Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Atlassian Corp (TEAM, Financial) generated $4.4 billion in revenue and over $1.4 billion in free cash flow for FY 2024.
- The company surpassed 300,000 customers and now has over 500 customers spending more than $1 million annually.
- Successful migration of millions of users to cloud and data center, completing a three-and-a-half-year journey of winding down server operations.
- Continued innovation with the release of Asset Intelligence, Compass, and virtual agents for Jira Service Management.
- Achieved FedRAMP in-process designation, enhancing support for U.S. public sector customers and unlocking new opportunities.
Negative Points
- FY 2025 revenue guidance of 16% growth is lower than investor expectations, causing disappointment.
- Challenges in the macroeconomic environment and execution risks related to the evolution of the go-to-market strategy.
- Slightly lower than expected revenue from data center migrations and timing of high-touch enterprise deals.
- Leadership transition with the departure of the head of sales, adding uncertainty to the go-to-market execution.
- Cloud revenue growth deceleration expected in FY 2025 due to less contribution from server migrations and ongoing macroeconomic pressures.
Q & A Highlights
Q: FY 25 guidance for total revenues of 16% is disappointing to investors. Can you help us bridge that equation and explain the confidence in the longer-term 20% plus growth profile?
A: Despite macroeconomic uncertainty and execution risks, we believe FY 25 will set a strong foundation for growth in FY 26 and beyond. We have a $67 billion addressable market opportunity, with $14 billion in our existing enterprise customer base alone. Key growth drivers include migrations from data center to cloud, paid seat expansion, cross-selling additional products, upselling to premium and enterprise editions, and leveraging AI and analytics. We remain confident in our ability to deliver over 20% compounded annual growth rate over the next three years. (Joseph Binz, CFO & Principal Financial Officer; Michael Cannon-Brookes, Co-Founder, Co-CEO & Director)
Q: Can you provide context around the Q4 revenue delta and the approach to cloud guidance for fiscal 25?
A: The Q4 revenue was slightly below expectations due to the timing of high-touch enterprise deals and slightly lower-than-expected revenue from data center migrations. We are taking a more conservative and risk-adjusted view of our revenue outlook for FY 25, considering macroeconomic uncertainties and execution risks related to our enterprise go-to-market transformation. (Joseph Binz, CFO & Principal Financial Officer)
Q: What are your thoughts on the next steps for your go-to-market organization and the transition from migration opportunities to selling new Atlassian products?
A: We are evolving our go-to-market motions to better serve enterprise customers while maintaining our efficient flywheel for SMBs. This includes hiring seasoned enterprise sales reps and continuing to build on our existing strengths. Our focus remains on capital efficiency, long-term growth, and maintaining a strong product-led growth motion. (Joseph Binz, CFO & Principal Financial Officer)
Q: Can you elaborate on the FedRAMP opportunity and its impact on migrating federal customers to the cloud?
A: We have a significant number of federal customers in data center, and FedRAMP certification will facilitate their migration to the cloud. This includes both direct government customers and businesses that work with the government. The migration process for these large customers is complex and will likely involve hybrid deployments over several years. (Joseph Binz, CFO & Principal Financial Officer)
Q: How has the response been from customers regarding the integration of Jira Work Management (JWM) and Jira Software?
A: The integration has been positively received, allowing technology and non-technology teams to work together seamlessly. This has led to consolidation on Atlassian products and expanded seat counts, as seen with customers like Rivian. The move supports our system of work strategy and enhances our ability to serve both technical and business teams. (Joseph Binz, CFO & Principal Financial Officer)
Q: Can you provide more details on the execution risks related to the enterprise go-to-market transformation and the impact of leadership changes?
A: The leadership transition and the nascent nature of our enterprise sales capabilities pose execution risks. However, we have a strong executive team and a solid foundation to build upon. We are searching for a transformational CRO to drive the next phase of our enterprise sales strategy. (Joseph Binz, CFO & Principal Financial Officer; Michael Cannon-Brookes, Co-Founder, Co-CEO & Director)
Q: How should we think about the impact of Loom on FY 25 revenue and operating margins?
A: Loom is expected to contribute 1.5 to 2 points to FY 25 cloud revenue growth and be slightly dilutive to operating margins. The product continues to sell strongly independently and is being integrated into our broader platform. (Joseph Binz, CFO & Principal Financial Officer; Michael Cannon-Brookes, Co-Founder, Co-CEO & Director)
Q: How are you thinking about seat expansion and pricing as contributors to your FY 25 targets?
A: We expect continued pressure on paid seat expansion due to macroeconomic conditions, but pricing increases will remain a driver of cloud revenue growth. Our approach to guidance incorporates these factors to provide a risk-adjusted and prudent outlook. (Joseph Binz, CFO & Principal Financial Officer)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
