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Atlassian (TEAM - Free Report) is a $50 billion provider of a suite of cloud-based software solutions that help organizations collaborate and manage their workforce such that the teams communicate and work better together.
Initially, Atlassian's products, like JIRA, were designed to help software developer teams communicate, collaborate, and manage the design and delivery cycle of software, similar to the ubiquitous Slack app that Salesforce (CRM) acquired last year.
Over the years, uses of Atlassian's solutions have expanded virally to teams across diverse industries.
EPS Estimates Drop After Analyst Reactions
Atlassian reported fourth-quarter fiscal 2022 non-IFRS earnings per share (EPS) of 27 cents beating the Zacks Consensus Estimate of 26 cents. The figure increased 12.5% from the year-ago quarter’s non-IFRS earnings of 24 cents per share.
Atlassian’s fiscal fourth-quarter revenues surged 36% to $760 million and surpassed the consensus mark of $717.8 million. The company witnessed solid demand for its cloud-based products, primarily led by smaller customers. Meanwhile, the cloud migration momentum continued for larger clients.
Since first-quarter fiscal 2022, Atlassian modified its revenue reporting style. Based on deployment options, the company started reporting revenues under four segments — cloud, data center, server, and marketplace and services. Also, it started excluding Trello single-user accounts while updating its active customer count from the first quarter of fiscal 2022 onward.
During the quarter under review reported in early August, cloud revenues were $434 million, indicating 55% year-over-year growth. Meanwhile, revenues from the data center surged 60% to $158.9 million. Marketplace and services revenues were $49.3 million, reflecting a 24% year-over-year downfall. Revenues from Server declined 16% to $117.6 million.
The company’s non-IFRS gross profit climbed 35.9% year over year to $644 million. Non-IFRS gross margin contracted 10 basis points (bps) to 84.8% during the quarter.
Atlassian’s non-IFRS operating income increased 14.8% year over year to $108.9 million, while its operating margin contracted 300 bps to 14%.
In late October, Mizuho analyst Gregg Moskowitz lowered the firm's price target on Atlassian to $320 from $360 and kept a Buy rating on the shares. Software stocks "remain besieged" by high inflation, rising yields, supply chain constraints, currency headwinds, and the ongoing Russia-Ukraine war, the analyst told investors in a research note.
While fundamental checks "have been healthy overall," they have "again picked up indications of uneven demand," he noted. The analyst cut price targets but says a lot of risk is now priced into software shares.
Fiscal 2022 Highlights
Atlassian’s fiscal 2022 revenues grew 34% year over year to $2.8 billion and surpassed the Zacks Consensus Estimate of $2.76 billion. The company reported non-IFRS earnings of $1.69 per share for the fiscal, which matched the Zacks Consensus Estimate but outpaced the year-ago quarter’s earnings of $1.40 per share.
Balance Sheet
The company ended the fourth quarter of fiscal 2022 with cash and cash equivalents and short-term investments of $1.46 billion, up from $1.28 billion at the end of the third quarter.
During the fourth quarter, TEAM generated operating and free cash flow of $230 million and $194.7 million, respectively. In fiscal 2022, the company generated operating and free cash flow of $883.5 million and $763.8 million, respectively.
TEAM Outlook
For the first quarter of fiscal 2023, the company anticipates revenues between $795 million and $810 million. Atlassian’s fiscal first-quarter revenue guidance is higher than the Zacks Consensus Estimate of $761.9 million.
Non-IFRS gross margin is estimated to be 84-85%. Non-IFRS operating margin is projected to be approximately 18%. The company anticipates reporting non-IFRS EPS of 37 to 38 cents approximately. The Zacks Consensus Estimate for fiscal first-quarter earnings is pegged at 33 cents per share.
Quarter Details
During the fourth quarter of fiscal 2022, Atlassian added 8,048 net new customers, bringing the total count to 242,623 customers on an active subscription or maintenance agreement basis. A large number of customers are opting for cloud offerings amid the ongoing cloud migration. Such new additions and increased pricing on certain products contributed to the company’s quarterly revenues.
Segment-wise, Subscription revenues surged 55% year over year to $597.3 million. Sales from the Maintenance business decreased 11% year over year to $117.1 million, while Other revenues (which included perpetual license revenues) jumped 6% year over year to $45.4 million.
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Bear of the Day: Atlassian (TEAM)
Atlassian (TEAM - Free Report) is a $50 billion provider of a suite of cloud-based software solutions that help organizations collaborate and manage their workforce such that the teams communicate and work better together.
Initially, Atlassian's products, like JIRA, were designed to help software developer teams communicate, collaborate, and manage the design and delivery cycle of software, similar to the ubiquitous Slack app that Salesforce (CRM) acquired last year.
Over the years, uses of Atlassian's solutions have expanded virally to teams across diverse industries.
EPS Estimates Drop After Analyst Reactions
Atlassian reported fourth-quarter fiscal 2022 non-IFRS earnings per share (EPS) of 27 cents beating the Zacks Consensus Estimate of 26 cents. The figure increased 12.5% from the year-ago quarter’s non-IFRS earnings of 24 cents per share.
Atlassian’s fiscal fourth-quarter revenues surged 36% to $760 million and surpassed the consensus mark of $717.8 million. The company witnessed solid demand for its cloud-based products, primarily led by smaller customers. Meanwhile, the cloud migration momentum continued for larger clients.
Since first-quarter fiscal 2022, Atlassian modified its revenue reporting style. Based on deployment options, the company started reporting revenues under four segments — cloud, data center, server, and marketplace and services. Also, it started excluding Trello single-user accounts while updating its active customer count from the first quarter of fiscal 2022 onward.
During the quarter under review reported in early August, cloud revenues were $434 million, indicating 55% year-over-year growth. Meanwhile, revenues from the data center surged 60% to $158.9 million. Marketplace and services revenues were $49.3 million, reflecting a 24% year-over-year downfall. Revenues from Server declined 16% to $117.6 million.
The company’s non-IFRS gross profit climbed 35.9% year over year to $644 million. Non-IFRS gross margin contracted 10 basis points (bps) to 84.8% during the quarter.
Atlassian’s non-IFRS operating income increased 14.8% year over year to $108.9 million, while its operating margin contracted 300 bps to 14%.
In late October, Mizuho analyst Gregg Moskowitz lowered the firm's price target on Atlassian to $320 from $360 and kept a Buy rating on the shares. Software stocks "remain besieged" by high inflation, rising yields, supply chain constraints, currency headwinds, and the ongoing Russia-Ukraine war, the analyst told investors in a research note.
While fundamental checks "have been healthy overall," they have "again picked up indications of uneven demand," he noted. The analyst cut price targets but says a lot of risk is now priced into software shares.
Fiscal 2022 Highlights
Atlassian’s fiscal 2022 revenues grew 34% year over year to $2.8 billion and surpassed the Zacks Consensus Estimate of $2.76 billion. The company reported non-IFRS earnings of $1.69 per share for the fiscal, which matched the Zacks Consensus Estimate but outpaced the year-ago quarter’s earnings of $1.40 per share.
Balance Sheet
The company ended the fourth quarter of fiscal 2022 with cash and cash equivalents and short-term investments of $1.46 billion, up from $1.28 billion at the end of the third quarter.
During the fourth quarter, TEAM generated operating and free cash flow of $230 million and $194.7 million, respectively. In fiscal 2022, the company generated operating and free cash flow of $883.5 million and $763.8 million, respectively.
TEAM Outlook
For the first quarter of fiscal 2023, the company anticipates revenues between $795 million and $810 million. Atlassian’s fiscal first-quarter revenue guidance is higher than the Zacks Consensus Estimate of $761.9 million.
Non-IFRS gross margin is estimated to be 84-85%. Non-IFRS operating margin is projected to be approximately 18%. The company anticipates reporting non-IFRS EPS of 37 to 38 cents approximately. The Zacks Consensus Estimate for fiscal first-quarter earnings is pegged at 33 cents per share.
Quarter Details
During the fourth quarter of fiscal 2022, Atlassian added 8,048 net new customers, bringing the total count to 242,623 customers on an active subscription or maintenance agreement basis. A large number of customers are opting for cloud offerings amid the ongoing cloud migration. Such new additions and increased pricing on certain products contributed to the company’s quarterly revenues.
Segment-wise, Subscription revenues surged 55% year over year to $597.3 million. Sales from the Maintenance business decreased 11% year over year to $117.1 million, while Other revenues (which included perpetual license revenues) jumped 6% year over year to $45.4 million.