IT project management software company, Atlassian (NASDAQ:TEAM) announced better-than-expected results in Q4 FY2023, with revenue up 23.6% year on year to $939.1 million. The company also expects next quarter's revenue to be around $960 million, roughly in line with analysts' estimates. Atlassian made a GAAP loss of $59 million, improving from its loss of $105.5 million in the same quarter last year.
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Atlassian (TEAM) Q4 FY2023 Highlights:
- Revenue: $939.1 million vs analyst estimates of $916 million (2.52% beat)
- EPS (non-GAAP): $0.57 vs analyst estimates of $0.45 (26.7% beat)
- Revenue Guidance for Q1 2024 is $960 million at the midpoint, above analyst estimates of $951 million
- Free Cash Flow of $270.4 million, down 22.7% from the previous quarter
- Customers: 262,337, up from 259,775 in the previous quarter
- Gross Margin (GAAP): 81.9%, in line with the same quarter last year
“We closed out a challenging year with strong momentum in cloud migrations, enterprise sales, and within the ITSM market, reinforcing our conviction in our strategy which has positioned us well for fiscal year 2024 and beyond,” said Scott Farquhar, Atlassian’s co-founder and co-CEO.
Founded by Australian co-CEOs Mike Cannon-Brookes and Scott Farquhar in 2002, Atlassian (NASDAQ:TEAM) provides software as a service that makes it easier for large teams of software developers to manage projects, especially in software development.
The future of work requires teams to collaborate across departments and remote offices. Project management software is both driving this change and benefiting from it. While the trend of collaborative work management has been strong for a while, the Covid pandemic has definitively accelerated the demand for tools that allow work to be done remotely.
Sales Growth
As you can see below, Atlassian's revenue growth has been very strong over the last two years, growing from $559.5 million in Q4 FY2021 to $939.1 million this quarter.
This quarter, Atlassian's quarterly revenue was once again up a very solid 23.6% year on year. However, its growth did slow down compared to last quarter as the company's revenue increased by just $23.6 million in Q4 compared to $42.7 million in Q3 2023. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.
Next quarter's guidance suggests that Atlassian is expecting revenue to grow 18.9% year on year to $960 million, slowing down from the 31.5% year-on-year increase it recorded in the same quarter last year.
The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.
Customer Growth
Atlassian reported 262,337 customers at the end of the quarter, an increase of 2,562 from the previous quarter. That's a little slower customer growth than what we've observed in past quarters, suggesting that the company's customer acquisition momentum is slowing.
Key Takeaways from Atlassian's Q4 Results
Sporting a market capitalization of $43.6 billion, more than $2.11 billion in cash on hand, and positive free cash flow over the last 12 months, we believe that Atlassian is attractively positioned to invest in growth.
It was good to see Atlassian beat analysts' revenue and operating profit expectations this quarter. We were also glad that next quarter's revenue guidance came in higher than Wall Street's expectations. The company also gave fiscal 2024 guidance, with calling for solid cloud revenue growth and slightly higher-than-expected operating margins. Overall, the results were solid. The stock is up 12.3% after reporting and currently trades at $190.5 per share.
Atlassian may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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The author has no position in any of the stocks mentioned in this report.