Friday, August 12, 2022

20 years later, Atlassian is still unprofitable

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Australian tech company Atlassian was famously founded by Mike Cannon-Brookes and Scott Farquhar with $10,000 in credit card debt. The idea has since turned them into multi-billionaires.

The NASDAQ-listed company recently celebrated its 20th anniversary and this week is again celebrating an annual net loss of more than US$600 million (A860m).

Atlassian (NASDAQ: TEAM) today released its fourth quarter and full year results. Quarterly revenue is up 36% from 12 months ago to $760 million. Subscription revenues increased 55% to $597 million.

Annual revenue was US$2.8 billion for FY2022, up 34% from FY21.

The company’s operating loss was $63.3 million for the fourth quarter, compared to a loss of $7.5 million 12 months ago.

Operating loss was $106.5 million for fiscal 2022, compared to operating income of $101.6 million for fiscal 2021.

Net loss was $105.5 million for the fourth quarter, about half of the $213.1 million for the fourth quarter 12 months ago.

Net loss was US$614.1 million (A$882 million) for FY22, compared to a net loss of US$696.3 million ($1 billion) in FY21.

“We ended fiscal 2022 with strong fourth quarter results, with cloud revenue growing 55% year-over-year,” said Mike Cannon-Brookes.

“While we cannot predict what the future holds at the macro level, we continue with conviction and vigilance to deepen our strategic position.”

 

Workforce growing

Atlassian closed the fourth quarter with a total headcount of 8,813 employees, net 634 in the quarter and more than 2,300 during the year, with most new hires in R&D.

The company added 8,048 net new customers during the quarter to 242,000.

Atlassian’s stock price has followed declines in the broader tech market this year, and after a small rally in the week leading up to results, is now down just over a third for 2022. But it has halved from a peak of $458 in October 2020 .

Atlassian’s share price in 2022.

In their emoji-sprinkled shareholder letter, Cannon-Brookes and Farquhar, along with Chief Revenue Officer Cameron Deatsch, wrote that it was “another fiscal year full of profits” in a climate of widespread uncertainty.

“We ended FY22 with strong Q4 results in our three markets: agile and DevOps, IT service management (ITSM) and work management,” they wrote.

“Not only did our customer base exceed 242,000 this quarter, but our workforce grew by 634 with most new hires in R&D – a testament to our team’s ability to execute on ambitious hiring goals.”

The company signaled a continued increase in operating expenses in addition to revenue, with expenses rising nearly 50% from US$1.651 billion in FY21 to $2.443 billion this fiscal year.

Atlassian’s continued shift from organic word of mouth to significant marketing budget continued, with marketing sales costs increasing US$195 million to $567,691. R&D expenditure increased by $432 million to $1.397 billion.

“We firmly believe Atlassian is uniquely positioned, with deep-rooted momentum and a differentiated mode of operation,” said the shareholder.

“This gives us the confidence to make incremental investments – despite the current environment – ​​that will drive even more sustainable long-term growth and deepen our strategic benefits. We know this is an unconventional choice right now.”

Atlassian’s Q4 and FY22 financial performance. Source: Atlassian

New CFO

Atlassian has appointed Microsoft veteran Joe Binz as the new Chief Financial Officer (CFO) and Principal Financial Officer, who will take up the position next month. He spent the past eight years as Corporate Vice President, Finance, at Microsoft.

The company forecasts Q1 FY23 total revenue in the range of US$795 million to $810 million, and its next loss per share will nearly triple to approximately $1.17, up from Q4’s $US0.41 per share.

Meanwhile, Farquhar and Cannon-Brookes, having floated Atlassian public in December 2015 for $21 a share, have retained control of the company, with over 88% of the voting power and approximately 43.08% of Atlassian’s outstanding Class B and Class A common stock. shares – a total of just under 110 million shares.

As part of ongoing, pre-agreed trading plans to sell their holdings, the co-CEOs are looking to sell about 2% of that stake — up to 2.16 million Class B shares each, which at today’s price would have gross profits of about $1,000. US A total of $980 million.

It is now worth over $100 billion by market cap, making NSW-based co-founders Mike Cannon-Brookes and Scott Farquhar extremely wealthy 20 years after they launched Atlassian after meeting at the University of NSW.

Forbes estimates their net worth at about $14.4 billion, down about $5.5 billion from six months ago, but the two 42-year-old Australians are still in the top 125 richest people in the world.

American motion voice

The plan to move the parent company from the UK to the US, announced in February, will be submitted to special shareholders’ meetings for approval on August 22.

The workplace collaboration software company was originally founded in the UK in 2014 prior to its listing on NASDAQ in 2015.

“We believe that moving our parent company to the United States will increase our access to a broader group of investors, support inclusion in additional equity indices, improve comparability of financial reporting with our peers, streamline our corporate structure and increase flexibility. will provide in accessing capital. Atlassian co-CEOs wrote in their shareholder letter.

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