It's been something of a roller-coaster ride for investors in Atlassian (NASDAQ:TEAM). In the little more than three years since its public debut, the collaborative software maker has quadrupled in value -- but those gains haven't all come in a straight line. During the year-end market malaise that hit stocks to close out 2018, Atlassian lost nearly a third of its value, but has since come roaring back, recently touching all-time highs.
The company will have another opportunity to make its case to investors, as Atlassian is scheduled to report the financial results of its recently completed fiscal third quarter after the market closes on Wednesday, April 17. Let's recap the company's second-quarter performance and look at recent developments to see if it provides any insight into what investors can expect when Atlassian reports earnings.
Growing like a weed
For the fiscal second quarter, which ended Dec. 31, Atlassian reported revenue of $299 million, up 39% from the prior-year quarter. This soared past the company's forecast and analysts' consensus estimates, which came in at $289 million and $288 million, respectively. This was also particularly impressive in light of the fact that it came on top of a 43% year-over-year jump in Q2 18. The most significant gains came from subscription revenue, which grew to $153 million, up 56% from the year-ago quarter, while maintenance revenue increased 21% to $97 million.
It wasn't just revenue that posted remarkable growth. Net income of $62 million increased by 93% year over year, resulting in adjusted earnings per share of $0.25, nearly double the $0.13 achieved in the year-ago quarter. This performance got a boost from a 25% adjusted operating margin, a 300-basis-point increase from this time last year.
Operational metrics were robust as well, as the company added 6,551 new customers, bringing the running total to 138,235.
Just last month, Atlassian announced that it will acquire enterprise agile planning software provider AgileCraft for $166 million. The acquisition closed early this month. AgileCraft creates software that helps businesses plan for and track strategic projects by providing insight into potential bottlenecks and providing risk assessment. AgileCraft is already tightly integrated into Atlassian's Jira software. For fiscal 2019, the acquisition is expected to add revenue of about $1 million to $2 million.
In the announcement, Atlassian's co-founder and co-CEO, Scott Farquhar, said: "Many leaders are still making mission-critical decisions using their instincts and best guesses instead of data. ... With AgileCraft joining Atlassian, we believe we're the best company to help executives align the work across their organization, providing an all-encompassing view that connects strategy, work, and outcomes."
What the quarter may hold
For the third quarter, Atlassian is forecasting revenue in a range of $303 million to $305 million, which would represent year-over-year growth of 36% at the midpoint of its guidance. That performance is expected to result in a loss per share of $0.14, and adjusted earnings per share of $0.18. The company is also anticipating gross margin of about 82% and an operating margin of minus-10%.
To put this outlook into perspective of the sentiment on Wall Street, analysts' consensus estimates are calling for revenue of $304.65 million and adjusted earnings per share of $0.18, both in line with Atlassian's projections.
Atlassian's stock has more than doubled over the past year and trades at more than 22 times its forward price-to-sales ratio, setting the stage for a showdown if it fails to deliver the goods. That said, Atlassian has made a practice of exceeding expectations, and there isn't any evidence to suggest things will be any different when the company reports earnings on Wednesday, April 17.