Atlassian Announces Second Quarter Fiscal Year 2016 Results

February 04, 2016

Quarterly revenue of $109.7 million, up 45% year-over-year

Quarterly IFRS operating income of $3.4 million and non-IFRS operating income of $20.3 million

Quarterly non-IFRS free cash flow of $28.8 million

SAN FRANCISCO and SYDNEY, Australia, Feb. 04, 2016 (GLOBE NEWSWIRE) -- Atlassian Corporation Plc (NASDAQ:TEAM), a leading provider of team collaboration and productivity software, today announced financial results for its second quarter of fiscal 2016 ended December 31, 2015.

"We achieved a strong first quarter as a public company, with a combination of continued growth and profitability," said Scott Farquhar, Atlassian’s co-CEO and co-founder. "Our business performed well as teams increasingly rely on our software to collaborate around shared work. We continue to leverage our highly-automated distribution model to make deep investments in product development, which most notably resulted in the launch of three purpose-built versions of JIRA that takes our flagship product into new markets. With products that support every aspect of team collaboration, we're well positioned to reach the Fortune 500,000 with the tools needed to create a more open and productive way to work."

Second Quarter Fiscal Year 2016 Financial Highlights:

On an IFRS basis, Atlassian reported:

  • Revenue: Total revenue was $109.7 million for the second quarter of fiscal 2016, up 45% from $75.8 million for the second quarter of fiscal 2015.
  • Operating Income: Operating income was $3.4 million for the second quarter of fiscal 2016, compared with $4.1 million for the second quarter of fiscal 2015.
  • Net Income and Net Income Per Diluted Share: Net income was $5.1 million for the second quarter of fiscal 2016, compared with $5.0 million for the second quarter of fiscal 2015. Net income per diluted share was $0.03 for the second quarter of fiscal 2016, compared with net income per diluted share of $0.03 for the second quarter of fiscal 2015.
  • Balance Sheet: Cash and cash equivalents and short-term investments at the end of the second quarter of fiscal 2016 totaled $682.0 million, compared with $217.3 million at the end of the fourth quarter of fiscal 2015.

On a non-IFRS basis, Atlassian reported:

  • Operating Income: Operating income was $20.3 million for the second quarter of fiscal 2016, compared with $15.3 million for the second quarter of fiscal 2015.
  • Net Income and Net Income Per Diluted Share: Net income was $19.1 million for the second quarter of fiscal 2016, compared with $14.3 million for the second quarter of fiscal 2015. Net income per diluted share was $0.11 for the second quarter of fiscal 2016, compared with $0.09 per diluted share for the second quarter of fiscal 2015.
  • Free Cash Flow: Cash flow from operations was $31.9 million for the second quarter of fiscal 2016, resulting in free cash flow of $28.8 million after taking into consideration $3.1 million of capital expenditures.

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:

  • Customers: Atlassian ended its second quarter of fiscal 2016 with a total customer count on an active subscription or maintenance agreement basis of 54,262, a 27% increase over the comparable prior year period. Atlassian added more than 2,600 net new customers during the second quarter.
  • JIRA: Atlassian transformed its flagship JIRA product, one of the leading software development tools for agile software teams worldwide, into three standalone offerings that expand the markets it serves: JIRA Software for agile development teams, JIRA Service Desk for IT and service teams, and JIRA Core for non-technical business teams such as HR, Finance, Legal and Marketing.
  • Atlassian Marketplace: Atlassian launched HipChat Connect, which allows third-party developers to create full-featured apps for HipChat available through the Atlassian Marketplace. With over 2,000 add-ons designed to enhance Atlassian products, the Atlassian Marketplace is one of the largest enterprise software marketplaces.
  • New CTO: Atlassian announced the hiring of a Chief Technology Officer (CTO), Sri Viswanath. Sri was previously CTO and SVP of Engineering & Operations at Groupon. Sri brings significant experience developing large-scale technology platforms to Atlassian, and commenced his new role in January 2016.
  • IPO: Atlassian completed its initial public offering in December 2015, raising net proceeds to the company, after expenses, of $431.4 million.

Financial Targets:

Atlassian is providing its financial targets for the third quarter and fiscal year 2016. The company’s financial targets are as follows:

  • Third Quarter Fiscal Year 2016: 
    • Total revenue is expected to be in the range of $113 million to $115 million.
    • Gross profit margin is expected to be approximately 82% on an IFRS basis and approximately 86% on a non-IFRS basis.
    • Operating income margin is expected to be -9% to -8% on an IFRS basis and 11% to 12% on a non-IFRS basis.
    • Weighted average share count is expected to be in the range of 231 million to 233 million shares on a fully diluted basis.
    • Net loss per diluted share is expected to be approximately ($0.05) on an IFRS basis, and net income per diluted share is expected to be in the range of $0.05 to $0.06 on a non-IFRS basis.
  • Fiscal Year 2016: 
    • Total revenue is expected to be in the range of $443 million to $447 million
    • Gross profit margin is expected to be approximately 83% on an IFRS basis and approximately 86% on a non-IFRS basis.
    • Operating income margin is expected to be approximately -4% on an IFRS basis and approximately 15% on a non-IFRS basis.
    • Weighted average share count is expected to be in the range of 202 million to 204 million shares on a fully diluted basis.
    • Net loss per diluted share is expected to be in the range of ($0.11) to ($0.10) on an IFRS basis, and net income per diluted share is expected to be in the range of $0.30 to $0.31 on a non-IFRS basis.
    • Free cash flow is expected to be in the range of $80 million to $83 million.

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

Webcast and Conference Call Details:

  • When:  February 4, 2016 at 2:00 P.M. Pacific Time (5:00 P.M. Eastern Time).
  • Webcast:  A live webcast of the call can be accessed from the Investor Relations section of Atlassian’s website at: http://investors.atlassian.com. Following the call, a replay will be available on the same website. Atlassian uses the http://investors.atlassian.com website as a means of disclosing material non-public information and for complying with disclosure obligations.
  • Dial in:  To access the call via telephone in North America, please dial 1-866-270-1533. For international callers, please dial 1-412-317-0797. Participants should request the “Atlassian call” after dialing in.
  • Audio replay:  An audio replay of the call will be available via telephone for seven days, beginning two hours after the call. To listen to the replay in North America, please dial 1-877-344-7529 (access code 10079274). International callers, please dial 1-412-317-0088 (access code 10079274).

Earnings materials, financial targets and an investor data sheet are posted to the Investor Relations section of Atlassian's website in advance of the conference call for reference. A reconciliation between IFRS and non-IFRS results is also provided on the same website.

About Atlassian

Atlassian unleashes the potential in every team. Our collaboration software helps teams organize, discuss and complete shared work. Teams at more than 54,000 large and small organizations – including Citigroup, eBay, Coca-Cola, Visa, BMW and NASA – use Atlassian’s project tracking, content creation and sharing and real-time communication and service management products to work better together and deliver quality results on time. Learn about products including JIRA Software, Confluence, HipChat, Bitbucket and JIRA Service Desk at http://atlassian.com

Forward-Looking Statements

This press release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as “may,” “will,” “should,” “might,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this press release include, but are not limited to, statements about our products, including our investments in products, technology and other key strategic areas, such as our ability to attract and retain customers, our ability to innovate and provide a superior customer service experience, our ability to expand into new markets, and our financial targets such as revenue, share count and IFRS and non-IFRS financial measures including gross profit margin, operating income margin, net income per diluted share and free cash flow.

Atlassian undertakes no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.

The achievement or success of the matters covered by such forward-looking statements involves known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, Atlassian’s results could differ materially from the results expressed or implied by the forward-looking statements we make. You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management’s beliefs and assumptions only as of the date such statements are made.

Further information on these and other factors that could affect Atlassian’s financial results is included in filings it makes with the Securities and Exchange Commission from time to time, including the section titled “Risk Factors” in the company’s Form F-1 previously filed with the SEC and Form 6-K report that will be filed with the SEC. These documents are available on the SEC Filings section of the Investor Relations section of Atlassian's website at: http://investors.atlassian.com

About Non-IFRS Financial Measures

Our reported results and financial targets include certain non-IFRS financial measures, including non-IFRS gross profit, non-IFRS operating income, non-IFRS net income, non-IFRS net income per diluted share and free cash flow. Management believes that the use of non-IFRS financial measures provides consistency and comparability with our past financial performance, facilitates period to period comparisons of results of operations, and also facilitates comparisons with other peer companies, many of which use similar non-IFRS or non-GAAP financial measures to supplement their IFRS or GAAP results. Non-IFRS results are presented for supplemental informational purposes only to aid in understanding our operating results. The non-IFRS results should not be considered a substitute for financial information presented in accordance with IFRS, and may be different from non-IFRS measures used by other companies.

Our non-IFRS financial measures reflect adjustments based on the items below:

Non-IFRS gross profit. Excludes expenses related to share-based compensation and amortization of acquired intangibles.

Non-IFRS operating income. Excludes expenses related to share-based compensation and amortization of acquired intangibles.

Non-IFRS net income and non-IFRS net income per diluted share. Excludes expenses related to share-based compensation, amortization of acquired intangibles and related income tax effects on these items.

Free cash flow. Free cash flow is defined as net cash provided by operating activities less capital expenditures, which consist of purchases of property, equipment and software. 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.

We exclude expenses related to share-based compensation, amortization of acquired intangibles and income tax effect on these items from certain of our non-IFRS financial measures as we believe this helps investors understand our operational performance. In addition, share-based compensation expense can be difficult to predict and varies from period to period and company to company due to differing valuation methodologies, subjective assumptions and the variety of equity instruments, as well as changes in stock price. Management believes that providing non-IFRS financial measures that exclude share-based compensation expense, amortization of acquired intangibles and the tax effects of those items allow for more meaningful comparisons between our operating results from period to period.

We include the effect of our outstanding share options and RSUs in weighted-average shares used in computing non-IFRS net income per diluted share. IFRS excludes the impact of the full weighting of these outstanding equity awards until the effectiveness of our initial public offering. We have presented the full weighting impact of these additional shares from previously granted share options and RSUs, as if they were outstanding from the date of grant, in order to provide investors with insight into the full impact of all potentially dilutive awards outstanding and provide comparability.

Our 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 a measure of operating performance, because these financial measures do not include the impact of items not directly resulting from our core operations;
  • for planning purposes, including the preparation of our annual operating budget;
  • to allocate resources to enhance the financial performance of our business;
  • to evaluate the effectiveness of our business strategies; and
  • in communications with our board of directors concerning our financial performance.

The tables in this press release titled "Reconciliation of IFRS to Non-IFRS Results" and "Reconciliation of Selected 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.

    
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,
 2015 2014 2015 2014
Revenues       
Subscription$33,911  $20,083  $64,378  $37,259 
Maintenance53,508  38,451  103,862  73,203 
Perpetual license15,645  14,321  31,146  27,238 
Other6,642  2,971  12,142  6,048 
Total revenues109,706  75,826  211,528  143,748 
Cost of revenues (1) (2)18,473  12,354  34,893  24,200 
Gross profit91,233  63,472  176,635  119,548 
Operating expenses       
Research and development (1)47,846  31,543  93,306  60,768 
Marketing and sales (1) (2)21,713  16,988  37,975  28,985 
General and administrative (1)18,307  10,821  34,909  23,241 
Total operating expenses87,866  59,352  166,190  112,994 
Operating income3,367  4,120  10,445  6,554 
Other non-operating income
  (expense), net
(181) (908) (784) (2,127)
Finance income123  81  169  154 
Finance costs(49) (16) (57) (32)
Income before income tax benefit3,260  3,277  9,773  4,549 
Income tax benefit1,805  1,734  374  4,045 
Net income$5,065  $5,011  $10,147  $8,594 
Net income per share attributable
  to ordinary shareholders:
       
Basic$0.03  $0.03  $0.06  $0.05 
Diluted$0.03  $0.03  $0.06  $0.05 
Weighted-average shares outstanding
  used to compute net income per share
  attributable to ordinary shareholders:  
       
Basic160,328  144,008  152,168  144,008 
Diluted165,730  145,493  155,576  145,493 

______________

 (1)Amounts include share-based payment expense, as follows:           


 Three Months Ended December 31, Six Months Ended December 31,
 2015 2014 2015 2014
Cost of revenues$1,301  $739  $2,507  $1,191 
Research and development                      7,777  6,181  13,698  10,813 
Marketing and sales3,064  1,784  5,806  2,926 
General and administrative2,910  953  7,137  2,653 


 (2)Amounts include amortization of acquired intangibles, as follows:

                 

 Three Months Ended December 31, Six Months Ended December 31,
 2015 2014 2015 2014
Cost of revenues$1,830  $1,529  $3,575  $3,151 
Marketing and sales                                    22  8  43  16 
            


    
Atlassian Corporation Plc
Consolidated Statements of Financial Position
(U.S. $ in thousands)
    
 December 31, 2015 June 30, 2015
 (unaudited)  
Assets   
Current assets:   
Cash and cash equivalents$570,268  $187,094 
Short-term investments111,718  30,251 
Trade and other receivables18,273  13,371 
Current tax receivables6,857  939 
Prepaid expenses and other current assets    6,792  6,976 
Total current assets713,908  238,631 
Non-current assets:   
Property and equipment, net41,202  41,948 
Deferred tax assets130,297  81,519 
Goodwill7,110  7,152 
Intangible assets, net17,402  21,099 
Other non-current assets5,812  6,812 
Total non-current assets201,823  158,530 
Total assets$915,731  $397,161 
Liabilities   
Current liabilities:   
Trade and other payables$41,999  $52,636 
Current tax liabilities69  973 
Provisions3,571  3,314 
Deferred revenue145,217  131,231 
Total current liabilities190,856  188,154 
Non-current liabilities:   
Deferred tax liabilities5,515  4,919 
Provisions1,898  1,873 
Deferred revenue5,600  5,334 
Other non-current liabilities7,228  6,827 
Total non-current liabilities20,241  18,953 
Total liabilities$211,097  $207,107 
Equity   
Share capital$21,213  $18,461 
Share premium438,487  5,744 
Other components of equity38,952  39,194 
Share-based payments reserve180,933  111,753 
Retained earnings25,049  14,902 
Total equity$704,634  $190,054 
Total liabilities and equity$915,731  $397,161 
        


    
Atlassian Corporation Plc
Consolidated Statements of Cash Flows
(U.S. $ in thousands)
(unaudited)
    
 Three Months Ended December 31, Six Months Ended December 31,
 2015 2014 2015 2014
Operating activities       
Income before income tax$3,260  $3,277  $9,773  $4,549 
Adjustments to reconcile income before income tax to net cash provided by operating activities:         
Depreciation and amortization5,372  3,551  9,906  7,139 
Net loss on disposal of property and equipment137  7  137  7 
Net unrealized foreign currency (gain) loss(130) 541  434  1,451 
Share-based payment expense15,052  9,657  29,148  17,583 
Change in fair value of contingent consideration      (155)
Interest income(123) (81) (169) (154)
Changes in assets and liabilities:       
Trade and other receivables(4,552) 2,303  (4,314) (724)
Prepaid expenses and other current assets and other non-current assets1,850  212  (28) (88)
Trade and other payables, provisions and other non-current liabilities5,962  7,705  (4,742) (1,834)
Deferred revenue7,551  8,466  14,252  17,509 
Interest received23  52  106  107 
Income tax paid, net of refunds(2,503) (1,203) (8,200) (1,249)
Net cash provided by operating activities31,899  34,487  46,303  44,141 
Investing activities       
Business combinations, net of cash acquired  (135)   (3,335)
Purchases of property and equipment(3,133) (8,760) (9,288) (13,938)
Purchases of intangible assets      (900)
Purchases of short-term investments and deposits(112,243) (82) (116,643) (19,318)
Proceeds from maturities of short-term investments and deposits15,040  159  34,622  19,527 
Payment of deferred consideration    (1,025)  
Net cash used in investing activities(100,336) (8,818) (92,334) (17,964)
Financing activities       
Proceeds from issuance of ordinary shares upon initial public offering, net of offering costs433,192    431,447   
Proceeds from exercise of share options, including early exercised options2,291  286  3,502  740 
Employee payroll taxes paid related to net share settlement of equity awards(5,395)   (5,395)  
Net cash provided by financing activities430,088  286  429,554  740 
Effect of exchange rate changes on cash and cash equivalents285  (415) (349) (1,111)
Net increase in cash and cash equivalents361,936  25,540  383,174  25,806 
Cash and cash equivalents at beginning of period208,332  117,032  187,094  116,766 
Cash and cash equivalents at end of period$570,268  $142,572  $570,268  $142,572 
                


    
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,
 2015 2014 2015 2014
Gross profit:       
IFRS gross profit$91,233  $63,472  $176,635  $119,548 
Plus: Share-based payment expense1,301  739  2,507  1,191 
Plus: Amortization of acquired intangibles1,830  1,529  3,575  3,151 
Non-IFRS gross profit$94,364  $65,740  $182,717  $123,890 
Operating income:       
IFRS operating income$3,367  $4,120  $10,445  $6,554 
Plus: Share-based payment expense15,052  9,657  29,148  17,583 
Plus: Amortization of acquired intangibles1,852  1,537  3,618  3,167 
Non-IFRS operating income$20,271  $15,314  $43,211  $27,304 
Net income:       
IFRS net income$5,065  $5,011  $10,147  $8,594 
Plus: Share-based payment expense15,052  9,657  29,148  17,583 
Plus: Amortization of acquired intangibles1,852  1,537  3,618  3,167 
Less: Income tax effects and adjustments(2,859) (1,936) (5,424) (3,956)
Non-IFRS net income$19,110  $14,269  $37,489  $25,388 
Net income per share:       
IFRS net income per share - basic$0.03  $0.03  $0.06  $0.05 
Plus: Share-based payment expense0.10  0.07  0.20  0.13 
Plus: Amortization of acquired intangibles0.01  0.01  0.02  0.02 
Less: Income tax effects and adjustments(0.02) (0.01) (0.03) (0.02)
Non-IFRS net income per share - basic$0.12  $0.10  $0.25  $0.18 
Weighted-average shares used in computing basic IFRS and Non-IFRS net income per share:  160,328  144,008  152,168  144,008 
        
IFRS net income per share - diluted$0.03  $0.03  $0.06  $0.05 
Plus: Share-based payment expense0.09  0.06  0.17  0.11 
Plus: Amortization of acquired intangibles0.01  0.01  0.02  0.02 
Less: Income tax effects and adjustments(0.02) (0.01) (0.03) (0.02)
Non-IFRS net income per share - diluted$0.11  $0.09  $0.22  $0.16 
Weighted-average shares used in computing diluted Non-IFRS net income per share:179,776  162,370  172,147  162,661 
        
Weighted-average diluted shares outstanding:       
Weighted-average shares used in computing diluted IFRS net income per share:165,730  145,493  155,576  145,493 
Plus: Additional dilution from share options and RSUs granted in periods prior to IPO14,046  16,877  16,571  17,168 
Weighted-average shares used in computing diluted non-IFRS net income per share:179,776  162,370  172,147  162,661 
Free cash flow:       
IFRS net cash provided by operating activities$31,899  $34,487  $46,303  $44,141 
Less: Capital expenditures(3,133) (8,760) (9,288) (14,838)
Free cash flow$28,766  $25,727  $37,015  $29,303 
                


    
Atlassian Corporation Plc
Reconciliation of Selected IFRS to Non-IFRS Financial Targets
    
 Three months ended
March 30, 2016
 Twelve months ended
June 30, 2016
Revenue$113 million to $115 million $443 million to $447 million
    
IFRS gross profit 82%            83%
Share-based payment expense     2       1 
Amortization of acquired intangibles     2       2 
Non-IFRS gross profit 86%  86%            
    
IFRS operating income       (9)% to (8)%                    (4)%                    
Share-based payment expense     18       17 
Amortization of acquired intangibles     2             2 
Non-IFRS operating income            11% to 12%        15%
 
IFRS net loss per share - diluted                 ($0.05)                         ($0.11) to ($0.10)  
Share-based payment expense 0.09                  0.37 
Amortization of acquired intangibles  0.01    0.04 
Income tax effects and adjustments  0.01   0.00 
Non-IFRS net income per share - diluted    $0.05 to $0.06         $0.30 to $0.31    
Weighted-averages shares used in computing
  diluted non-IFRS net income per share              
  231 million to 233 million     202 million to 204 million
 

 

 

Investor Relations Contact
Ian Lee
IR@atlassian.com

Media Contact
Heather Staples
press@atlassian.com

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Source: Atlassian Corporation Plc