Please ensure Javascript is enabled for purposes of website accessibility

Atlassian's Results Sailed on the Growth of Its Cloud Customers

By Brian Withers and Brian Stoffel - Jun 3, 2021 at 7:05AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

But its migration to a cloud-centric model may have rough waters ahead.

Founded in the early 2000s, Atlassian (TEAM 0.39%) started before cloud computing became a popular way to use software products. As a result, the company has many of its older customers using its on-premise server-based products. But this is changing. On a Fool Live episode recorded on May 12, Fool contributor Brian Stoffel covers the most recent quarterly results and explains why going forward, things might be a little choppy for this team collaboration software specialist.

Brian Stoffel: I will go first. First company we're covering is Atlassian, the ticker symbol is TEAM as in "team." This company makes tools that make it easier for companies to collaborate. Obviously, that was becoming more important for a while, became monstrously more important when the pandemic hit.

The interesting thing that's going on here is that the company was started in 2003 [note: the company was started in 2002] so a lot of the software that they have for their legacy, their older customers has been on-premise. Those customers like having it on-premise, but they announced that everybody has to move to the cloud, to migrate to the cloud over the next couple of years. The idea was that this is going to create some lumpy returns.

Well, when the company both pre-announced and then announced their results for the calendar first quarter of the year, the results were really great. Revenue was up 38% but subscription revenue was up 43%. Free cash flow over the last nine months, because that's their fiscal year, we're three quarters in, is up 47%, and their customer count was up 24%.

Their outlook is calling for 21% revenue growth. I am guessing that that's sandbagging, but the thing that we've got to keep in mind is because of this kind of choppy migration to the cloud, the revenue growth rate is going to modulate up and down a little bit over the coming quarters. All in all, I think it was a really solid quarter and it continues to be a company that I own and have very high conviction on.

Brian Stoffel owns shares of Atlassian. Brian Withers owns shares of Atlassian. The Motley Fool owns shares of and recommends Atlassian. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Atlassian Corporation Plc Stock Quote
Atlassian Corporation Plc
TEAM
$287.31 (0.39%) $1.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
390%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/11/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.