Key Points
- Revenue of $1.13 billion was up 20.5% year over year.
- Atlassian's net loss widened to $196.9 million, more than triple Q4 2023's total.
- Cloud revenue remains a strong performer, growing 34% year over year.
Atlassian (TEAM -1.84%), known for its software solutions for team collaboration and productivity, reported fiscal 2024 fourth-quarter earnings on Thursday that showed robust revenue growth as well as increased net losses.
Q4 revenue hit $1.13 billion, near the high end of management's guidance range and up 20.5% year over year. However, Atlassian reported a net loss of $196.9 million, considerably larger than the $59 million loss from the same quarter last year. growth of 31% fell short of management's guidance of 32%.
Overall, the highlighted some for the company.
| Financial Metric | Q4 FY2024 | Management's Guidance | Q4 FY2023 | Change (YOY) |
|---|---|---|---|---|
| Total revenue | $1.13 billion | $1.12 billion to $1.135 billion | $939.1 million | 20.5% |
| Cloud revenue growth | 31% | 32% | - | - |
| Operating margin (GAAP) | (6%) | (7%) | - | - |
| Net loss | $196.9 million | - | $59 million | - |
| Free cash flow | $413 million | - | $270.4 million | 52.7% |
Source: Atlassian. Note: Management guidance was provided on April 25, 2024. YOY = Year over year. GAAP = generally accepted accounting principles.
Overview of Atlassian's Business
Atlassian is a leading provider of collaboration and productivity software for teams worldwide. Its key products include Jira, Confluence, and Trello. Atlassian uses a high-velocity, low-friction distribution model that focuses on self-service and online transactions to reduce customer acquisition costs.
Recently, Atlassian has concentrated on enhancing its product offerings to include and expand its market reach. The company channels significant resources into research and development (R&D) to maintain a robust pipeline of products.
Q4 Financial and Operational Highlights
Subscription revenue grew by 34% year over year to $1.07 billion, reflecting solid adoption of the company's subscription-based models.
Gross margins were more mixed. GAAP gross profit margin was 81%, meeting management's guidance, while the non-GAAP gross margin of 83.5% matched guidance. Meanwhile, the company's GAAP operating margin was (6%), slightly better than the (7%) forecast, and the non-GAAP operating margin stood at 20%, exceeding the forecast of 18.5%.
The huge year-over-year rise in Q4 net losses was attributed to higher expenses, including stock-based compensation and R&D investments. Operating cash flow, however, was strong at $426 million, and free cash flow increased to $413 million from $270.4 million in the previous year, showcasing robust cash generation capabilities despite the rising costs.
Product innovation was a highlight for the quarter. Atlassian released "Rovo," a human-AI technology, and over 30 new Atlassian Intelligence capabilities. These innovations underscore Atlassian's commitment to maintaining a competitive edge through continuous technological advancements.
Atlassian’s market reach also expanded. The company now serves over 300,000 customers, with a 48% year-over-year increase in the number of customers spending more than $1 million annually. Additionally, the number of customers with over $10,000 in Cloud annual recurring revenue (ARR) rose by 18%, reaching 45,842.
Looking Ahead
management's guidance for fiscal 2025's Q1 calls for total revenue between $1.149 billion and $1.157 billion. For the full fiscal year 2025, revenue is projected to grow by 16%, with Cloud revenue anticipated to increase by approximately 27% in Q1 and around 23% for the year. Cloud revenue guidance is down from prior management projections.
Operating margins are expected to remain a focal point. Management predicts GAAP operating margins will be around (6%) and non-GAAP margins at 21.5% for the full fiscal 2025. Atlassian's strategic focus will remain on expanding AI capabilities, accelerating cloud transitions, and maintaining an efficient go-to-market approach. Investors should monitor these developments closely in the coming quarters to gauge their impact on the company’s performance.
