Atlassian (TEAM) Q4 2016 earnings summary

Executive summary

• FY16 revenue rose 43% YoY to $457.1M, with 60,950 customers across more than 170 countries and positive free cash flow of $95.3M.

• IFRS net income was $4.4M, down from $6.8M in FY15; operating loss was $5.9M as operating expenses expanded sharply.

• More than 12,300 net new customers were added in FY16; JIRA Service Desk reached over 17,000 organizations.

Financial highlights

• Revenue was $457.1M, up 43% YoY; over 90% came from customer accounts that existed by June 30, 2015.

• Subscription revenue rose 71% to $146.7M; maintenance increased 36% to $218.8M; perpetual license revenue grew 14% to $65.5M.

• Gross profit was $381.3M, with gross margin of 83%, unchanged from FY15; operating expenses increased 46% to $387.2M.

• Net income was $4.4M versus $6.8M in FY15; diluted IFRS EPS was $0.02 versus $0.04.

• Operating cash flow was $129.5M and free cash flow was $95.3M, up from $65.5M in FY15; deferred revenue increased $44.5M.

Outlook and guidance

• Subscription revenue is expected to continue growing faster than perpetual license revenue as cloud-based services gain adoption.

• Cloud infrastructure investment is expected to raise cost of revenue as a percentage of revenue in FY17; R&D and marketing and sales expenses are expected to rise in absolute dollars.

• Capital expenditures are expected to decrease in absolute dollars in FY17 versus FY16, despite continued investment in offices and operations.

• The final full quarter of benefit from historical pricing-plan changes was expected in the quarter ending September 30, 2016; the FY17 benefit was expected to be immaterial and partly offset by summer seasonality.

• Significant ongoing investment and share-based compensation may prevent IFRS profitability in future periods, including the near term.