual license revenue which is included in other revenue on the Consolidated Statements of Operations. In Q2’22, Marketplace and services revenue includes approximately $6 million of premier support revenue which is included in subscription revenue on the Consolidated Statements of Operations. Included in Server is perpetual license revenue. Perpetual license revenue is captured as other revenue on the Consolidated Statements of Operations. (1) (4) (3) Included in Marketplace and services is premier support revenue. Premier support is a subscription-based arrangement for a higher level of support across different deployment options. Premier support is recognized as subscription revenue on the Consolidated Statements of Operations as the services are delivered over the term of the arrangement. (2) $688.5 $614.0 $559.5$568.7 $501.4 $459.5
Q2 FY22 18 Headcount Total employee headcount was 7,388, an increase of 476 employees since the end of Q1’22. We hired across all major functions, with the largest number being added in R&D. Net income (in thousands) Balance Sheet Atlassian finished Q2’22 with $986.0 million in cash and cash equivalents plus short-term investments. During Q2’22, we drew $350.0 million from our term loan facility, used $1.2 billion in cash to settle the remaining portion of our outstanding exchangeable senior notes, and received $104.5 million in cash from the unwinding of the related capped calls. The net impact resulted in cash outflows of $779.9 million, which is reflected in cash used in financing activities on our Consolidated Statements of Cash Flows. Margins, operating expenses, and operating income (in thousands) GE OF R CS GS TECM )')) NCSI OT COF QGSC OI GYQGOTG T NNCS P WUCPFU G EGR RGT U CTG FC C CPF RGTEGP CIG ) )) ) )( 6S TT NCSI O 86 IT UU OCTI P .)%) . % P$86 IT UU OCTI P .,% .,%, CM QGSC OI GYQGOTGT 86 RGTC PI G RGPUGU , .) ) , P$86 RGTC PI G RGPUGU ) ( GTGCSEJ COF FGWGM QNGO GYQGOTGT 86 TGUGCTE CPF FG GN ROGP G RGPUGU )- -, ( , P$86 TGUGCTE CPF FG GN ROGP G RGPUGU ((- , ,- )- 2 525 0 3.7.16.4 ( CSLG OI COF TCMGT GYQGOTGT 86 OCTMG PI CPF UCNGU G RGPUGU ) , -- P$86 OCTMG PI CPF UCNGU G RGPUGU , . ,) ,. 2 525 0 3.7.16.4 % ) 6GOGSCM COF CFN O T SC WG GYQGOTGT 86 IGPGTCN CPF CFO P U TC G G RGPUGU ) . - P$86 IGPGTCN CPF CFO P U TC G G RGPUGU . 2 525 0 3.7.16.4 QGSC OI OE NG 86 RGTC PI PE OG N UU ,, - . (- - ) P$86 RGTC PI PE OG -. ( ) -- 2 525 0 3.7.16.4 %( % ) GE OF R CS GS TECM )')) SGWGO G SGT M T P WUCPFU G EGR RGTEGP CIG ) )) ) )( GCS% WGS% GCS IS J GWGO GT D QG WDUET R P . .- ) ,- ) :C P GPCPEG (- ) (-, GT ( . . % CN TG GPWGU ,.. (, ) ) )) ) )( GCS% WGS% GCS IS J GWGO GT D 3GQM NGO 3N WF ), () ( . 4C C 3GP GT ) . -, , .) GT GT ) ) ) ( :CTMG RNCEG CPF UGT EGU . .. ( CN TG GPWGU ,.. (, ) )- GE OF R CS GS TECM )')) G 7OE NG P WUCPFU G EGR RGT U CTG FC C ) )) ) )( 75 GT M T G N UU -- -( ,( (. G N UU RGT U CTG $ F NW GF %) (% O%75 GT M T G PE OG (- )( ) G PE OG RGT U CTG $ F NW GF % %)- GE OF R CS GS TECM )')) 5SGG 2CTJ 5M P WUCPFU G EGR RGTEGP CIG ) )) ) )( 5SGG ECTJ M 86 PG ECU RT FGF D RGTC PI CE GU (( ,. ( ,( 9GUU0 3CR CN G RGPF WTGU ( . . 9GUU0 C OGP U NGCUG DN IC PU ,(, ) 6TGG ECU N - -- - -- 2 525 0 3.7.16.4 ( ),
Q2 FY22 19 Free cash flow (in thousands) Financial targets 5 OCOE CM CSIG T 75 JSGG O JT 4OF OI CSEJ ($ )')) G GPWG , O NN P - O NN P 7T UU OCTI P .( .) RGTC PI OCTI P G N UU RGT U CTG $ F NW GF %)) %) BG I GF$C I% U CTGU WUGF P E ORW PI F NW GF 86 PG N UU RGT U CTG ( ) O NN P ( O NN P O%75 JSGG O JT 4OF OI CSEJ ($ )')) 7T UU OCTI P . . RGTC PI OCTI P - . G PE OG RGT U CTG $ F NW GF %( %) BG I GF$C I% U CTGU WUGF P E ORW PI F NW GF P P$86 PG PE OG RGT U CTG ( - O NN P ( . O NN P GE OF R CS GS TECM )')) SGWGO G SGT M T P WUCPFU G EGR RGTEGP CIG ) )) ) )( GCS% WGS% GCS IS J GWGO GT D QG WDUET R P . .- ) ,- ) :C P GPCPEG (- ) (-, GT ( . . % CN TG GPWGU ,.. (, ) ) )) ) )( GCS% WGS% GCS IS J GWGO GT D 3GQM NGO 3N WF ), () ( . 4C C 3GP GT ) . -, , .) GT GT ) ) ) ( :CTMG RNCEG CPF UGT EGU . .. ( CN TG GPWGU ,.. (, ) )- GE OF R CS GS TECM )')) G 7OE NG P WUCPFU G EGR RGT U CTG FC C ) )) ) )( 75 GT M T G N UU -- -( ,( (. G N UU RGT U CTG $ F NW GF %) (% O%75 GT M T G PE OG (- )( ) G PE OG RGT U CTG $ F NW GF % %)- GE OF R CS GS TECM )')) 5SGG 2CTJ 5M P WUCPFU G EGR RGTEGP CIG ) )) ) )( 5SGG ECTJ M 86 PG ECU RT FGF D RGTC PI CE GU (( ,. ( ,( 9GUU0 3CR CN G RGPF WTGU ( . . 9GUU0 C OGP U NGCUG DN IC PU ,(, ) 6TGG ECU N - -- - -- 2 525 0 3.7.16.4 ( ), Fiscal 2022 outlook Revenue With the price changes to certain Data Center and Server products, and the end of upgrades for Server products both going into effect on February 15, 2022, we may see variability in total revenue as a result of customer purchasing behavior leading up to the effective date of these changes. Recall, we observed unprecedented event-driven customer purchasing in Q3’21 driven by our announcement of the end of new Server license sales and price changes to our on-premises products. As a result, Q3’22 will likely be a tough compare from a year-over-year revenue growth perspective. On migrations, we continue to believe we have a multi-year journey ahead of us and expect variability in our revenue growth as customers choose the timing of when to migrate to our Cloud or Data Center offerings.
Q2 FY22 20 In FY22, we expect to see the following trends: SUBSCRIPTION REVENUE • We now expect subscription revenue growth year-over-year to be approximately 50% for FY22, versus our prior expectation of mid-40s % growth. • We expect our year-over-year subscription revenue growth rate to be lower in the second half of FY22 relative to the first half. • Recall, our subscription revenue in Q3’21 benefited from a strong Data Center revenue growth rate, driven by accelerated demand resulting from the discontinuation of new Server license sales and customers purchasing ahead of both Server and Data Center price increases that went into effect during Q3’21. • For Data Center revenue, a portion is recognized up-front as subscription revenue in the period that the contract is signed, while the remainder is recognized ratably over the life of the contract. • In addition, it is important to note that Q4’21 continued to see strong Data Center revenue growth, as it benefited from ratable revenue rolling off of our deferred revenue balance. Our deferred revenue balance also benefited from the event-driven purchasing observed in Q3’21, as noted above. • For FY22, we expect our Cloud revenue growth rate to accelerate relative to FY21. MAINTENANCE REVENUE • We expect our Server business to be a driver of any revenue variability in Q3’22. We also expect maintenance revenue to slowly contract over the remainder of FY22 as customers continue to migrate to our subscription products. In Q4’22, we expect maintenance revenue to decline to approximately $100 million. OTHER REVENUE • We expect Marketplace revenue, which is reflected in other revenue and the primary driver of this line item, to be approximately flat relative to FY21. • Recall, Marketplace revenue will be impacted by the lowered Marketplace take rates on the sales of third-party Cloud apps which are designed to incentivize further Cloud app development. • Marketplace revenue will also continue to see a year-over-year headwind from the accelerated, event-driven app purchasing in Q3’21 across Server and Data Center. Note that revenue on the sale of third-party Marketplace apps is recognized in the period the product is purchased. • We expect quarterly perpetual license revenue, which is also reflected in other revenue, to be flat sequentially at approximately $10 million for Q3’22. As noted above, upgrades of existing licenses will no longer be offered after Q3’22, and as a result, we do not expect any further perpetual license revenue in Q4’22 or beyond.
Q2 FY22 21 Profitability We expect to further ramp our hiring plans in the second half of FY22 and beyond. As noted above, hiring and retention of our talented team is the key to Atlassian’s future. We will continue to hire talent from across the globe with the majority in R&D. Our investments will focus on platform advancements, new Cloud features and products in each of our three core markets, and bolstering the ecosystem around us. We expect the following in FY22: • Gross margin will decline in FY22 relative to FY21 due to our investments to support our Cloud migrations and the shift from Server to Cloud. These investments include migration-focused personnel costs as well as increased cloud hosting costs. • Operating margin is expected to decline as we continue to invest in innovation, hiring and retaining top-tier talent. • Free cash flow is expected to see variability as a result of the business mix shift to the Cloud as well as the impact of any event-driven customer purchasing activity related to the price changes and end of Server upgrades. The reduction in operating margin in FY22 noted above will also impact our free cash flow margin in FY22. The above trends reflect our commitment to our long-term strategy and the massive market opportunities in front of us that we are well equipped to tap. SHARE COUNT We expect share-based compensation (SBC) expense to be significantly higher in FY22 versus FY21 as we invest in hiring and retaining our team. Recall that we report our financial statements in accordance with IFRS. SBC is recognized on a more front-loaded schedule compared to the straight-line expense method allowed under U.S. GAAP. SBC is also impacted by a number of variables each of which are inherently difficult to forecast. We are targeting approximately 1-2% share count dilution in FY22. Despite the expected increase in SBC expense in FY22, our comparable share dilution will still be ranked in the lower half of our peer company set.
Q2 FY22 ATLASSIAN CORPORATION PLC Consolidated statements of operations (U.S. $ and shares in thousands, except per share data) (unaudited) 22 JSGG O JT 4OFGF 3GEGNDGS ($ Y O JT 4OFGF 3GEGNDGS ($ )')( )')' )')( )')' G GPWGU0 WDUET R P . .- ) ,- (.) .. ,) :C P GPCPEG (- ) (-, ( - , ( . - GT ( . . , . ) ( , CN TG GPWGU ,.. (, ) ) ( , ., 3 U TG GPWGU ( , - .( ( ) - ) ,, 7T UU RT -) ), ( .-- . )- . - , RGTC PI G RGPUGU0 GUGCTE CPF FG GN ROGP ( )- -, ( , , .(( -) ( :CTMG PI CPF UCNGU ( ) , -- ()- .- - )- 7GPGTCN CPF CFO P U TC G ) . - (( ) - ) . CN RGTC PI G RGPUGU , .) ) , , ) -,. RGTC PI PE OG N UU ,, - . (- - ) (- -( ) , GT P P$ RGTC PI G RGPUG PG ) - ( ( ( -( ( 6 PCPEG PE OG -- ( ( ) - - ( 6 PCPEG E U U , -. . ) . () 9 UU DG TG PE OG C G RGPUG -) ). , - )-( , , ,) , , 8PE OG C G RGPUG ) , ( . )., G N UU -- -( ,( (. -- - , ) .( G N UU RGT U CTG C T DW CDNG TF PCT U CTG NFGTU0 2CU E %) (% %. (% 4 NW GF %) (% %. (% BG I GF$C GTCIG U CTGU W U CPF PI WUGF E ORW G PG N UU RGT U CTG C T DW CDNG TF PCT U CTG NFGTU0 2CU E ( ( , ( .. ( ( )) ( . , 4 NW GF ( ( , ( .. ( ( )) ( . , 1O WP U PENWFG U CTG$DCUGF RC OGP G RGPUG CU NN U0 JSGG O JT 4OFGF 3GEGNDGS ($ Y O JT 4OFGF 3GEGNDGS ($ )')( )')' )')( )')' 3 U TG GPWGU ) ,) , . ( -, ( - GUGCTE CPF FG GN ROGP - ()) -) . ( .) ) ), :CTMG PI CPF UCNGU ) . ( ,,, .. . 7GPGTCN CPF CFO P U TC G )) , , ., (. ). ( 1O WP U PENWFG CO T C P CESW TGF P CPI DNG CUUG U CU NN U0 JSGG O JT 4OFGF 3GEGNDGS ($ Y O JT 4OFGF 3GEGNDGS ($ )')( )')' )')( )')' 3 U TG GPWGU ) (.. .)( GUGCTE CPF FG GN ROGP ) ( .- .) :CTMG PI CPF UCNGU ( (,, ( ) - )- , ,
Q2 FY22 ATLASSIAN CORPORATION PLC Consolidated statements of financial position (U.S. $ in thousands) 23 3GEGNDGS ($ )')( 8 OG '$ )')( OC F GF 1TTG T 3WTTGP CUUG U0 3CU CPF ECU GSW CNGP U . ) ((- T $ GTO P GU OGP U ., ,( ) ) TCFG TGEG CDNGU ( ,.( -) -) C TGEG CDNGU ))- ( ))( 4GT C G CUUG U -. (- ., TGRC F G RGPUGU CPF GT EWTTGP CUUG U , .( . )(( ) ( . .) . 1UUG U GNF T UCNG .(, ) ,, CM E SSGO CTTG T ) ,) ,(- , P$EWTTGP CUUG U0 T RGT CPF GSW ROGP PG - ,, (( 4G GTTGF C CUUG U (. ,(( ), - 7 F NN -( . -( - . 8P CPI DNG CUUG U PG . -. ( I $ $WUG CUUG U PG (-, ( ( ) TC GI E P GU OGP U ,) ( (( GT P P$EWTTGP CUUG U )) , )- ,), CM O O%E SSGO CTTG T -. ) - .). CM CTTG T ( -, , ) ( ) 9 CD M GT 3WTTGP N CD N GU0 TCFG CPF GT RC CDNGU ( - (,, - C N CD N GU . - ( T U PU )( ( ) ( . 4G GTTGF TG GPWG ) .. . ( ) 9GCUG DN IC PU . ) ( , 4GT C G N CD N GU ( . --( (- 5 E CPIGCDNG UGP T P GU PG ) . - CM E SSGO M CD M GT ( . ( ) P$EWTTGP N CD N GU0 4G GTTGF C N CD N GU , ). (, ,( T U PU ) . ( ) 4G GTTGF TG GPWG , . . , ( GTO N CP CE N PG ))( 9GCUG DN IC PU (. .( ( ) GT P P$EWTTGP N CD N GU )( ( , CM O O%E SSGO M CD M GT )-- .- ) CM M CD M GT ( ,), .. ( , ) 4R CTG ECR CN ( )) ( , CTG RTGO WO , ( , , GT ECR CN TGUGT GU .-( ( , , GT E OR PGP U GSW (- .)( 1EEWOWNC GF FG E ( ( (. . ( - - CM GR () ,( ( CM M CD M GT COF GR ( -, , ) ( )
Q2 FY22 ATLASSIAN CORPORATION PLC Consolidated statements of cash flows (U.S. $ in thousands) (unaudited) 24 JSGG O JT 4OFGF 3GEGNDGS ($ Y O JT 4OFGF 3GEGNDGS ($ )')( )')' )')( )')' QGSC OI CE W GT 9 UU DG TG PE OG C G RGPUG -) ). , - )-( , , ,) , , 1FLWU OGP U TGE PE NG N UU DG TG PE OG C G RGPUG PG ECU RT FGF D RGTC PI CE GU0 4GRTGE C P CPF CO T C P ( ) ) . - ( ) - (- ( . 4GRTGE C P T I $ $WUG CUUG U ) )-. ( )( . ( CTG$DCUGF RC OGP G RGPUG ()- - , ( ) . ) () G N UU P G E CPIG FGT C G CPF ECRRGF ECNN TCPUCE PU ) ( ( .( ,, . 1O T C P FGD F UE WP CPF UUWCPEG E U . .- . ) . - (- 8P GTGU PE OG -- ( ( ) - - ( 8P GTGU G RGPUG , ) ) , , G WPTGCN GF TG IP EWTTGPE N UU IC P ( . .- , , G WPTGCN GF N UU P P GU OGP U - - 9 UU IC P P UCNG P GU OGP U F UR UCN CUUG U CPF GT ( . ) - ( 3 CPIGU P CUUG U CPF N CD N GU0 TCFG TGEG CDNGU ( )- ,. ( ) () TGRC F G RGPUGU CPF GT CUUG U . - - ) - ), TCFG CPF GT RC CDNGU RT U PU CPF GT P P$EWTTGP N CD N GU , .,) )( .() ,( , 4G GTTGF TG GPWG , ( , ( - -- .. .) )) 8P GTGU TGEG GF ) ( . ., - 8PE OG C RC F PG ( , ( ., ) (. , G ECTJ QS W FGF D QGSC OI CE W GT (( ,. ( ,( ) - (- (- 7OWGT OI CE W GT 2WU PGUU E OD PC PU PG ECU CESW TGF - ( , WTE CUGU RT RGT CPF GSW ROGP ( . . ,( - ), WTE CUGU P GU OGP U ( ), ) , ) , (, T EGGFU T O OC WT GU P GU OGP U - , ( ,(- , .- ) T EGGFU T O UCNGU P GU OGP U , - ., (,( - , 3 CPIG P TGU T E GF ECU ( ,( ( ,( C OGP FG GTTGF E PU FGTC P ( - ) .) . G ECTJ QS W FGF D TGF O OWGT OI CE W GT ). ,) ) . , . - 5 OCOE OI CE W GT T EGGFU T O G GTE UG U CTG R PU (( - C OGP U NGCUG DN IC PU ,(, ) () . ( (( () C OGP UUWCPEG E U U T FGD 8P GTGU RC F ) , ) ) ( . ( ) ( GRC OGP G E CPIGCDNG UGP T P GU () )-, ,- . . ,., ,- - T EGGFU T O UG NGOGP ECRRGF ECNN TCPUCE PU -( --, ) - -( --, 65 7 0653 63 25,4 0, 121 ( G ECTJ TGF O OCOE OI CE W GT - .( , - ),, - . ,(- . 5 GE G E CPIG TC G E CPIGU P ECU CPF ECU GSW CNGP U ( , ( ) ) - G FGESGCTG O ECTJ COF ECTJ GR WCMGO T , ( ( , ) . - ( - ((. ( 2CTJ COF ECTJ GR WCMGO T C DGI OO OI QGS F - . , (,( ((- - , G FGETGCUG P ECU CPF ECU GSW CNGP U PENWFGF P CUUG U GNF T UCNG .( ,. 2CTJ COF ECTJ GR WCMGO T C GOF QGS F . ) ( - . ) ( -
Q2 FY22 ATLASSIAN CORPORATION PLC Reconciliation of IFRS to non-IFRS results (U.S. $ and shares in thousands, except per share data) (unaudited) 25 JSGG O JT 4OFGF 3GEGNDGS ($ Y O JT 4OFGF 3GEGNDGS ($ )')( )')' )')( )')' 6S TT QS 86 IT UU RT -) ), ( .-- . )- . - , NWU0 CTG$DCUGF RC OGP G RGPUG ) ,) , . ( -, ( - NWU0 1O T C P CESW TGF P CPI DNG CUUG U ) (.. .)( P$86 IT UU RT ( ) (( ) .) .. QGSC OI OE NG 86 RGTC PI PE OG N UU ,, - . (- - ) (- -( ) , NWU0 CTG$DCUGF RC OGP G RGPUG ()- - , ( ) . ) () NWU0 1O T C P CESW TGF P CPI DNG CUUG U - . - --( , ( ) P$86 RGTC PI PE OG -. ( ) -- ) ( ( . G OE NG 86 PG N UU -- -( ,( (. -- - , ) .( NWU0 CTG$DCUGF RC OGP G RGPUG ()- - , ( ) . ) () NWU0 1O T C P CESW TGF P CPI DNG CUUG U - . - --( , ( ) NWU0 P$E WR P ORCE TGNC GF G E CPIGCDNG UGP T P GU CPF ECRRGF ECNNU ,(, , (- . ) ,,) ,( 9GUU0 8PE OG C G GE U CPF CFLWU OGP U -( ( . -, ,) - P$86 PG PE OG (- )( ) ( ,)- -( .( G OE NG QGS TJCSG 86 PG N UU RGT U CTG $ F NW GF %) (% %. (% NWU0 CTG$DCUGF RC OGP G RGPUG % ) % % %-. NWU0 1O T C P CESW TGF P CPI DNG CUUG U % ) % % , % - NWU0 P$E WR P ORCE TGNC GF G E CPIGCDNG UGP T P GU CPF ECRRGF ECNNU (% . %, (%,) 9GUU0 8PE OG C G GE U CPF CFLWU OGP U % % %) %( P$86 PG PE OG RGT U CTG $ F NW GF % %)- % , %,. AG IJ GF%CWGSCIG F M GF TJCSGT T COF OI BG I GF$C GTCIG U CTGU WUGF P E ORW PI F NW GF 86 PG N UU RGT U CTG ( ( , ( .. ( ( )) ( . , NWU0 4 NW P T O U CTG R PU CPF AU . ) - (. - BG I GF$C GTCIG U CTGU WUGF P E ORW PI F NW GF P P$86 PG PE OG RGT U CTG ( , -. ( ( , , ( . 5SGG ECTJ M 86 PG ECU RT FGF D RGTC PI CE GU (( ,. ( ,( ) - (- (- 9GUU0 3CR CN G RGPF WTGU ( . . ,( - ), 9GUU0 C OGP U NGCUG DN IC PU ,(, ) () . ( (( () 6TGG ECU N - -- - -- ( , - , ( )(- G G GE U GUG F NW G UGEWT GU GTG P PENWFGF P G 86 ECNEWNC P F NW GF PG N UU RGT U CTG T G TGG CPF U O P U GPFGF 4GEGODGT ) ( ( CPF ( ( DGECWUG G G GE WNF C G DGGP CP $F NW G%
Q2 FY22 ATLASSIAN CORPORATION PLC Reconciliation of IFRS to non-IFRS financial targets (U.S. $) 26 JSGG O JT 4OF OI CSEJ ($ )')) GWGO G -0' N MM O .', N MM O 75 IS TT NCSI O ) NWU0 CTG$DCUGF RC OGP G RGPUG ( NWU0 1O T C P CESW TGF P CPI DNG CUUG U O%75 IS TT NCSI O , 75 QGSC OI NCSI O (' 0 NWU0 CTG$DCUGF RC OGP G RGPUG (, NWU0 1O T C P CESW TGF P CPI DNG CUUG U O%75 QGSC OI NCSI O (. ( 75 OG M TT QGS TJCSG % F M GF ' ' ( NWU0 CTG$DCUGF RC OGP G RGPUG %- NWU0 1O T C P CESW TGF P CPI DNG CUUG U % ) 9GUU0 8PE OG C G GE U CPF CFLWU OGP U % O%75 OG OE NG QGS TJCSG % F M GF ' )0 ' ( AG IJ GF%CWGSCIG TJCSGT TGF O E NQ OI F M GF 75 OG M TT QGS TJCSG ), N MM O ), N MM O 4 NW P T O U CTG R PU CPF AU O NN P AG IJ GF%CWGSCIG TJCSGT TGF O E NQ OI F M GF O O%75 OG OE NG QGS TJCSG ),. N MM O ), N MM O G G GE U GUG F NW G UGEWT GU CTG P PENWFGF P G 86 ECNEWNC P F NW GF PG N UU RGT U CTG T G TGG O P U GPF PI :CTE ) ( (( DGECWUG G G GE WNF DG CP $F NW G%
Q2 FY22 27 FORWARD-LOOKING STATEMENTS This shareholder letter contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. All statements other than statements of historical fact could be deemed forward looking, including risks and uncertainties related to statements about our products, customers, anticipated growth, sustainability, Atlassian Marketplace, partnerships, acquisitions, strategic investments, outlook, 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, and net income (loss) per diluted share. We undertake no obligation to update any forward-looking statements made in this shareholder letter to reflect events or circumstances after the date of this shareholder letter 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, our 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 our financial results is included in filings we make with the Securities and Exchange Commission from time to time, including the section titled “Risk Factors” in our most recent Forms 20-F and 6-K (reporting our quarterly results). These documents are available on the SEC Filings section of the Investor Relations section of our 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 these 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 results of operations. 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 include: • 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, non-coupon impact related to exchangeable senior notes and capped calls, the related income tax effects on these items, and a discrete tax impact resulting from a non-recurring transaction. • Free cash flow. Free cash flow is defined as net cash provided by operating activities less capital expenditures, which consists of purchases of property and equipment and payments of lease obligations. Our non-IFRS financial measures reflect adjustments based on the items below: • Share-based compensation. • Amortization of acquired intangible assets. • Non-coupon impact related to exchangeable senior notes and capped calls: • Amortization of notes discount and issuance costs. • Mark to fair value of the exchangeable senior notes exchange feature. • Mark to fair value of the related capped call transactions. • Net loss on settlements of exchangeable senior notes and capped call transactions. • The related income tax effects on these items, and a discrete tax impact resulting from a non-recurring transaction. • Purchases of property and equipment and payments of lease obligations. We exclude expenses related to share-based compensation, amortization of acquired intangible assets, non-coupon impact related to exchangeable senior notes and capped calls, the related income tax effects on these items, and a discrete tax impact resulting from a non-recurring transaction 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, non-coupon impact related to exchangeable senior notes and capped calls, the related income tax effects on these items, and a discrete tax impact resulting from a non-recurring transaction allow for more meaningful comparisons between our results of operations from period to period.
Q2 FY22 28 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. • In communications with our Board of Directors and investors concerning our financial performance. The tables in this shareholder 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. ABOUT ATLASSIAN Atlassian unleashes the potential of every team. Our team collaboration and productivity software helps teams organize, discuss and complete shared work. Teams at more than 225,000 customers, across large and small organizations - including Bank of America, Redfin, NASA, Verizon, and Dropbox - use Atlassian's project tracking, content creation and sharing, and service management products to work better together and deliver quality results on time. Learn more about our products, including Jira Software, Confluence, Jira Service Management, Trello, Bitbucket, and Jira Align at https://atlassian.com. Investor relations contact: Martin Lam, [email protected] Media contact: M-C Maple, [email protected]