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UNITED STATESSECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
Report of Foreign Private IssuerPursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
July 27, 2017
Commission File Number 001-37651
Atlassian Corporation Plc(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
Exchange HousePrimrose Street
London EC2A 2EGc/o Herbert Smith Freehills LLP
415.701.1110(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant’s Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F: Form 20-F xForm 40-F ¨ Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
Results of Operations and Financial Condition
On July 27, 2017, Atlassian Corporation Plc (“Atlassian” or the “Company”) issued a press release announcing its results for the fiscal quarter and fiscal year ended June 30, 2017. Acopy of the press release is attached as Exhibit 99.1 to this report on Form 6-K and is incorporated by reference herein. The Company also issued a letter to its shareholders announcing itsfinancial results for the fiscal quarter and year ended June 30, 2017 (the “Shareholder Letter”). The full text of the Shareholder Letter is attached as Exhibit 99.2 to this report on Form 6-K andis incorporated by reference herein.
Departure of Certain Officers
The Company also announced that its Chief Financial Officer, Murray Demo, will be leaving Atlassian on December 31, 2017 to focus on his corporate and non-profit board work. Mr.Demo indicated his pending departure is not due to a dispute or disagreement with the Company. The Company has begun a search for a Chief Financial Officer to succeed Mr. Demo.
The information in this report on Form 6-K and the exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended(the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or theExchange Act, regardless of any general incorporation language in such filing.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto dulyauthorized.
Dated: July 27, 2017 Atlassian Corporation Plc (Registrant) /S/ MURRAY J. DEMO
Murray J. DemoChief Financial Officer(Principal Financial Officer)
Exhibit Index ExhibitNumber Exhibit Title 99.1 Press Release dated July 27, 2017.99.2 Shareholder Letter dated July 27, 2017.
Atlassian Announces Fourth Quarter and Fiscal Year 2017 Results
Quarterlyrevenueof$174.3million,up37%year-over-yearQuarterlyIFRSoperatingmarginof(19%)andnon-IFRSoperatingmarginof14%
Quarterlyfreecashflowof$44.5million
SAN FRANCISCO (July 27 , 2017 ) — Atlassian Corporation Plc (NASDAQ: TEAM ), a leading provider of team collaboration and productivity software, today announcedfinancial results for its fourth quarter and fiscal year ended June 30, 2 017, and released a shareholder letter on the Investor Relations section of itswebsite at https://investors.atlassian.com.
“Fiscal 2017 was an amazing year for Atlassian. Our continued success was driven by our commitment to building great products that help unleash the potential of teams formore than 89,000 customers globally,” said Scott Farquhar, Atlassian’s co-CEO and co-founder. “During the past year, we invested in our products and platform to supportmore cloud and enterprise customers, and complemented our product family with the additions of StatusPage and Trello - the two largest acquisitions in our history. We alsoachieved strong financial results, growing annual revenue to more than $619 million, and generating more than $183 million of free cash flow.”
Fourth Quarter Fiscal Year 2017 Financial HighlightsOn an IFRS basis, Atlassian reported:
• Revenue: Total revenue was $174.3 million for the fourth quarter of fiscal 2017, up 37% from $127.6 million for the fourth quarter of fiscal 2016.
• Operating Loss and Operating Margin: Operating loss was $32.3 million for the fourth quarter of fiscal 2017, compared with $11.4 million for the fourth quarter offiscal 2016. Operating margin was (19%) for the fourth quarter of fiscal 2017, compared with (9%) for the fourth quarter of fiscal 2016.
• Net Loss and Net Loss Per Diluted Share: Net loss was $20.7 million for the fourth quarter of fiscal 2017, compared with $4.7 million for the fourth quarter of fiscal2016. Net loss per diluted share was $0.09 for the fourth quarter of fiscal 2017, compared with $0.02 for the fourth quarter of fiscal 2016.
• Balance Sheet: Cash and cash equivalents, and short-term investments at the end of the fourth quarter of fiscal 2017 totaled $549.9 million.
On a non-IFRS basis, Atlassian reported:
• Operating Income and Operating Margin: Operating income was $24.3 million for the fourth quarter of fiscal 2017, compared with $15.6 million forthe fourth quarter of fiscal 2016. Operating margin was 14% for the fourth quarter of fiscal 2017, compared with 12% for the fourth quarter of fiscal 2016.
• Net Income and Net Income Per Diluted Share: Net income was $21.6 million for the fourth quarter of fiscal 2017, compared with $16.9 million for the fourth quarterof fiscal 2016. Net income per diluted share was $0.09 for the fourth quarter of fiscal 2017, compared with $0.07 per diluted share for the fourth quarter of fiscal 2016.
• Free Cash Flow: Cash flow from operations for the fourth quarter of fiscal 2017 was $50.6 million, while capital expenditures totaled $6.1 million, resulting in freecash flow of $44.5 million, an increase of 153% year-over-year.
Fiscal Year 2017 Financial HighlightsOn an IFRS basis, Atlassian reported:
• Revenue: Total revenue was $619.9 million for fiscal year 2017, up 36% from $457.1 million for fiscal year 2016.
• Operating Loss and Operating Margin: Operating loss was $63.1 million for fiscal year 2017, compared with $5.9 million for fiscal year 2016. Operating marginwas (10%) for fiscal 2017, compared with (1%) for fiscal 2016.
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• Net Income/Loss and Net Income/Loss Per Diluted Share: Net loss was $42.5 million for fiscal year 2017, compared with net income of $4.4 million for fiscal year2016. Net loss per diluted share was $0.19 for fiscal year 2017, compared with net income per diluted share of $0.02 for fiscal year 2016.
On a non-IFRS basis, Atlassian reported:
• Operating Income and Operating Margin: Operating income was $104.2 million for fiscal year 2017, compared with $77.1 million for fiscal year 2016. Operatingmargin was 17% for fiscal 2017, compared with 17% for fiscal 2016.
• Net Income and Net Income Per Diluted Share: Net income was $84.9 million for fiscal year 2017, compared with $71.3 million for fiscal year 2016. Net income perdiluted share was $0.36 for fiscal year 2017, compared with $0.35 per diluted share for fiscal year 2016.
• Free Cash Flow: Cash flow from operations for fiscal year 2017 was $199.4 million while capital expenditures totaled $16.1 million, leading to free cash flow of$183.3 million, an increase of 92% year-over-year.
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 measuresis also included below, under the heading “About Non-IFRS Financial Measures.”
Recent Business Highlights• Customer growth: Atlassian ended the fourth quarter of fiscal 2017 with a total customer count on an active subscription or maintenance agreement
basis of 89,237, an increase of 46% year-over-year. Atlassian added 4,206 net-new customers during the quarter.
• European cloud infrastructure: In May 2017, Atlassian announced the global expansion of its cloud hosting infrastructure with the launch of an Amazon WebServices (AWS) data center in Ireland. European cloud customers will experience improved performance and reduced latency after their migration to the newinfrastructure.
• Summit Europe and AtlasCamp: In May 2017, Atlassian held its first ever European Summit user conference in Barcelona. Atlassian hosted over 1,700 attendeesat the sold-out event, which was combined with our 10th AtlasCamp developer conference.
CFO TransitionAtlassian also announced that its Chief Financial Officer, Murray Demo, will be leaving Atlassian on December 31, 2017 to focus on his corporate and non-profit board work.After serving on Atlassian’s board for four years, Demo joined the company as Chief Financial Officer in 2015 to help support Atlassian through its transition to a publiccompany. Atlassian will soon begin a search for a Chief Financial Officer to succeed Demo.
“Over his six years with Atlassian, Murray has been instrumental in helping shape our long-term strategy and operational and financial rigor,” said Scott Farquhar. “Mike and Iare both grateful for his leadership and friendship over the many years. Atlassian exists to unleash the potential in every team, and both as a board member, and as our CFO,Murray helped unleash Atlassian’s potential.”
“It's been a privilege to be part of the Atlassian journey over the past six years as both a board member and CFO,” said Murray Demo. “Atlassian’s world-class products,engaging culture, unique business model and talented employees have been the catalyst for Atlassian’s global success. I am excited for the company’s long-term future andlook forward to cheering on Scott, Mike and TEAM’s continued strong results.”
Financial TargetsAtlassian is providing its financial targets for the first quarter and full fiscal year 2018. The company’s financial targets are as follows:
• First Quarter Fiscal Year 2018 : • Total revenue is expected to be in the range of $184 million to $186 million.
• Gross margin is expected to be approximately 80% on an IFRS basis and approximately 84% on a non-IFRS basis.
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• Operating margin is expected to be approximately (18%) on an IFRS basis and approximately 17% on a non-IFRS basis.
• Net loss per diluted share is expected to be approximately ($0.11) on an IFRS basis, and net income per diluted share is expected to be approximately $0.09 on anon-IFRS basis.
• Weighted average share count is expected to be in the range of 228 million to 230 million shares when calculating diluted IFRS net loss per share and in therange of 242 million to 244 million shares when calculating diluted non-IFRS net loss per share.
• Fiscal Year 2018: • Total revenue is expected to be in the range of $826 million to $834 million.
• Gross margin is expected to be approximately 80% on an IFRS basis and approximately 84% on a non-IFRS basis.
• Operating margin is expected to be in the range of (16%) to (15%) on an IFRS basis and in the range of 18% to 19% on a non-IFRS basis.
• Net loss per diluted share is expected to be in the range of ($0.46) to ($0.44) on an IFRS basis, and net income per diluted share is expected to be in the range of$0.42 to $0.44 on a non-IFRS basis.
• Weighted average share count is expected to be in the range of 232 million to 234 million shares when calculating diluted IFRS net loss per share and in therange of 244 million to 246 million shares when calculating diluted non-IFRS net loss per share.
• Free cash flow is expected to be in the range of $230 million to $240 million, which includes capital expenditures that are expected to be in the range of $25million to $30 million in fiscal 2018.
With respect to Atlassian’s expectations under “Financial Targets” above, a reconciliation of IFRS to non-IFRS gross margin, operating margin, net income per diluted share,and free cash flow has been provided in the financial statement tables included in this press release.
Investor & Financial Analyst Session at Atlassian Summit U.S. - September 13, 2017Atlassian will be holding an Investor & Financial Analyst session on Wednesday, September 13, 2017 as part of its Summit U.S. user conference in San Jose, CA. Keynotesand breakout sessions at Summit U.S. will be held at the San Jose Convention Center on September 13-14, 2017, and the Investor & Financial Analyst session will be held atthe Hilton San Jose adjoining the Convention Center.
Atlassian's Investor & Financial Analyst session will be available via live webcast on September 13, 2017, beginning at 1:00 p.m. Pacific Time (4:00 p.m. Eastern Time), andan archive version will be available for 12 months. Both will be available on the Investor Relations section of Atlassian’s website at: https://investors.atlassian.com.
Shareholder Letter and Webcast/Conference Call DetailsA detailed shareholder letter is available on the Investor Relations section of Atlassian’s website at: https://investors.atlassian.com. Atlassian will host a webcast andconference call to answer questions today:
• When: Thursday, July 27, 2017 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: https://investors.atlassian.com. Following thecall, a replay will be available on the same website.
• Dial In: To access the call via telephone in North America, please dial 1-888-346-0688. For international callers, please dial 1-412-902-4250. Participants shouldrequest 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 NorthAmerica, please dial 1-877-344-7529 (access code 10109534). International callers, please dial 1-412-317-0088 (access code 10109534).
Atlassian has used, and will continue to use, its Investor Relations website at https://investors.atlassian.com, as a means of making material information public and forcomplying with its disclosure obligations.
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About AtlassianAtlassian unleashes the potential in every team. Our collaboration software helps teams organize, discuss and complete shared work. Teams at more than 89,000 customers,across large and small organizations - including Citigroup, eBay, Coca-Cola, Visa, BMW and NASA - use Atlassian's project tracking, content creation and sharing, real-timecommunication and service management products to work better together and deliver quality results on time. Learn more about our products including JIRA Software,Confluence, HipChat, Trello, Bitbucket and JIRA Service Desk at https://atlassian.com/.
Investor Relations ContactIan [email protected]
Media ContactPaul [email protected]
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risksand uncertainties. All statements other than statements of historical fact could be deemed forward looking, including risks and uncertainties related to statements about ourproducts, customers, technology and other key strategic areas, and our financial targets such as revenue, share count and IFRS and non-IFRS financial measures includinggross margin, operating margin, net income per diluted share and free cash flow.
We undertake 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 toreflect 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 risksor uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-lookingstatements we make. You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management’s beliefsand assumptions only as of the date such statements are made.
Further information on these and other factors that could affect our financial results is included in filings we make with the Securities and Exchange Commission from time totime, including the section titled “Risk Factors” in our most recent Forms 20-F and 6-K (reporting our quarterly results). These documents are available on the SEC Filingssection of the Investor Relations section of our website at: https://investors.atlassian.com/.
About Non-IFRS Financial MeasuresOur 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 these non-IFRS financial measures provides consistency and comparabilitywith our past financial performance, facilitates period-to-period comparisons of our results of operations, and also facilitates comparisons with peer companies, many of whichuse similar non-IFRS or non-GAAP financial measures to supplement their IFRS or GAAP results. Non-IFRS results are presented for supplemental informational purposesonly 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 or non-GAAP measures used by other companies.
Our non-IFRS financial measures reflect adjustments based on the items below:
Non-IFRSgrossprofit.Excludes expenses related to share-based compensation and amortization of acquired intangible assets.
Non-IFRSoperatingincome.Excludes expenses related to share-based compensation and amortization of acquired intangible assets.
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Non-IFRSnetincomeandnon-IFRSnetincomeperdilutedshare.Excludes expenses related to share- based compensation, amortization of acquired intangibleassets and related income tax effects on these items.
Freecashflow.Free cash flow is defined as net cash provided by operating activities less capital expenditures, which consists of purchases of property andequipment and acquired intangible assets.
We exclude expenses related to share-based compensation, amortization of acquired intangible assets and the related income tax effects on these items from certain of ournon-IFRS financial measures as we believe this helps investors understand our operational performance. In addition, share-based compensation expense can be difficult topredict and varies from period to period and company to company due to differing valuation methodologies, subjective assumptions and the variety of equity instruments, aswell as changes in stock price. Management believes that providing non-IFRS financial measures that exclude share-based compensation expense, amortization of acquiredintangible assets and the related income tax effects on these items allow for more meaningful comparisons between our operating results from period to period.
We include the effect of our outstanding share options and restricted share units (“RSUs”) in weighted-average shares used in computing non-IFRS net income per dilutedshare. IFRS excludes the impact of the full weighting of these outstanding equity awards until the effectiveness of our initial public offering (“IPO”). We have presented the fullweighting 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 investorswith insight into the full impact of all potentially dilutive awards outstanding and to provide comparability across periods.
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 ourbusiness that can be used for strategic opportunities, including investing in our business, making strategic acquisitions and strengthening our statement of financial position.
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 measures 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 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 arefrequently used by investors and securities analysts in their evaluation of companies, these measures have limitations as analytical tools, and you should not consider them inisolation or as substitutes for analysis of our results of operations as reported under IFRS.
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Atlassian Corporation PlcConsolidated Statements of Operations
(U.S. $ and shares in thousands, except per share data)(unaudited)
Three Months Ended June 30, Fiscal Year Ended June 30,
2017 2016 2017 2016
Revenues: Subscription $ 72,502 $ 43,590 $ 242,128 $ 146,659Maintenance 71,648 58,808 265,521 218,848Perpetual license 19,359 17,911 74,565 65,487Other 10,822 7,279 37,722 26,064
Total revenues 174,331 127,588 619,936 457,058Cost of revenues (1) (2) 36,805 21,126 119,161 75,783Gross profit 137,526 106,462 500,775 381,275Operating expenses: Research and development (1) 90,691 60,830 310,168 208,306Marketing and sales (1) (2) 45,887 30,980 134,908 93,391General and administrative (1) 33,204 26,042 118,785 85,458
Total operating expenses 169,782 117,852 563,861 387,155Operating loss (32,256) (11,390) (63,086) (5,880)Other non-operating income (expense), net (536) (342) (1,342) (1,072)Finance income 1,048 1,244 4,851 2,116Finance costs (24) (9) (75) (71)
Loss before income tax benefit (31,768) (10,497) (59,652) (4,907)Income tax benefit 11,060 5,795 17,148 9,280
Net income (loss) $ (20,708) $ (4,702) $ (42,504) $ 4,373
Net income (loss) per share attributable to ordinary shareholders: Basic $ (0.09) $ (0.02) $ (0.19) $ 0.02
Diluted $ (0.09) $ (0.02) $ (0.19) $ 0.02Weighted-average shares outstanding used to compute net income (loss) per shareattributable to ordinary shareholders: Basic 225,805 214,505 222,224 182,773
Diluted 225,805 214,505 222,224 193,481
(1) Amounts include share-based payment expense, as follows:
Three Months Ended June 30, Fiscal Year Ended June 30,
2017 2016 2017 2016
Cost of revenues $ 2,159 $ 1,606 $ 6,856 $ 5,371Research and development 24,598 12,542 79,384 35,735Marketing and sales 5,455 3,385 17,395 11,945General and administrative 9,125 7,553 33,813 22,429
(2) Amounts include amortization of acquired intangible assets, as follows:
Three Months Ended June 30, Fiscal Year Ended June 30,
2017 2016 2017 2016
Cost of revenues $ 5,280 $ 1,909 $ 14,587 $ 7,405Marketing and sales 9,988 21 15,269 86
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Atlassian Corporation PlcConsolidated Statements of Financial Position
(U.S. $ in thousands)(unaudited)
June 30, 2017 June 30, 2016
Assets Current assets: Cash and cash equivalents $ 244,420 $ 259,709Short-term investments 305,499 483,405Trade receivables 26,807 15,233Current tax receivables 12,445 6,013Prepaid expenses and other current assets 23,317 14,178
Total current assets 612,488 778,538Non-current assets: Property and equipment, net 41,173 58,762Deferred tax assets 188,239 127,411Goodwill 311,900 7,138Intangible assets, net 120,789 13,577Other non-current assets 9,269 5,547
Total non-current assets 671,370 212,435
Total assets $ 1,283,858 $ 990,973
Liabilities Current liabilities: Trade and other payables $ 73,192 $ 57,886Current tax liabilities 2,207 286Provisions 6,162 4,716Deferred revenue 245,306 173,612
Total current liabilities 326,867 236,500Non-current liabilities: Deferred tax liabilities 43,950 6,639Provisions 3,333 2,170Deferred revenue 10,691 7,456Other non-current liabilities 4,969 6,545
Total non-current liabilities 62,943 22,810Total liabilities $ 389,810 $ 259,310Equity Share capital $ 22,726 $ 21,620Share premium 450,959 441,734Other capital reserves 437,346 244,335Other components of equity 6,246 4,699Retained earnings (accumulated deficit) (23,229) 19,275Total equity $ 894,048 $ 731,663
Total liabilities and equity $ 1,283,858 $ 990,973
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Atlassian Corporation PlcConsolidated Statements of Cash Flows
(U.S. $ in thousands)(unaudited)
Three Months Ended June 30, Fiscal Year Ended June 30,
2017 2016 2017 2016
Operating activities Loss before income tax $ (31,768) $ (10,497) $ (59,652) $ (4,907)Adjustments to reconcile loss before income tax to net cash provided by operating activities: Depreciation and amortization 23,766 6,342 61,546 21,926Net loss (gain) on sale of investments and other assets 25 (33) (397) 165Net unrealized foreign currency loss 92 160 93 152Share-based payment expense 41,337 25,086 137,448 75,480Interest income (1,048) (1,244) (4,851) (2,116)Changes in assets and liabilities: Trade receivables (295) (1,101) (10,208) (3,487)Prepaid expenses and other assets (2,788) (2,454) (5,647) (4,203)Trade and other payables, provisions and other non-current liabilities 1,639 5,647 10,947 11,622Deferred revenue 23,252 14,979 72,604 44,503
Interest received 1,393 1,381 6,540 2,839Income tax paid, net of refunds (5,008) (3,271) (9,042) (12,432)
Net cash provided by operating activities 50,597 34,995 199,381 129,542Investing activities Business combinations, net of cash acquired — — (381,090) —Purchases of property and equipment (5,208) (17,394) (15,129) (34,213)Purchases of intangible assets (925) — (925) —Proceeds from sale of other assets — — 342 —Purchases of investments (85,155) (133,639) (423,540) (569,067)Proceeds from maturities of investments 31,215 17,470 111,403 65,294Proceeds from sales of investments 54,911 43,140 488,672 49,501Increase in restricted cash (2) — (3,371) —Payment of deferred consideration — — (935) (1,025)Net cash used in investing activities (5,164) (90,423) (224,573) (489,510)Financing activities Proceeds from issuance of ordinary shares upon initial public offering, net of offering costs — — — 431,447Proceeds from exercise of share options 2,035 2,466 9,438 6,732Employee payroll taxes paid related to net share settlement of equity awards — — — (5,395)Net cash provided by financing activities 2,035 2,466 9,438 432,784Effect of exchange rate changes on cash and cash equivalents 70 (223) 465 (201)Net increase (decrease) in cash and cash equivalents 47,538 (53,185) (15,289) 72,615Cash and cash equivalents at beginning of period 196,882 312,894 259,709 187,094
Cash and cash equivalents at end of period $ 244,420 $ 259,709 $ 244,420 $ 259,709
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Atlassian Corporation PlcReconciliation of IFRS to Non-IFRS Results
(U.S. $ and shares in thousands, except per share data)(unaudited)
Three Months Ended June 30, Fiscal Year Ended June 30,
2017 2016 2017 2016
Gross profit: IFRS gross profit $ 137,526 $ 106,462 $ 500,775 $ 381,275Plus: Share-based payment expense 2,159 1,606 6,856 5,371Plus: Amortization of acquired intangible assets 5,280 1,909 14,587 7,405
Non-IFRS gross profit $ 144,965 $ 109,977 $ 522,218 $ 394,051
Operating income: IFRS operating loss $ (32,256) $ (11,390) $ (63,086) $ (5,880)Plus: Share-based payment expense 41,337 25,086 137,448 75,480Plus: Amortization of acquired intangible assets 15,268 1,930 29,856 7,491
Non-IFRS operating income $ 24,349 $ 15,626 $ 104,218 $ 77,091
Net income: IFRS net income (loss) $ (20,708) $ (4,702) $ (42,504) $ 4,373Plus: Share-based payment expense 41,337 25,086 137,448 75,480Plus: Amortization of acquired intangible assets 15,268 1,930 29,856 7,491Less: Income tax effects and adjustments (14,277) (5,437) (39,864) (16,018)
Non-IFRS net income $ 21,620 $ 16,877 $ 84,936 $ 71,326
Net income per share: IFRS net income (loss) per share - basic $ (0.09) $ (0.02) $ (0.19) $ 0.02Plus: Share-based payment expense 0.18 0.12 0.62 0.42Plus: Amortization of acquired intangible assets 0.07 0.01 0.13 0.04Less: Income tax effects and adjustments (0.06) (0.03) (0.18) (0.09)
Non-IFRS net income per share - basic $ 0.10 $ 0.08 $ 0.38 $ 0.39
IFRS net income (loss) per share - diluted $ (0.09) $ (0.02) $ (0.19) $ 0.02Plus: Share-based payment expense 0.18 0.11 0.59 0.37Plus: Amortization of acquired intangible assets 0.06 0.01 0.13 0.04Less: Income tax effects and adjustments (0.06) (0.03) (0.17) (0.08)
Non-IFRS net income per share - diluted $ 0.09 $ 0.07 $ 0.36 $ 0.35
Weighted-average diluted shares outstanding: Weighted-average shares used in computing diluted IFRS net income (loss) per share 225,805 214,505 222,224 193,481Dilution from share options and RSUs (1) 13,596 17,417 13,833 —Dilution from share options and RSUs granted in periods prior to IPO (2) — — — 8,205
Weighted-average shares used in computing diluted non-IFRS net income per share 239,401 231,922 236,057 201,686
Free cash flow: IFRS net cash provided by operating activities $ 50,597 $ 34,995 $ 199,381 $ 129,542Less: Capital expenditures (6,133) (17,394) (16,054) (34,213)
Free cash flow $ 44,464 $ 17,601 $ 183,327 $ 95,329(1) The effects of these dilutive securities were not included in the IFRS calculation of diluted net loss per share for the three months ended June 30, 2017 and 2016 and the fiscal year ended
June 30, 2017 because the effect would have been anti-dilutive.(2) Gives effect to share options and RSUs in periods prior to our IPO for comparability.
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Atlassian Corporation PlcReconciliation of IFRS to Non-IFRS Results
(as a percentage of total revenues)(unaudited)
Three Months Ended June 30, Fiscal Year Ended June 30,
2017 2016 2017 2016
Operating margin IFRS operating margin (19%) (9%) (10%) (1%)Plus: Share-based payment expense 24 20 22 17Plus: Amortization of acquired intangible assets 9 2 5 2
Non-IFRS operating margin 14 % 12 % 17 % 17 %
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Atlassian Corporation PlcReconciliation of IFRS to Non-IFRS Financial Targets
(U.S. $)
Three Months Ending
September 30, 2017 Fiscal Year Ending
June 30, 2018
Revenue $184 million to $186 million $826 million to $834 million IFRS gross margin 80% 80%Share-based payment expense 1 1Amortization of acquired intangible assets 3 3
Non-IFRS gross margin 84% 84%
IFRS operating margin (18%) (16%) to (15%)Share-based payment expense 27 27Amortization of acquired intangible assets 8 7
Non-IFRS operating margin 17% 18% to 19%
IFRS net loss per share - diluted ($0.11) ($0.46) to ($0.44)Share-based payment expense 0.21 0.95Amortization of acquired intangible assets 0.06 0.23
Income tax effects and adjustments (0.07) (0.30)
Non-IFRS net income per share - diluted $0.09 $0.42 to $0.44
Weighted-average shares used in computing diluted IFRS net income pershare 228 million to 230 million 232 million to 234 millionDilution from share options and RSUs (1) 14 million 12 million
Weighted-average shares used in computing diluted non-IFRS net incomeper share 242 million to 244 million 244 million to 246 million
IFRS net cash provided by operations $255 million to $270 millionLess: Capital expenditures (25 million) to (30 million)
Free cash flow $230 million to $240 million
(1) The effect of these dilutive securities are not included in our IFRS calculation of diluted net loss per share for the three months ending September 30, 2017 and fiscal year ending June 30,2018 because the effect would be anti-dilutive.
11
Shareholder Letter Q4’17 and Fiscal 2017 July 27, 2017
Q4 FY2017 Fellow shareholders, Fiscal 2017 marks 15 years since we started Atlassian. Much of workplace technology has changed dramatically over that time, but some things remain the same: meaningful progress – in every company and every industry –requires teamwork, and teamwork is stillhard. Despite their best intentions to increase cross-functional collaboration, teams still struggle to share and utilize knowledge and information, stalling projects and creating bottlenecks. Our commitment to unleash the potential in every team helps millions of knowledge workers on hundreds of thousands of teams get the job done. One of our ve company values is “open company, no bullsh*t,” and the idea ofopennessinfuses everything we do: the culture we’ve built, our commitment to transparency with our customers, and most importantly, the new approaches to teamwork our products are pioneering. Atlassian productsremovebarriers within and between teams, giving them simpler ways to plan, collaborate, anddeliver work.By making workvisible across the company by default,it can be shared quickly and discovered easily. That openness breeds trust. And trust, in turn, breeds eective teams, who are not only loyal customers, butvocal champions of this new way of working. It's clear our approach is working.Austrian Federal Railways, for example, coordinates the movement of466 million passengers and 111 million tons of cargo per yearwith the help of our products.And micro-lender Kiva uses JIRA Software, Conuence, and HipChat to streamline teamwork as they connect over 1.5 million lenders with entrepreneurs in the world’s most remote areas. Reaching new heights (again) this quarter Revenue for the quarter totaled $174.3 million, an increase of 37% year-over-year. For the year, revenue totaled $619.9 million, up 36% year-over-year. We also generated $183.3 million in free cash ow during scal 2017, up 92% year-over-year. Ourmodel'semphasis on automation, customer service, simple and transparent pricing, and ecient land-and-expand paths result in a unique pairing of consistent top-line growth and strong free cash ow. From the CEOs 2
Q4 FY2017 3 We added 4,206net-newcustomers in the fourth quarter of scal 2017, and over 28,000 net-new customers over the course of scal 2017, bringing our total customer count to 89,237 .The 100,000 customer mark is clearly in sight. Fiscal 2017 was an activeyear for us on the M&A front. We kicked o the yearwith the acquisition of StatusPage, a status and incident communication platform. In February, we acquired Trello, apopular task management product.These were the two largest acquisitions in our history.Both complement our product portfolio, business model, and company culture, and have enhanced our ability to serve the collaboration needs of teams of all sizes.StatusPage t seamlessly into the Atlassian family, and our integration of Trello is progressing well so far.We're excited to take these products to the next level of growth in scal 2018. Of course, none of our achievements this year would have been possible without our amazing team of Atlassians. We now have 2,193 employees, up from 1,760 at the end of last year. We're grateful for their hard work, and their contribution to some fantastic achievements in scal 2017. Infrastructure expansion for Cloud products Atlassian’s cloud infrastructure has gone global, starting with a new Amazon Web Services (AWS) hosting center in Ireland that will serve the European region. Over three quarters of our new customers choose the cloud, and approximately 40% of our revenue currently comes from Europe. Placing a data center closer to European customers ensures faster performance for our Cloud products and is an important investment in our future. Thanks to the use of third-party cloud providers like AWS, we can add more regions quickly andplan to expand to other data centers around the globe. $50k+ customers up ~46% Y/Y Atlassian’s Data Center products are the beating heart of operations for larger companies that simply cannot allow downtime - whether planned or unplanned. One such larger customer is highly admired healthcare company Cerner. Their service facilitates secure sharing of patient data between clinics. If their work stops, so does the work of doctors. Cerner was an early adopter of ourData Center family of products, which we introduced three years ago. In addition to high availability, enterprises choose Data Center for added administrative controls, easy scaling, and superior performance when supporting thousands (or tens of thousands) of users.We rounded out our Data Center oerings this quarter with therelease of HipChat Data Center and Crowd Data Center.Now, all our major server products are available in Data Center editions.
Q4 FY2017 4 To simplify the adoption of the Data Center family for larger enterprises, in June, we introducedthe Atlassian Stack: one instance of each of our Data Center products, plus our Premier Support service, bundled into a single license. Nearly half of our customers with 500+ users already usethree or more of our products, and many are standardizing on the full Atlassian portfolio and upgrading to Data Center. The Atlassian Stack not only simplies procurement but also has the potential to expand adoption of our products throughout the enterprise. Consistent improvements to our products and services for enterprises have propelled our growth with larger customers. At the end of scal 2017, we had 1,817 customers spending $50,000 or more with us annually, compared with 1,245 customers at the end of scal 2016. Additionally, we had 75 customers with spend of $500,000 or more over the course of scal 2017, compared with 37 in scal 2016. Rapid growth in the public sector This quarter marked a breakthrough in our ability to work with public sector entities in the US: we are now General Services Administration (GSA) approved, thanks to a new partnership with Carahsoft.Withthis relationship, government entities are now able to purchase Atlassian products on Carahsoft’s GSA Schedule and NASA’s Solution for Enterprise-Wide Procurement (SEWP) contract. Public sector organizations such as NASA’s Jet Propulsion Lab (JPL), the U.S. Department of Defense, and CSIRO (Australia’s national science agency)have long been fans of Atlassian. Our powerful, attractively-priced products are a great t for government entities that are under constant pressure to deliver results as eciently and as cost-eectively as possible. Our public sector business is still a small portion of our overall revenue but it is growing quickly. Unit sales of Data Center products to government customers, for example, almost doubled in scal 2017, compared with scal 2016.
Q4 FY2017 5 Mike Cannon-Brookes Co-founder and CEO Scott Farquhar Co-founder and CEO Investor & Financial Analyst session at Summit U.S. 2017 - Sept. 13 in San Jose As we discussed last quarter, we traveled to Barcelona in May to hold our 10th AtlasCamp developer conference, combined with the rst European edition of our Summit user conference. Both were terric events and we were thrilled to spend time with hundreds of developers, customers, and partners. Up next is our largest U.S. event of the year:Atlassian Summit U.S. 2017, in San Jose, CA. We'll be holding keynotes, breakout sessions, and a variety of customer and partner programs on September 13-14 at the San Jose Convention Center (SJCC). And please mark your calendars for our rst Investor & Financial Analyst session, kicking o at 1pm PT on September 13, at the Hilton San Jose right next to the SJCC. During theInvestor & Financial Analyst session, we’ll walk through our go-to-market model, technology platform, and nancial model. The main keynote presentations at Summit will cover our broader company priorities, strategies, and other updates. We look forward to seeing many of you at Summit, and to hearing your thoughts and questions. CFO transition Murray Demo, our CFO, will be leaving Atlassian onDecember 31, 2017to focus on his corporate and non-prot board work. After serving on our board for four years, Murray joined as CFO in 2015 to help support our transition to a public company. The company will soon begin a search for a CFO to succeed him. We are both grateful for Murray’s leadership and friendship over the many years. Here's to the road ahead, and to unleashing the potential in every team. Best Wishes, Mike Cannon-Brookes and Scott Farquhar
Q4 FY2017 Our customers represent diverse industries and geographies, from start-ups to blue chips, thanks to a highly automated sales model that allows us to target the Fortune 500,000. We nished scal 2017 with 89,237 customers, thanks to the addition of 4,206 net-new customers this quarter. With the introduction of a per-user pricing model for our Cloud products that we describe in theFinancial highlightssection below , an increasing number of customers may qualify as an active customer per our denition. We expect to provide more details on this topic at our Investor& Financial Analyst session at Summit U.S. in September. Customer highlights 6 Customers: We dene the number of customers at the end of any particular period as the number of organizations with unique domains that have at least one active and paid license or subscription of our products for which they paid approximately $10 or more per month. While a single customer may have distinct departments, operating segments or subsidiaries with multiple active licenses or subscriptions of our products, if the product deployments share a unique domain name, we only include the customer once for purposes of calculating this metric. We dene active licenses as those licenses that are under an active maintenance or subscription contract as of period end. Customers Period ended Jay Simons President Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 89,237 85,031 68,837 65,673 60,950 57,431 54,262 51,636 48,622 45,460 * *Includes an increase of 12,789 customers as a result of our acquisition of Trello during the third quarter of scal 2017.
Q4 FY2017 Over three-quarters of our net-new customers in Q4'17 chose Cloud products.Overall, as of the end of scal 2017, more than 70% of our total customer base uses a Cloud product. Some of the new customers we added during the quarter include retail clothing company Tillys, internet television service provider Sling, global advertising rm Leo Burnett, cloud-based payroll and benets provider Gusto,ngerprint sensor and biometrics technology developer Goodix, and autonomous driving software systems maker Zenuity. Customers use our products in a variety of ways, across all types of teams. While it would be dicult to list the thousands of use cases for our products, we'd like to share a handful of the stories our customers share with us each quarter. These examples illustrate the breadth of applications and versatility of our products, as well as how we expand across teams, departments and customer organizations. Nasdaq Spreading from development to IT and business teams A long-time customer, Nasdaq started using JIRA ten years ago when a handful of development teams took the initiative to modernize their development methods. Over time, more teams saw the benets of JIRA, and its usage spread. Five years ago, due to the ease of Atlassian's integrations, engineering added Conuence for documentation, Bitbucket for their source code management, and HipChat for notications and real-time communication. As usage spread enterprise-wide, Nasdaq migrated to Data Center for Conuence and Bitbucket. For certain projects, when building a new product feature, development and operations now use HipChat to discuss requirements, document the requirements in Conuence and track the work in JIRA Software. HipChat's usage in particular has spread organically to other departments including IT and business teams. Atlassian tools have increased visibility, communication, and collaboration between teams at Nasdaq, unlocking teamwork in new ways as a result of the transparency the tools have facilitated. Today, Nasdaq has over 2,000 users on JIRA Software, Conuence, and HipChat, and over 500 users on Bitbucket. 7
Q4 FY2017 HackerNest Helping a small team with a big organization HackerNest, a Canadian non-prot that unites local technology communities around the world through community events and socially benecial hackathons, has over 65,000 members in 34 cities and 14 countries. With only 16 sta managing teams of organizers around the world, JIRA and Trello help HackerNest operate at an impressive global scale. As a result, the HackerNest community has been able to help tackle many of the world's issues using technology, from aiding patients with dementia to making the world's sheries more sustainable. "We've put our organization's trust in Atlassian," notes Shaharris Beh, the founder and CEO of HackerNest. "We use JIRA to help manage the development of our community platforms and Trello to put together our events. Atlassian enables so much change in the world by giving organizations like ours the tools to get s**t done.” HackerNest hackathons focus on creating sustainable, innovative products for the good of mankind. One example is Fishackathon, a 50-city hackathon in partnership with the U.S. Department of State that has the mission of making the world's sheries more sustainable and equitable. HackerNest sta will be using Trello to help manage over 2,000 participants in events around the world at Fishackathon. Online travel marketplace and hospitality service Enhancing the employee experience with JIRA Service Desk A leading online travel marketplace and hospitality service started as an Atlassian customer in 2010 with JIRA Software and added Conuence soon after. With the company experiencing incredibly rapid employee growth across the globe, itrecently rolled out JIRA Service Desk to various organizations across the company to provide an exceptional experience for its employees. The company's IT organization adopted JIRA Service Desk to provide better service to employees for service requests, incidents and access requests. Several other teams also added JIRA Service Desk to track requests and provide unparalleled service to employees: thesecurity team to manage oce visits and employee safety, the facilities team to support rapid employee growth and general oce operations, and the HR team to track and update employee proles and information within their human capital management system. The results since rolling out JIRA Service Desk have been fantastic, showing a signicant decrease in response times to incident and service requests, as well as incredible employee satisfaction scores in response to the new system. This customer is now looking to scale JIRA Service Desk to additional business units across the company. 8
Q4 FY2017 Financial highlights Fourth quarter 2017 results Revenue Total revenue for the fourth quarter of scal 2017 was $174.3 million, up 37% year-over-year. Our revenue for the quarter reected strong performance across our Cloud and Data Center products. Our revenue by line item for the quarter is as follows: • Subscription revenueprimarily relates to fees earned from sales of our Cloud products. A small portion of this revenue also relates to sales of our Data Center products, which are server products sold to our largest enterprise customers on a subscription basis. We recognize subscription revenue ratably over the term of the contract. For Q4'17, subscription revenue was $72.5 million, up 66% year-over-year. The growth in subscription revenue reects more of our customers choosing our Cloud products, as well as strong growth in our Data Center oerings during the quarter.Trello revenue, which is included in subscription revenue, achieved the target of approximately $3 million for Q4'17 that we communicated previously.This is the rst quarter in company history where subscription revenue surpassed maintenance revenue as our largest revenue line. This underscores the transition that we're seeing as more customers move to the cloud and our largest customers choose our Data Center oerings. 9 Murray Demo Chief Financial Ocer Fourth quarter and scal 2017 nancial summary (in thousands, except per share data) A reconciliation of IFRS to non-IFRS measures is provided within tables at the end of this letter, in our earnings press release or posted on our Investor Relations website. Fourth quarter and fiscal 2017 financial summary (in thousands, except per share data) Three Months Ended June 30, Fiscal Year Ended June 30, IFRS Results 2017 2016 2017 2016 Revenue $174,331 $127,588 $619,936 $457,058 Gross profit $137,526 $106,462 $500,775 $381,275 Gross margin 78.9% 83.4% 80.8% 83.4% Operating loss ($32,256) ($11,390) ($63,086) ($5,880) Operating margin (18.5%) (8.9%) (10.2%) (1.3%) Net income (loss) ($20,708) ($4,702) ($42,504) $4,373 Net income (loss) per share - diluted ($0.09) ($0.02) ($0.19) $0.02 Non-IFRS Results Gross profit $144,965 $109,977 $522,218 $394,051 Gross margin 83.2% 86.2% 84.2% 86.2% Operating income $24,349 $15,626 $104,218 $77,091 Operating margin 14.0% 12.2% 16.8% 16.9% Net income $21,620 $16,877 $84,936 $71,326 Net income per share - diluted $0.09 $0.07 $0.36 $0.35 Free cash flow $44,464 $17,601 $183,327$95,329
Q4 FY2017 Revenue by type USD in millions (Y/Y growth rate in %) Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Subscription Maintenance Perpetual License Other 16% 22% 66% 23% 13% 64% 28% 17% 68% 66% 36% 11% 71% 22% 8% • Maintenance revenuerepresents fees earned from providing customers updates, upgrades and technical product support for our perpetual license products.Maintenance revenue is recognized ratably over the support period, which is typically 12 months. For Q4'17, maintenance revenue was $71.6 million, up 22% year-over-year. • License revenueis related to fees earned from the sale of perpetual licenses for our server or behind- the-rewall products, and is recognized at the time of sale. For Q4'17, license revenue was $19.4 million, up 8% year-over-year.The growth rate in license revenue was lower this quarter as new customers chose our cloud oerings more than server oerings. • Other revenueincludes our portion of the fees received for sales of third-party add-ons and extensions in the Atlassian Marketplace, and for training services. For Q4'17, other revenue was$10.8 million, up 49% year-over-year. 10 $118 $128 $137 $149 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 $174 $160 $149 $137 $128 $118 39%40% 34% 36% 36% Revenue USD in millions (Y/Y growth rate in %) 37% 19% 19% 64% $160 $174 Margins and operating expenses IFRS gross margin for Q4'17 was 78.9%, compared with 83.4% for Q4'16.Non-IFRS gross margin for Q4'17 was 83.2%, compared with 86.2% for Q4'16. As we have discussed in prior quarters, gross margin for the quarter included accelerated depreciation expense incurred as part of our transition from our data centers to third-party cloud providers.In the fourth quarter, weincreased our spend on cloud
Q4 FY2017 infrastructure services andexpanded the number of local language oerings for our products ahead of our rst European Summit. Both of these contributed to a slightly lower gross margin. On an IFRS basis, operating expenses were $169.8 million in Q4'17, up 44% from $117.9 million in Q4'16.On a non-IFRS basis, operating expenses were $120.6 million in Q4'17, up 28% from $94.4 million in Q4'16. • Research & development expense on an IFRS basis was $90.7 millionin Q4'17, compared with $60.8 million in Q4'16.Research & development expense on a non-IFRS basis was $66.1 million or 37.9% of revenue in Q4'17, compared with $48.3 million or 37.8% of revenue in Q4'16. • Marketing & salesexpense on an IFRS basis was $45.9 million in Q4'17, compared with $31.0 million in Q4'16.Marketing & salesexpense on a non-IFRS basis was $30.4 million or 17.5% of revenue in Q4'17, compared with $27.6 million or 21.6% of revenue in Q4'16.Marketing and sales expense as a percent of revenue was higher this quarter, as compared to Q3’17, as we held our European Summit, and also ran various marketing and advertising programs during the quarter. • General & administrative expense on an IFRS basis was $33.2 million in Q4'17, compared with $26.0 million in Q4'16.General & administrative expense on a non-IFRS basis was $24.1 million or 13.8% of revenue in Q4'17, compared with $18.5 million or 14.5% of revenue in Q4'16. Total employee headcount was 2,193 at the end of Q4'17, an increase of 115 employees since the end of Q3'17. The increase wasacross all major organizations, with the largest portion being in R&D. IFRS operating loss was $32.3 million for Q4'17, compared with IFRS operating loss of $11.4 million for Q4'16.Non-IFRS operating income was $24.3 million, or 14.0% of revenue for Q4'17, compared with $15.6 million or 12.2% of revenue for Q4'16. Net income IFRS net loss was $20.7 million, or ($0.09) per diluted share, for Q4'17 compared with IFRS net loss of $4.7 million, or ($0.02) per diluted share, for Q4'16. Non-IFRS net income was $21.6 million, or $0.09 per diluted share, for Q4'17 compared with $16.9 million, or $0.07 per diluted share, for Q4'16. Balance sheet Atlassian nished Q4'17 with $549.9 million in cash and cash equivalents and short-term investments. Free cash ow Free cash ow for Q4'17 was $44.5 million, comprised of cash ow from operations of $50.6 million, less capital expenditures of $6.1 million. Free cash ow marginfor Q4'17, dened as free cash ow as a percentage of revenue, was 25.5%. 11
Q4 FY2017 Fiscal year 2017 results Revenue Total revenue for scal 2017 was $619.9 million, up 36% year-over-year. Our revenue by line item for scal 2017 was as follows: • Subscription revenue was $242.1 million, up 65% year-over-year. • Maintenance revenue was $265.5 million, up 21% year-over-year. • License revenue was $74.6 million, up 14% year-over-year. • Other revenue was$37.7 million, up 45% year-over-year. Margins and operating expenses IFRS gross margin for fiscal 2017 was 80.8%, compared with 83.4% for fiscal 2016.Non-IFRS gross margin for fiscal 2017 was 84.2%, compared with 86.2% for fiscal 2016. On an IFRS basis, operating expenses were $563.9 million infiscal 2017, up 46% from $387.2 million in fiscal 2016.On a non-IFRS basis, operating expenses were $418.0 million in fiscal 2017, up 32% from $317.0 million in fiscal 2016. • Research & development expense on an IFRS basis was $310.2 million in fiscal 2017, compared with $208.3 million in fiscal 2016.Research & development expense on a non-IFRS basis was $230.8 million or 37.2% of revenue in fiscal 2017, compared with $172.6 million or 37.8% of revenue in fiscal 2016. • Marketing & sales expense on an IFRS basis was $134.9 million in fiscal 2017, compared with $93.4 million in fiscal 2016.Marketing & salesexpense on a non-IFRS basis was $102.2 million or 16.5% of revenue in fiscal 2017, compared with $81.4 million or 17.8% of revenue in fiscal 2016. • General & administrative expense on an IFRS basis was $118.8 million infiscal 2017, compared with $85.5 million in fiscal 2016. General & administrative expense on a non-IFRS basis was $85.0 million or 13.7% of revenue infiscal 2017, compared with $63.0 million or 13.8% of revenue in fiscal 2016. IFRS operating loss was $63.1 million forfiscal 2017, compared with IFRS operating loss of $5.9 million for fiscal 2016.Non-IFRS operating income was $104.2 million, or 16.8% of revenue forfiscal 2017, compared with $77.1 million or 16.9% of revenue for fiscal 2016. Net income IFRS net loss was $42.5 million, or ($0.19) per diluted share, forscal 2017compared with IFRS net income of $4.4 million, or $0.02 per diluted share, for scal 2016. Non-IFRS net income was $84.9 million, or $0.36 per diluted share, forscal 2017compared with $71.3 million, or $0.35 per diluted share, for scal 2016. Free cash ow Free cash ow forscal 2017was $183.3 million, comprised of cash ow from operations of $199.4 million, less capitalexpenditures of $16.1 million. Free cash ow margin for scal 2017 , dened as free cash ow as a percentage of revenue, was 29.6%. 12
Q4 FY2017 Financial targets for Q1'18 and full year scal 2018 13 Financial Targets IFRS Three Months Ending September 30, 2017 Fiscal Year Ending June 30, 2018 Revenue $184 million to $186 million $826 million to $834 million Gross margin 80% 80% Operating margin (18%) (16%) to (15%) Net loss per share - diluted ($0.11) ($0.46) to ($0.44) Weighted-avg. shares used in computing diluted IFRS net loss per share 228 million to 230 million 232 million to 234 million Non-IFRS Three Months Ending September 30, 2017 Fiscal Year Ending June 30, 2018 Gross margin 84% 84% Operating margin 17% 18% to 19% Net income per share - diluted $0.09 $0.42 to $0.44 Weighted-avg. shares used in computing diluted non-IFRS net income per share 242 million to 244 million 244 million to 246 million Free cash flow not provided $230 million to $240 million *Reects capital expenditures that are expected to be in the range of $25 million to $30 million. Our revenue target for scal 2018 includes approximately $20 million of revenue contribution from Trello, and also assumes that the Cloud pricing changes we recently announcedwill contribute low single-digit points of annual revenue growth. For our full year scal 2018 operating margin target of 18% to 19%, we expect our operating margin to relatively consistent across the rst three quarters and higher in the fourth quarter. For our free cash ow target, we expect capital expenditures to be higher in scal 2018 than scal 2017, due to investments in new leasedfacilities. Our targets for IFRS and non-IFRS net income and net income per diluted share assume our IFRS and non- IFRS tax rates for scal 2018 will be higher than scal 2017. This is attributable to our expected mix of income and deductions across geographies in scal 2018. This mix will not impact our expected cash taxes for scal 2018. Cloud product pricing changes In late June we announced new pricing for the Cloud versions of JIRA Software, JIRA Service Desk, JIRA Core, Conuence and their related Cloud add-ons.We are moving to a per-user pricing model for monthly subscriptions and a more granular tiering model for annual subscriptions. These changes allow our customers to more precisely pay for the number of users they need, and also aligns our pricing structure with industry standards. These pricing changes become eective on July 31, 2017 and the nancial impact of the changes is included in our scal 2018 revenue targets. *
Q4 FY2017 Atlassian Corporation Plc Consolidated statements of operations (U.S. $ and shares in thousands, except per share data) (unaudited) 14 Three Months Ended June 30, Fiscal Year Ended June 30, 2017 2016 2017 2016 Revenues: Subscription $ 72,502 $ 43,590 $ 242,128 $ 146,659 Maintenance 71,648 58,808 265,521 218,848 Perpetual license 19,359 17,911 74,565 65,487 Other 10,822 7,279 37,722 26,064 Total revenues 174,331 127,588 619,936 457,058 Cost of revenues (1) (2) 36,805 21,126 119,161 75,783 Gross profit 137,526 106,462 500,775 381,275 Operating expenses: Research and development (1) 90,691 60,830 310,168 208,306 Marketing and sales (1) (2) 45,887 30,980 134,908 93,391 General and administrative (1) 33,204 26,042 118,785 85,458 Total operating expenses 169,782 117,852 563,861 387,155 Operating loss (32,256) (11,390) (63,086) (5,880) Other non-operating income (expense), net (536) (342) (1,342) (1,072) Finance income 1,048 1,244 4,851 2,116 Finance costs (24) (9) (75) (71) Loss before income tax benefit (31,768) (10,497) (59,652) (4,907) Income tax benefit 11,060 5,795 17,148 9,280 Net income (loss) $ (20,708) $ (4,702) $ (42,504) $ 4,373 Net income (loss) per share attributable to ordinary shareholders: Basic $ (0.09) $ (0.02) $ (0.19) $ 0.02 Diluted $ (0.09) $ (0.02) $ (0.19) $ 0.02 Weighted-average shares outstanding used to compute net income (loss) per share attributable to ordinary shareholders: Basic 225,805 214,505 222,224 182,773 Diluted 225,805 214,505 222,224 193,481 (1) Amounts include share-based payment expense, as follows: Three Months Ended June 30, Fiscal Year Ended June 30, 2017 2016 2017 2016 Cost of revenues $ 2,159 $ 1,606 $ 6,856 $ 5,371 Research and development 24,598 12,542 79,384 35,735 Marketing and sales 5,455 3,385 17,395 11,945 General and administrative 9,125 7,553 33,813 22,429 (2) Amounts include amortization of acquired intangible assets, as follows: Three Months Ended June 30, Fiscal Year Ended June 30, 2017 2016 2017 2016 Cost of revenues $ 5,280 $ 1,909 $ 14,587 $ 7,405 Marketing and sales 9,988 21 15,269 86
Q4 FY2017 Atlassian Corporation Plc Consolidated statements of nancial position (U.S. $ in thousands) (unaudited) 15 June 30, 2017 June 30, 2016 Assets Current assets: Cash and cash equivalents $ 244,420 $ 259,709 Short-term investments 305,499 483,405 Trade receivables 26,807 15,233 Current tax receivables 12,445 6,013 Prepaid expenses and other current assets 23,317 14,178 Total current assets 612,488 778,538 Non-current assets: Property and equipment, net 41,173 58,762 Deferred tax assets 188,239 127,411 Goodwill 311,900 7,138 Intangible assets, net 120,789 13,577 Other non-current assets 9,269 5,547 Total non-current assets 671,370 212,435 Total assets $ 1,283,858 $ 990,973 Liabilities Current liabilities: Trade and other payables $ 73,192 $ 57,886 Current tax liabilities 2,207 286 Provisions 6,162 4,716 Deferred revenue 245,306 173,612 Total current liabilities 326,867 236,500 Non-current liabilities: Deferred tax liabilities 43,950 6,639 Provisions 3,333 2,170 Deferred revenue 10,691 7,456 Other non-current liabilities 4,969 6,545 Total non-current liabilities 62,943 22,810 Total liabilities $ 389,810 $ 259,310 Equity Share capital $ 22,726 $ 21,620 Share premium 450,959 441,734 Other capital reserves 437,346 244,335 Other components of equity 6,246 4,699 Retained earnings (accumulated deficit) (23,229) 19,275 Total equity $ 894,048 $ 731,663 Total liabilities and equity $ 1,283,858 $ 990,973
Q4 FY2017 Three Months Ended June 30, Fiscal Year Ended June 30, 2017 2016 2017 2016 Operating activities Loss before income tax $ (31,768) $ (10,497) $ (59,652) $ (4,907) Adjustments to reconcile loss before income tax to net cash provided by operating activities: Depreciation and amortization 23,766 6,342 61,546 21,926 Net loss (gain) on sale of investments and other assets 25 (33) (397) 165 Net unrealized foreign currency loss 92 160 93 152 Share-based payment expense 41,337 25,086 137,448 75,480 Interest income (1,048) (1,244) (4,851) (2,116) Changes in assets and liabilities: Trade receivables (295) (1,101) (10,208) (3,487) Prepaid expenses and other assets (2,788) (2,454) (5,647) (4,203) Trade and other payables, provisions and other non-current liabilities 1,639 5,647 10,947 11,622 Deferred revenue 23,252 14,979 72,604 44,503 Interest received 1,393 1,381 6,540 2,839 Income tax paid, net of refunds (5,008) (3,271) (9,042) (12,432) Net cash provided by operating activities 50,597 34,995 199,381 129,542 Investing activities Business combinations, net of cash acquired — — (381,090) — Purchases of property and equipment (5,208) (17,394) (15,129) (34,213) Purchases of intangible assets (925) — (925) — Proceeds from sale of other assets — — 342 — Purchases of investments (85,155) (133,639) (423,540) (569,067) Proceeds from maturities of investments 31,215 17,470 111,403 65,294 Proceeds from sales of investments 54,911 43,140 488,672 49,501 Increase in restricted cash (2) — (3,371) — Payment of deferred consideration — — (935) (1,025) Net cash used in investing activities (5,164) (90,423) (224,573) (489,510) Financing activities Proceeds from issuance of ordinary shares upon initial public offering, net of offering costs — — — 431,447 Proceeds from exercise of share options 2,035 2,466 9,438 6,732 Employee payroll taxes paid related to net share settlement of equity awards — — — (5,395) Net cash provided by financing activities 2,035 2,466 9,438 432,784 Effect of exchange rate changes on cash and cash equivalents 70 (223) 465 (201) Net increase (decrease) in cash and cash equivalents 47,538 (53,185) (15,289) 72,615 Cash and cash equivalents at beginning of period 196,882 312,894 259,709 187,094 Cash and cash equivalents at end of period $ 244,420 $ 259,709 $ 244,420 $ 259,709 Atlassian Corporation Plc Consolidated statements of cash ows (U.S. $ in thousands) (unaudited) 16
Q4 FY2017 Atlassian Corporation Plc Reconciliation of IFRS to non-IFRS results (U.S. $ and shares in thousands, except per share data) (unaudited) 17 Three Months Ended June 30, Fiscal Year Ended June 30, 2017 2016 2017 2016 Gross profit: IFRS gross profit $ 137,526 $ 106,462 $ 500,775 $ 381,275 Plus: Share-based payment expense 2,159 1,606 6,856 5,371 Plus: Amortization of acquired intangible assets 5,280 1,909 14,587 7,405 Non-IFRS gross profit $ 144,965 $ 109,977 $ 522,218 $ 394,051 Operating income: IFRS operating loss $ (32,256) $ (11,390) $ (63,086) $ (5,880) Plus: Share-based payment expense 41,337 25,086 137,448 75,480 Plus: Amortization of acquired intangible assets 15,268 1,930 29,856 7,491 Non-IFRS operating income $ 24,349 $ 15,626 $ 104,218 $ 77,091 Net income: IFRS net income (loss) $ (20,708) $ (4,702) $ (42,504) $ 4,373 Plus: Share-based payment expense 41,337 25,086 137,448 75,480 Plus: Amortization of acquired intangible assets 15,268 1,930 29,856 7,491 Less: Income tax effects and adjustments (14,277) (5,437) (39,864) (16,018) Non-IFRS net income $ 21,620 $ 16,877 $ 84,936 $ 71,326 Net income per share: IFRS net income (loss) per share - basic $ (0.09) $ (0.02) $ (0.19) $ 0.02 Plus: Share-based payment expense 0.18 0.12 0.62 0.42 Plus: Amortization of acquired intangible assets 0.07 0.01 0.13 0.04 Less: Income tax effects and adjustments (0.06) (0.03) (0.18) (0.09) Non-IFRS net income per share - basic $ 0.10 $ 0.08 $ 0.38 $ 0.39 IFRS net income (loss) per share - diluted $ (0.09) $ (0.02) $ (0.19) $ 0.02 Plus: Share-based payment expense 0.18 0.11 0.59 0.37 Plus: Amortization of acquired intangible assets 0.06 0.01 0.13 0.04 Less: Income tax effects and adjustments (0.06) (0.03) (0.17) (0.08) Non-IFRS net income per share - diluted $ 0.09 $ 0.07 $ 0.36 $ 0.35 Weighted-average diluted shares outstanding: Weighted-average shares used in computing diluted IFRS net income (loss) per share 225,805 214,505 222,224 193,481 Dilution from share options and RSUs (1) 13,596 17,417 13,833 — Dilution from share options and RSUs granted in periods prior to IPO (2) — — — 8,205 Weighted-average shares used in computing diluted non-IFRS net income per share 239,401 231,922 236,057 201,686 Free cash flow: IFRS net cash provided by operating activities $ 50,597 $ 34,995 $ 199,381 $ 129,542 Less: Capital expenditures (6,133) (17,394) (16,054) (34,213) Free cash flow $ 44,464 $ 17,601 $ 183,327 $ 95,329 (1) Theeffects of these dilutive securities were not included in the IFRS calculation of diluted net loss per share for the three months ended June 30, 2017 and 2016 and the fiscal year ended June 30, 2017 because the effect would have been anti-dilutive. (2) Gives effect to share options and RSUs in periods prior to our IPO for comparability.
Q4 FY2017 Atlassian Corporation Plc Reconciliation of IFRS to non-IFRS nancial targets (U.S. $) 18 Three Months Ending September 30, 2017 Fiscal Year Ending June 30, 2018 Revenue $184 million to $186 million $826 million to $834 million IFRS gross margin 80% 80% Share-based payment expense 1 1 Amortization of acquired intangible assets 3 3 Non-IFRS gross margin 84% 84% IFRS operating margin (18%) (16%) to (15%) Share-based payment expense 27 27 Amortization of acquired intangible assets 8 7 Non-IFRS operating margin 17% 18% to 19% IFRS net loss per share - diluted ($0.11) ($0.46) to ($0.44) Share-based payment expense 0.21 0.95 Amortization of acquired intangible assets 0.06 0.23 Income tax effects and adjustments (0.07) (0.30) Non-IFRS net income per share - diluted $0.09 $0.42 to $0.44 Weighted-average shares used in computing diluted IFRS net income per share 228 million to 230 million 232 million to 234 million Dilution from share options and RSUs (1) 14 million 12 million Weighted-average shares used in computing diluted non-IFRS net income per share 242 million to 244 million 244 million to 246 million IFRS net cash provided by operations $255 million to $270 million Less: Capital expenditures (25 million) to (30 million) Free cash flow $230 million to $240 million (1) The eect of these dilutive securities are not included in our IFRS calculation of diluted net loss per share for the three months ending September 30, 2017 and scal year ending June 30, 2018 because the eect would be anti-dilutive.
Q4 FY2017 Forward-looking statements This shareholder letter contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. All statements other than statements of historical fact could be deemed forward looking, including risks and uncertainties related to statements about our products, customers, technology and other key strategic areas, and our nancial targets such as revenue, share count and IFRS and non-IFRS nancial measures including gross margin, operating margin, net income per diluted share and free cash ow. We undertake no obligation to update any forward-looking statements made in this shareholder letter to reect events or circumstances after the date of this shareholder letter or to reect 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, our results could dier 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 aect our nancial results is included in lings we make with the Securities and Exchange Commission from time to time, including the section titled “Risk Factors” in our most recent Forms 20-F and 6-K (reporting our quarterly results). These documents are available on the SEC Filings section of the Investor Relations section of our website at: https:// investors.atlassian.com. About non-IFRS nancial measures Our reported results and nancial targets include certain non-IFRS nancial measures, including non-IFRS gross prot, non-IFRS operating income, non-IFRS net income, non-IFRS net income per diluted share, and free cash ow. Management believes that the use of these non- IFRS nancial measures provides consistency and comparability with our past nancial performance, facilitates period-to-period comparisons of our results of operations, and also facilitates comparisons with peer companies, many of which use similar non-IFRS or non-GAAP nancial measures to supplement their IFRS orGAAP 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 nancial information presented in accordance with IFRS, and may be dierent from non-IFRS or non-GAAP measures used by other companies. Our non-IFRS nancial measures reect adjustments based on the items below: • Non-IFRS gross prot. Excludes expenses related to share-based compensation and amortization of acquired intangible assets. • Non-IFRS operating income. Excludes expenses related to share-based compensation and amortization of acquired intangible assets. • Non-IFRS net income and non-IFRS net income per diluted share. Excludes expenses related to share based compensation, amortization of acquired intangible assets and related income tax eects on these items. • Free cash ow. Free cash ow is dened as net cash provided by operating activities less capital expenditures, which consists of purchases of property and equipment and acquired intangible assets. We exclude expenses related to share-based compensation, amortization of acquired intangible assets and the related income tax eects on these items from certain of our non-IFRS nancial measures as we believe this helps investors understand our operational performance. In addition, share-based compensation expense can be dicult to predict and varies from period to period and company to company due to diering valuation methodologies, subjective assumptions and the variety of equity instruments, as well as changes in stock price. Management believes that providing non-IFRS nancial measures that exclude share-based compensation expense, amortization of acquired intangible assets and the related income tax eects on these items allow for more meaningful comparisons between our operating results from period to period. 19
Q4 FY2017 We include the eect 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 eectiveness of our IPO. 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 to provide comparability across periods. Management considers free cash ow 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 nancial position. Management uses non-IFRS gross prot, non-IFRS operating income, non-IFRS net income, non-IFRS net income per diluted share and free cash ow: • As measures of operating performance, because these nancial 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 nancial performance of our business; • To evaluate the eectiveness of our business strategies; and • In communications with our board of directors concerning our nancial performance. The tables in this shareholder letter titled “Reconciliation of IFRS to non-IFRS results” and “Reconciliation of IFRS to non-IFRS nancial targets” provide reconciliations of non-IFRS nancial measures to the most recent directly comparable nancial measures calculated and presented in accordance with IFRS. We understand that although non-IFRS gross prot, non-IFRS operating income, non-IFRS net income, non-IFRS net income per diluted share and free cash ow 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. About Atlassian Atlassian unleashes the potential in every team. Our collaboration software helps teams organize, discuss and complete shared work. Teams at more than 89,000 large and small organizations — including Citigroup, eBay, CocaCola, Visa,BMW and NASA — use Atlassian's project tracking, content creation and sharing, real-time communication and service management products to work better together and deliver quality results on time. Learn more about products including JIRA Software, Conuence, HipChat, Trello, Bitbucket and JIRA Service Desk at https://atlassian.com. Investor relations contact: Ian Lee, [email protected] Media Contact: Paul Loeer, [email protected] 20