01—Abstract
Summary
Summary of the 10-Q filed November 3, 2023. Cited figures are marked; the original filing is the authoritative source.
Atlassian Corporation's Form 10-Q for the quarter ended September 30, 2023 reports total revenues of $977.8 milliona, up 21% from $807.4 million in the same quarter a year earlier.
Subscription revenue rose 31% to $852.0 millionb, driven by additional subscriptions from existing customers and migrations to Cloud and Data Center offerings, while maintenance revenue fell 31% to $78.6 million as Server offerings wind down. Gross margin was 82% versus 83% a year earlier, and the company reported an operating loss of $18.9 million compared with $34.0 million a year earlier. Net loss was $31.9 million, or $0.12 per share, compared with a net loss of $13.7 million, or $0.05 per share, in the prior-year quarter.
Stock-based compensation was $235.6 millionc for the quarter. On a non-GAAP basis, operating income was $224.9 million (23% operating margin) versus $147.9 million (18%) a year earlier, and free cash flow was $163.3 million versus $75.9 million. Net cash from operating activities was $167.0 million.
Cash and cash equivalents totaled $2.14 billiond at quarter end, against $1.0 billion drawn under the term loan facility. The company repurchased approximately 0.3 million Class A shares for about $65.3 million during the quarter, with $780.5 million remaining under its $1.0 billion authorization.
The filing also highlights several items for investors: a securities class action and related stockholder derivative suits tied to statements made during August to November 2022, an October 2023 agreement with the Australian Taxation Office with a cash payment of approximately $60.5 million, and a definitive agreement to acquire Loom, Inc. for approximately $975 million, of which about $880 million is cash. The company expects Server maintenance and support to end in February 2024, and management attributed the weakening economic conditions to moderating growth from existing customers.
02—Key points
Key Highlights
- Total revenues of $977.8 million rose 21% year over year, with subscription revenue up 31% to $852.0 million.
- Maintenance revenue declined 31% to $78.6 million as Server offerings approach end of maintenance in February 2024.
- Operating loss narrowed to $18.9 million from $34.0 million; net loss was $31.9 million ($0.12 per share) versus $13.7 million ($0.05 per share).
- Non-GAAP operating income was $224.9 million (23% margin) versus $147.9 million (18%), and free cash flow was $163.3 million versus $75.9 million.
- Cash and cash equivalents were $2.14 billion at September 30, 2023, against $1.0 billion drawn on the term loan facility.
- The company repurchased about $65.3 million of Class A stock in the quarter, with $780.5 million remaining under its $1.0 billion program.
- Agreed to acquire Loom, Inc. for approximately $975 million, with about $880 million in cash, expected to close in the third quarter of fiscal year 2024.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2024, Atlassian lost $0.03.
- Revenue$977.8M100.0%
- Cost of revenue−$178.0M18.2%
- Gross profit$799.7M81.8%
- Operating costs−$818.6M83.7%
- Operating income−$18.9M1.9%
- Interest, other & tax−$13.0M1.3%
- Net income−$31.9M3.3%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed November 3, 2023Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $977.77M$807.39M | +21.1% |
| Cost of Revenue | $178.03M$139.39M | +27.7% |
| Gross Profit | $799.75M$668.00M | +19.7% |
| R&D Expenses | $481.74M$399.01M | +20.7% |
| Operating Expenses | $818.62M$702.03M | +16.6% |
| Operating Income | -$18.87M-$34.03M | +44.5% |
| Interest Expense | $8.98M$6.12M | +46.6% |
| Net Income | -$31.88M-$13.74M | −132.0% |
| EPS (Basic) | $-0.12$-0.05 | −140.0% |
| EPS (Diluted) | $-0.12$-0.05 | −140.0% |
| Shares Outstanding (Basic) | 257.91M255.17M | +1.1% |
| Shares Outstanding (Diluted) | 257.91M255.17M | +1.1% |
05—Questions
Frequently Asked Questions
How did Atlassian's revenue and profitability change in the quarter?
Total revenues increased $170.4 million, or 21%, to $977.8 million. The operating loss narrowed to $18.9 million from $34.0 million, while the net loss widened to $31.9 million from $13.7 million, largely because of a higher income tax provision of $20.9 million, which the company attributed to reserves for uncertain tax positions and growth in foreign jurisdictions.
What is driving the decline in maintenance revenue?
Maintenance revenue fell $35.0 million, or 31%, to $78.6 million. The company no longer offers upgrades to perpetual licenses beginning February 2022 and plans to generally end maintenance and support for Server products in February 2024, with Server customers expected to migrate to Cloud and Data Center offerings.
What legal risks does the filing disclose?
A putative securities class action filed in February 2023 alleges false and misleading statements during August 5, 2022 to November 3, 2022. Three stockholder derivative lawsuits were consolidated, and a separate derivative action was stayed on October 31, 2023. The defendants deny the allegations, and the company has not recorded any liability for these matters.
What are the key details of the pending Loom acquisition?
Atlassian entered into a definitive agreement in October 2023 to acquire Loom, Inc. for approximately $975 million, inclusive of Loom's cash balance. Total consideration is about $880 million in cash plus equity awards subject to vesting. The company expects to fund the cash portion from existing cash balances, and closing is expected in the third quarter of fiscal year 2024, subject to regulatory approval.
How is the company's liquidity and debt position?
Cash and cash equivalents totaled $2.14 billion at September 30, 2023, and the company stated these, plus operating cash flow and borrowing capacity under its credit facility, are sufficient for at least the next 12 months. The $1.0 billion term loan is fully drawn, with $1.0 billion outstanding as of September 30, 2023, and the $500 million revolving credit facility is available. Quarterly repayments of 1.25% of the term loan begin October 31, 2023.
06—Continue