Atlassian (TEAM)

Earnings after the bell for TEAM today.

Atlassian is a global software company helping teams around the world unleash their potential. We build tools that help teams collaborate, build, and create together.

Revenue growth (%)

2017 34 36 36 37
2018 42 43 40 40
2019 38 39

FCF $ (% of revenue)

2015 66 (21%)
2016 95 (21%)
2017 183 (29%)
2018 281 (32%)

2019G 370-380 (32%)

My main concern with TEAM, are they going to run out of customers?

They have about 138,000 customers last quarter.

During the investor breakout from Summit 19 (TEAM’s yearly user conference last week), they think they have potential for 1 million customers.

A couple of other things I picked up this week:

In rereading the last quarterly letter, they talk about the purchase of Opsgenie, and how they are going to role it out, using their sales model, to all their current customers.

Will be interesting to see how that affects PagerDuty.

PagerDuty was a sponsor of the SUMMIT19 conference.

The name Atlassian comes from the greek god Atlas.

TEAM never took invested capital before going public.

A really good history of the company, before IPO, can be found on the ACQUIRED podcast, a few seasons back.

ACQUIRED has a great review pre IPO of Square.

Jim (long TEAM)

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In July 2010, Atlassian raised $60 million in venture capital from Accel Partners.

As to running out of customers… there is literally almost no development team on the planet today that does not use at least on Atlassian product.

So they will run out of customers when folks stop developing software.

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Not according to the podcast. Accel bought shares from existing shareholders (employees), no money went to the company. The company was bootstrapped all the way.

One hour here after closing and after hours down -10%

I will mention three products that they have: JIRA, Confluence, Trello. All of these have potential that goes way beyond IT related use cases. Once TEAM will run out of IT customers, there is huge potential in different verticals.

JIRA can be used by business team to support different needs. E.g. we are using JIRA as an approval flow for business process changes. Our legal (!) team is using JIRA to track the progress on contracts. Sure, it might need some tweaks to make it more user-friendly, once you have the backend ready the frontend is easier to deliver. (Note: this a reason why I did not put money in SMAR as I see it only as a fancy GUI that TEAM can easily replicate)

Confluence is our main tool for documentation. Not only for the documentation of processes, procedures, policies, but it also works as a PM tracking tool thanks to all the extensions that are available.

I have colleagues who are using Trello without having any idea it can be used in agile IT development.

I believe that once TEAM will be better at marketing the different use cases, it will be only natural for many companies to expand the use since there is a good chance JIRA is already being used for dev/support.

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I have used JIRA and Confluence for years. Many sw companies and technology pretenders (financial services) use it, and obviously it’s growing.

Their cloud version of these products is very good, and like most good Saas software it’s quite economical to have them support it and enhance it incrementally in the cloud, vs having it installed on premise.

The con is, there’s so much competition in their space for project management tools (agile and waterfall). Microsoft (TFS/Visual, Project, Teams), Version1, Rally (owned by CA), KeyedIn, etc etc etc. The barriers to switching are minimal - it’s a matter of exporting backlogs and content to JSON or CSV and importing it to another tool to get started. That said, there is enterprise inertia acting against switching.

FC

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My main concern with TEAM, are they going to run out of customers?

From SA: TEAM added 5,803 net new customers this quarter. Operating margin 19% vs. 17% last year. Guidance was $0.16 EPS instead of $0.19 expected. FY19 guidance has revenue from $1.205B to $1.207B (consensus: $1.2B) and EPS of about $0.82 (consensus: $0.81)

So good growth, weak guidance = stock down ~9% AH

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I think Atlassian is a great company - growing near 40%, profitable. As Zeke said, there is hardly a dev team on the planet that doesn’t use something they do. They have a generous free tier, but also great cloud hosted products that it’s easy to step into the revenue tier on.

They had a great quarter and fell on guidance. I’ve been waiting for an entry point - this was it, I jumped in.

By the way, they are an investor in ZM and made a few bucks today :wink:

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