Atlassian Corp
For the period ended Sep 30, 2024. Filed Nov 1, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 1, 2024
TEAM$153.68-16.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-04-26.
0001650372-24-000016
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-01.
0001650372-24-000056
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 139 previous paragraphs and 114 current paragraphs.
54 unchanged; 37 reworded; 23 added; 43 removed; 5 previous and 0 current paragraphs rearranged.
Tables are not compared: 28 previous and 16 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
The Atlassian System of Work is our philosophy of how technology-driven organizations should work, connecting technology and business teams to accelerate progress and maximize team impact. Through a connected portfolio of products with discrete value propositions that are built on the Atlassian platform and data model, the Atlassian System of Work helps customers of any size align work to goals, plan and track work, and unleash their organization's collective knowledge.
Current report
Cost of Revenues
Current report
Operating Expenses
Current report
Research and Development
Current report
Marketing and Sales
Current report
General and Administrative
Current report
Other revenues decreased $70.0 million, or 56%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease in other revenues was primarily attributable to a decrease of $75.5 million in maintenance revenue due to the end of support for our Server offerings.
Current report
Cost of Revenues
Current report
Operating Expenses
Current report
Research and Development
Current report
Marketing and Sales
Current report
General and Administrative
Current report
Interest expense decreased $1.7 million, or 18% in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was primarily attributable to a decrease in interest expense on our outstanding debt as a result of the issuance of the Notes (as defined below), and repayment of the Term Loan (as defined below) in the fourth quarter of fiscal year 2024.
Current report
Provision for income taxes increased $72.7 million for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The increase was primarily attributable to the change in the mix of earnings and losses in foreign jurisdictions. See Note 14, “Income Taxes,” of the notes to our condensed consolidated financial statements for additional information.
Current report
We recognize the tax benefit of an uncertain tax position only if we conclude it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits. The tax benefit recognized is measured as the largest amount of benefit which is greater than 50 percent likely to be realized upon settlement with the taxing authority. We believe we have provided adequate reserves for income tax uncertainties in all open tax years. Based on the information currently available, we do not anticipate a material change in unrecognized tax benefits in the next 12 months.
Current report
The Organization for Economic Co-operation and Development introduced a framework for a global minimum corporate income tax of 15% known as the Global Anti-Base Erosion rules. This legislation has been enacted in certain jurisdictions where we operate and is effective for our fiscal year 2025. As of September 30, 2024, the global minimum tax does not have a significant impact on our financial statements. As additional jurisdictions enact legislation, transitional rules lapse, and other provisions of the global minimum tax legislation become effective, our effective tax rate and cash tax payments may increase in future years.
Current report
Our primary source of cash is through collections from our customers. Our primary uses of cash from operating activities are general business expenses including employment expenses, cloud platform and other infrastructure services, income taxes, professional services fees, marketing expenses, software expenses, and facility expenses.
Current report
Net cash provided by operating activities decreased by $86.5 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The net decrease was primarily attributable to an increase in cash paid to employees, including higher annual employee bonus payments, cash paid to suppliers, and cash used to pay income taxes, partially offset by an increase in cash received from customers.
Current report
As of September 30, 2024, we had $500.0 million aggregate principal amount of 5.250% senior notes due 2029 (the “2029 Notes”) and $500.0 million aggregate principal amount of 5.500% senior notes due 2034 (the “2034 Notes,” and together with the 2029 Notes, the “Notes”). The 2029 Notes and the 2034 Notes will mature on May 15, 2029 and May 15, 2034, respectively. Interest on the Notes will be paid semi-annually in arrears on May 15 and November 15 of each year, starting from November 15, 2024.
Current report
In August 2024, our prior credit facility was amended and restated to provide for a $750 million senior unsecured revolving credit facility (the “2024 Credit Facility”). We may repay outstanding loans under the 2024 Credit Facility at any time, without premium or penalty, and we have an option to request an increase of $250 million in certain circumstances. The 2024 Credit Facility replaced our prior credit facility entered into in October 2020, which provided for a $1 billion senior unsecured delayed-draw term loan facility (the “Term Loan”) and a $500 million senior unsecured revolving credit facility. Refer to Note 9, “Debt,” to our condensed consolidated financial statements for additional information.
Current report
Share Repurchase Programs
Current report
In January 2023, the Board of Directors authorized a program to repurchase up to $1.0 billion of our outstanding Class A Common Stock (the “2023 Repurchase Program”). In September 2024, the Board of Directors authorized a new program under which we may repurchase up to an additional $1.5 billion of our outstanding Class A Common Stock (the “2024 Repurchase Program” and, together with the 2023 Repurchase Program, the “Repurchase Programs”). The 2024 Repurchase Program will commence following completion of the 2023 Repurchase Program. The Share Repurchase Programs do not have a fixed expiration date, may be suspended or discontinued at any time, and do not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares.
Current report
Other Future Obligations
Removed paragraphs (43)
Previous report
Our products help teams plan, track and execute shared work — delivering superior outcomes for their organizations.
Previous report
To reach this expansive market, we primarily distribute and sell our products online where our customers can get started in minutes without the need for assistance. We focus on enabling a self-service, low-friction model that makes it easy for customers to try, adopt and use our products. By making our products simple, powerful, affordable and easy to adopt, we generate demand from word-of-mouth and viral expansion within organizations.
Previous report
Maintenance provides our customers with access to unspecified future updates, upgrades and enhancements and technical product support on an if-and-when-available basis for perpetual license products purchased and operated by our customers on their premises (“Server offerings”). We no longer sell perpetual licenses or upgrades for our Server offerings and generally ended maintenance and support for these Server offerings in February 2024, subject to limited exceptions for some enterprise customers that have signed an agreement for our Cloud offerings. We have helped our customers transition to other versions of our products with our migration tools and programs, customer support teams, and pricing and packaging options. Maintenance revenue no longer constitutes a material portion of our recurring revenue base after February 2024. In each of the past three fiscal years, more than 80% of our total revenues have been of a recurring nature from subscription and maintenance fees.
Previous report
On November 30, 2023, we acquired 100% of the outstanding equity of Loom, Inc. (“Loom”), an asynchronous video messaging platform that helps users communicate through instantly shareable videos. We believe the acquisition of Loom will further elevate the collaboration experience for our customers.
Previous report
Free cash flow increased by $205.2 million during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The increase in free cash flow was primarily attributable to an increase in net cash provided by operating activities, partially offset by an increase in capital expenditures. The increase in net cash provided by operating activities was primarily attributable to an increase in cash received from customers, partially offset by an increase in cash paid to suppliers and employees and cash used to pay income taxes.
Previous report
Maintenance Revenues
Previous report
Maintenance revenues represent fees earned from providing customers unspecified future updates, upgrades and enhancements and technical product support for our Server offerings on an if-and-when-available basis. Maintenance revenue is recognized ratably over the term of the support period.
Previous report
Net Income (Loss)
Previous report
We earned a net income during the three months ended March 31, 2024, primarily attributable to strong growth in subscription revenues. We incurred a net loss during the nine months ended March 31, 2024, primarily attributable to continued investments, particularly in research and development personnel to drive continued product innovation, as well as infrastructure to support our Cloud offerings.
Previous report
Business Combinations
Previous report
The allocation of the purchase price in a business combination requires management to make significant estimates in determining the fair value of acquired assets and assumed liabilities, especially with respect to intangible assets. The excess of the purchase price in a business combination over the fair value of these tangible and intangible assets acquired and liabilities assumed is recorded as goodwill. Critical assumptions used to estimate the fair value of intangible assets include revenue growth rate, technology migration curve and discount rate. These assumptions are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. We evaluate these estimates and assumptions as new information is obtained and may record adjustments to the fair value of the tangible and intangible assets acquired and liabilities assumed but not later than one year from the acquisition date.
Previous report
Maintenance revenues decreased $64.7 million, or 69%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. We no longer offer upgrades to perpetual licenses beginning February 2022, and generally ended maintenance and support for these products in February 2024.
Previous report
Other revenues increased $27.7 million, or 46%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase in other revenues was primarily attributable to an increase of $25.4 million in revenue from sales of third-party apps through our Atlassian Marketplace.
Previous report
Marketing and sales expenses increased $2.9 million, or 1%, for thethree months ended March 31, 2024, compared to thethree months ended March 31, 2023. The overall increase was primarily attributable to an increase of $20.5 million in compensation expenses for employees, an increase of$4.3 million in advertising and marketing event expenses, and slight increases in contractor costs and professional service fees, partially offset byrestructuring charges of $24.2 million recorded during the three months ended March 31, 2023.
Previous report
General and administrative expenses decreased $7.5 million, or (5)% in thethree months ended March 31, 2024 compared to thethree months ended March 31, 2023. The overall decrease was primarily attributable to restructuring charges of $21.1 million recorded during the three months ended March 31, 2023, partially offset by an increase of $8.1 million in compensation expenses for employees, and slight increases across several other areas.
Previous report
Interest expense increased $0.5 million, or 6% in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily attributable to an increase in interest expense from our Credit Facility (as defined below) as a result of increased interest rates.
Previous report
We reported an income tax provision of $7.0 million on pretax income of $19.8 million for the three months ended March 31, 2024, as compared to an income tax provision of $53.6 million on pretax loss of $155.4 million for the three months ended March 31, 2023. The decrease in the income tax provision for the three months ended March 31, 2024 was primarily attributable to a decrease in the recognition of reserves for uncertain tax positions.
Previous report
Our effective tax rate substantially differed from the U.S. statutory income tax rate of 21.0% primarily attributable to non-deductible stock-based compensation in certain foreign jurisdictions, full valuation allowances in the U.S. and Australia, research and development tax credits and incentives, the recognition of reserves for uncertain tax positions, and different tax rates in foreign jurisdictions such as Australia. See Note 15, “Income Taxes,” to the notes to our condensed consolidated financial statements for additional information.
Previous report
Nine Months Ended March 31, 2024 and 2023
Previous report
Revenues
Previous report
Subscription revenues increased $732.7 million, or 35%, in the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. The increase in subscription revenues was primarily attributable to additional subscriptions from our existing customer base, and customers migrating to cloud-based subscription services and term-based licenses for our Data Center products.
Previous report
Maintenance revenues decreased $136.6 million, or 44%, in the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. We no longer offer upgrades to perpetual licenses beginning February 2022, and generally ended maintenance and support for these products in February 2024.
Previous report
Other revenues increased $35.4 million, or 22%, in the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. The increase in other revenues was primarily attributable to an increase of $34.0 million in revenue from sales of third-party apps through our Atlassian Marketplace.
Previous report
Research and development expenses increased $200.0 million, or 14%, in the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. The overall increase was primarily attributable to an increase of $254.0 million in compensation expenses for employees (which includes an increase of $87.2 million instock-based compensation), partially offset byrestructuring charges of$43.3 million recorded during the nine months ended March 31, 2023, anda decrease of $30.4 million in contractor costs and professional services fees.
Previous report
General and administrative expenses decreased $5.9 million, or (1)%, in thenine months ended March 31, 2024 compared to thenine months ended March 31, 2023. The overall decrease was primarily attributable to restructuring charges of$21.1 million recorded during the nine months ended March 31, 2023, a decrease of $6.9 million in recruitment cost, and a decrease of $5.8 millionin contractor costs and professional services, offset byan increase of$31.6 million in compensation expenses for employees (which includes an increase of$13.4 million in stock-based compensation).
Previous report
Other Income (Expense), net
Previous report
Other income (expense), net decreased $45.6 million, or 211% in thenine months ended March 31, 2024 compared to thenine months ended March 31, 2023. The decrease was primarily attributable to a decrease in other income of$43.1 million from a non-cash sale of a controlling interest of a subsidiary that occurred during nine months ended March 31, 2023, and an increase in other expense of$11.3 million related to our share of loss from an equity method investment, partially offset by a decrease of$9.7 million in mark-to-market adjusted losses related to our publicly held equity securities, and a decrease of$6.0 millionin losses related to our private held equity investments.
Previous report
Interest Income
Previous report
Interest income increased$40.1 million, or 137% in the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. The increase was primarily attributable to an increase in investment income as a result of increased investment balances and increased interest rates.
Previous report
Interest Expense
Previous report
Interest expense increased$4.8 million, or 22%, in the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. The overall increase was primarily attributable to an increase in interest expense from our Credit Facility (as defined below) as a result of increased interest rates.
Previous report
Provision for Income Taxes
Previous report
Not meaningful
Previous report
We reported an income tax provision of $72.3 million on pretax loss of $31.3 million for the nine months ended March 31, 2024, as compared to an income tax provision of $162.1 million on pretax loss of $265.7 million for the nine months ended March 31, 2023. The decrease in the income tax provision for the nine months ended March 31, 2024 was primarily attributable to a decrease in the recognition of reserves for uncertain tax positions and the partial release of valuation allowance as a result of Loom acquisition. See Note 7, “Business Combinations,” for additional information.
Previous report
We finalized an Advanced Pricing Arrangement with the Australian Tax Office with respect to our transfer pricing arrangements between Australia and the U.S. that covers the tax years ended June 30, 2019 to June 30, 2025. Pursuant to the terms of the agreement, we made a cash tax payment of approximately $60.5 million during the nine months ended March 31, 2024.
Previous report
Our effective tax rate substantially differed from the U.S. statutory income tax rate of 21.0% primarily attributable to non-deductible stock-based compensation in certain foreign jurisdictions, full valuation allowances in the U.S. and Australia, research and development tax credits and incentives, the recognition of reserves for uncertain tax positions, and different tax rates in foreign jurisdictions such as Australia. See Note 15, “Income Taxes,” to the notes to our condensed consolidated financial statements for additional information.
Previous report
We regularly assess the need for a valuation allowance against our deferred tax assets. Our assessment is based on all positive and negative evidence related to the realizability of such deferred tax assets. Based on available objective evidence as of March 31, 2024, we will continue to maintain a full valuation allowance on our U.S. federal, U.S. state, and Australian deferred tax assets as it is more likely than not that these deferred tax assets will not be realized. We intend to maintain the full valuation allowance until sufficient positive evidence exists to support the reversal of, or decrease in, the valuation allowance.
Previous report
Cash provided by operating activities has historically been affected by the amount of net loss adjusted for non-cash expense items such as depreciation and amortization, expense associated with stock-based awards, and gain on non-cash sale of controlling interest of a subsidiary, the timing of employee-related costs such as bonus payments, collections from our customers, which is our largest source of operating cash flows, income tax payment and changes in other working capital accounts.
Previous report
Accounts impacting working capital consist of accounts receivables, prepaid expenses and other current assets, accounts payables, current provisions, and current deferred revenue. Our working capital may be impacted by various factors in future periods, such as billings to customers for subscriptions and licenses, and the subsequent collection of those billings or the amount and timing of certain expenditures.
Previous report
Net cash provided by operating activities increased by $426.6 million for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. The net increase was primarily attributable to an increase in cash received from customers, partially offset by an increase in cash paid to suppliers and employees and cash used to pay income taxes.
Showing the first 40 of 43 passages. Open the source sections for the rest.
Reworded paragraphs (37)
Previous wording
Our primary products include Jira Software and Jira Work Management for planning and project management, Confluence for content creation and sharing, and Jira Service Management for team service, management and support applications. Together, our products form an integrated system for organizing, discussing and completing shared work, becoming deeply entrenched in how teams collaborate and how organizations run. The Atlassian platform is the common technology foundation for our products that drives connection between teams, information, and workflows. It allows work to flow seamlessly across tools, automates the mundane so teams can focus on what matters, and enables better decision-making based on the data customers choose to put into our products.
Current wording
Our primary products include Jira for planning and project management, Confluence for content creation and sharing, Jira Service Management for team service, management and support applications, Loom for asynchronous video collaboration, and Rovo for unlocking organizational knowledge. Together, our connected portfolio of products form integrated solutions and, when deployed in the cloud, provide customers all the benefits of analytics, automation, and AI, along with integrations with thousands of third-party apps as a solution that is deeply entrenched in how teams collaborate and how organizations run. The Atlassian platform is the common technology foundation for our products that drives connection between teams, information, and workflows. It allows work to flow seamlessly across tools, automates the mundane so teams can focus on what matters, and enables better decision-making based on the data customers choose to put into our products.
Previous wording
Our mission is possible with a deep investment in product development to create and refine high-quality and versatile products that users love. We make our products affordable for organizations of all sizes, transparently share our pricing online for most of our products, and generally do not follow the practice of ad hoc discounting that is typical in the enterprise software industry. We aim to grow our customer base, targeting every organization, regardless of size, industry, or geography. This allows us to operate at unusual scale for an enterprise software company, with customers across virtually every industry sector in approximately 200 countries as of March 31, 2024. Our customers range from small organizations that have adopted one of our products for a small group of users, to over eighty percent of the Fortune 500, many of which use a combination of our products across thousands of users.
Current wording
Our mission is possible with a deep investment in product development to create and refine innovative, high-value, and versatile products that users love. We make our products affordable for organizations of all sizes and transparently share our pricing online for most of our products. We aim to grow our customer base, targeting organizations of all sizes, in every industry, and in most geographies, and strategically expand our relationships with customers over time, including with our dedicated sales team. This product-led philosophy enables us to go to market in a unique and efficient way. To land new customers, we’ve engineered a low-friction flywheel with an emphasis on self-service, making it easy to try and get value first and foremost. This allows us to operate at an unusual scale for an enterprise software company, with customers across virtually every industry sector in approximately 200 countries and territories as of September 30, 2024. Our customers range from small organizations that have adopted one of our products for a small group of users, to over eighty percent of the Fortune 500, many of which use a combination of our products across thousands of users. By designing our products to be simple, powerful, affordable, and easy to adopt, we generate demand through word-of-mouth and viral expansion within organizations, allowing our sales force to focus primarily on expanding and deepening strategic relationships with existing customers, particularly in the enterprise.
Previous wording
A substantial majority of our sales are automated through our website, including sales of our products through our solution partners and resellers. Our solution partners and resellers primarily focus on customers in regions that require local language support and other customized needs. We plan to continue to invest in our partner programs to help us enter and grow in new markets, complementing our automated, low-touch approach.
Current wording
Our high-velocity, low-friction distribution model is designed to drive exceptional customer scale by making products that are free to try and affordable to purchase online. We prioritize product quality, automated distribution, transparent pricing, and customer service to land new customers and expand to new teams. We also have a sales team focused primarily on expanding and deepening strategic relationships with existing customers, particularly large enterprises. We primarily rely on word-of-mouth and low-touch demand generation to drive trial, adoption, and initial expansion of our products. A substantial majority of our sales are automated through our website, including sales of our products through our solution partners and resellers. Our solution partners and resellers primarily focus on customers in regions that require local language support and other customized needs. We plan to continue to invest in our partner programs to help us enter and grow in new markets, complementing our automated, low-touch approach.
Previous wording
Our culture of innovation, transparency and dedication to customer service drives our success in implementing and refining this unique approach. We believe this approach creates a self-reinforcing effect that fosters innovation, quality, customer success, and scale. As a result of this strategy, we invest significantly more in research and development activities than in traditional sales activities relative to other enterprise software companies.
Current wording
Our culture of innovation, transparency and dedication to customer service drives our success in implementing and refining this unique approach. We believe this approach creates a self-reinforcing effect that fosters innovation, quality, customer success, and scale. As part of this strategy, we invest significantly more in research and development activities than in traditional sales activities relative to other enterprise software companies.
Previous wording
We generate revenues primarily in the form of subscription and maintenance fees. Subscription revenues consist primarily of fees earned from subscription-based arrangements for providing customers the right to use our software in a cloud-based-infrastructure that we provide (“Cloud offerings”). We also sell on-premises term license agreements for our Data Center products (“Data Center offerings”), consisting of software licensed for a specified period and support and maintenance services that are bundled with the license for the term of the license period. Subscription revenues also include subscription-based agreements for our premier support services. From time to time, we make changes to our product offerings, prices and pricing plans for our products which may impact the growth rate of our revenue, our deferred revenue balances, and customer retention. Subscription revenue, through our Cloud and Data Center offerings, results in a large recurring revenue base.
Current wording
We generate revenues primarily in the form of subscription fees. Subscription revenues consist primarily of fees earned from subscription-based arrangements for providing customers the right to use our software in a cloud-based-infrastructure that we provide (“Cloud offerings”). We also sell on-premises term license agreements for our Data Center products (“Data Center offerings”), consisting of software licensed for a specified period and support and maintenance services that are bundled with the license for the term of the license period. Subscription revenues also include subscription-based agreements for our premier support services. From time to time, we make changes to our product offerings, prices and pricing plans for our products which may impact the growth rate of our revenue, our deferred revenue balances, and customer retention. Subscription revenue, through our Cloud and Data Center offerings, results in a large recurring revenue base.
Previous wording
Our results of operations may vary based on the impact of changes in the global economy on us or our customers. Our business depends on demand for business software applications generally and for collaboration software solutions in particular. We are subject to risks and exposures from the evolving macroeconomic environment, including the effects of rising inflation, increases in interest rates, and increases in geopolitical tensions. We monitor the direct and indirect impacts of these circumstances on our business and financial results. We have seen expansion from existing customers moderate in recent quarters, particularly amongst our small and medium-sized customers. The extent to which these risks ultimately impact our business, results of operations, and financial position will depend on future developments, which are uncertain and cannot be predicted at this time.
Current wording
Our results of operations may vary based on the impact of changes in the global economy on us or our customers. Our business depends on demand for business software applications generally and for collaboration software solutions in particular. We are subject to risks and exposures from the evolving macroeconomic environment, including the effects of rising inflation, and increases in interest rates, political instability, and geopolitical tensions. We monitor the direct and indirect impacts of these circumstances on our business and financial results. The extent to which these risks ultimately impact our business, results of operations, and financial position will depend on future developments, which are uncertain and cannot be predicted at this time.
Previous wording
We have a history of successfully growing both our total customer base and the spend per customer through growth in users, purchase of new licenses, and adoption of new products. We believe our ability to attract new customers is critical, and expanding within the existing customer base is the primary driver of our success as a business. Typically, new customers begin their journey with Atlassian products with a small footprint by either adopting our free editions or purchasing a single product for a limited number of users. We are focused on continuing to grow our total customer base, specifically the number of customers with more than $10,000 in annualized recurring revenue from our Cloud offerings (“Cloud ARR”), as it measures our ability to successfully expand within our existing customer base.
Current wording
We have a history of successfully growing both our total customer base and the spend per customer through growth in users and adoption of new products. We believe our ability to attract new customers is critical, and expanding within the existing customer base is the primary driver of our success as a business. Typically, new customers begin their journey with Atlassian products with a small footprint by either adopting our free editions or purchasing a single product for a limited number of users. We are focused on continuing to grow our total customer base, specifically the number of customers with more than $10,000 in annualized recurring revenue from our Cloud offerings (“Cloud ARR”), as it measures our ability to successfully expand within our existing customer base.
Previous wording
The following table sets forth our number of customers as of the dates presented:
Current wording
The following table sets forth our number of customers with greater than $10,000 in Cloud ARR as of the dates presented:
Previous wording
Free cash flow increased by $430.3 million during the nine months ended March 31, 2024 as compared to the nine months ended March 31, 2023. The increase in free cash flow was primarily attributable to an increase in net cash provided by operating activities and a decrease in capital expenditures. The increase in net cash provided by operating activities was primarily attributable to an increase in cash received from customers, partially offset by an increase in cash paid to suppliers and employees and cash used to pay income taxes.
Current wording
Free cash flow decreased by $88.9 million during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The decrease in free cash flow was primarily attributable to a decrease in net cash provided by operating activities and an increase in capital expenditures. The decrease in net cash provided by operating activities was primarily attributable to an increase in cash paid to employees, including higher annual employee bonus payments, cash paid to suppliers, and cash used to pay income taxes, partially offset by an increase in cash received from customers.
Previous wording
Subscription revenues consist primarily of fees earned from subscription-based arrangements for providing customers the right to use our software in a cloud-based-infrastructure that we provide. We also sell on-premises term license agreements for our Data Center offerings, which consist of software licensed for a specified period and include support and maintenance services that are bundled with the license for the term of the license period. Subscription revenues also include subscription-based agreements for our premier support services. Subscription revenues are driven primarily by the number and size of active licenses, the type of product and the price of the licenses. Our subscription-based arrangements generally have a contractual term of one to twelve months, with a majority being one month. For Cloud offerings, subscription revenue is recognized ratably as services are performed, commencing with the date the service is made available to customers. For Data Center offerings, we recognize revenue upfront for the portion that relates to the delivery of the term license and the support and related revenue is recognized ratably as the services are delivered over the term of the arrangement. Premier support consists of subscription-based arrangements for a higher level of support across different deployment options, and revenue is recognized ratably as the services are delivered over the term of the arrangement.
Current wording
Subscription revenues consist primarily of fees earned from subscription-based arrangements for providing customers the right to use our software in a cloud-based-infrastructure that we provide. We also sell on-premises term license agreements for our Data Center offerings, which consist of software licensed for a specified period and include support and maintenance services that are bundled with the license for the term of the license period. Subscription revenues also include subscription-based agreements for our premier support services. Subscription revenues are driven primarily by the number and size of active licenses, the type of product and the price of the licenses. Our subscription-based arrangements generally have a contractual term of one to twelve months. For Cloud offerings, subscription revenue is recognized ratably as services are performed, commencing with the date the service is made available to customers. For Data Center offerings, we recognize revenue upfront for the portion that relates to the delivery of the term license, and the support and related revenue is recognized ratably as the services are delivered over the term of the arrangement. Premier support consists of subscription-based arrangements for a higher level of support across different deployment options, and revenue is recognized ratably as the services are delivered over the term of the arrangement.
Previous wording
Other revenues primarily include fees received for sales of third-party apps in the Atlassian Marketplace. Technical account management, consulting and training services are also included in other revenues. Revenue from the sale of third-party apps via Atlassian Marketplace is recognized on the date of product delivery given that all of our obligations have been met at that time and on a net basis as we function as the agent in the relationship. Revenue from technical account management is recognized over the time period that the customer has access to the service. Revenue from consulting and training is recognized over time as the services are performed.
Current wording
Other revenues primarily include fees received for sales of third-party apps in the Atlassian Marketplace. Advisory services and training services are also included in other revenues. Revenue from the sale of third-party apps via Atlassian Marketplace is recognized on the date of product delivery given that all of our obligations have been met at that time and on a net basis as we function as the agent in the relationship. Revenue from advisory services is recognized over the time period that the customer has access to the service. Revenue from consulting and training is recognized over time as the services are performed.
Previous wording
We expect subscription revenue to increase and continue to be our primary driver of revenue growth as our customers continue to migrate to our Cloud and Data Center offerings. We no longer sell perpetual licenses or upgrades for our Server offerings and we generally ended maintenance and support for these Server offerings in February 2024. Consistent with our strategy, our Server business has continued to contract as Server customers migrate to our Cloud and Data Center offerings, and maintenance revenue is expected to be immaterial after the Server end of support date.
Current wording
We expect subscription revenue to increase and continue to be our primary driver of revenue growth. Maintenance revenue related to our Server offerings is immaterial after the Server end of support date and has been classified in other revenues within our condensed consolidated statements of operations for all periods presented.
Previous wording
Gross profit is total revenues less total cost of revenues. Gross margin is gross profit expressed as a percentage of total revenues. Gross margin can fluctuate from period to period as a result of changes in product and services mix.
Current wording
Gross profit is total revenues less total cost of revenues. Gross margin is gross profit expressed as a percentage of total revenues. Gross margin can fluctuate from period to period as a result of changes in product mix.
Previous wording
We expect gross margin to decrease due to the sales mix shift from Server and Data Center offerings to Cloud offerings. This impact will be primarily driven by increased hosting costs as well as additional personnel costs to support migrations and our Cloud customers.
Current wording
We expect gross margin to modestly decrease due to the sales mix shift from Data Center offerings to Cloud offerings. This impact will be primarily driven by increased hosting costs and personnel costs to support our Cloud customers.
Previous wording
Our operating expenses are classified as research and development, marketing and sales, and general and administrative. For each functional category, the largest component is compensation expenses, which include salaries and bonuses, stock-based compensation, employee benefit costs, and contractor costs. We allocate overhead, such as information technology costs, rent, and occupancy charges in each expense category based on headcount in that category.
Current wording
Our operating expenses are classified as research and development, marketing and sales, and general and administrative. For each functional category, the largest component is compensation expenses, which include salaries and bonuses, stock-based compensation and employee benefit costs. We allocate overhead, such as information technology costs, rent, and occupancy charges in each expense category based on headcount in that category.
Previous wording
Research and development expenses consist primarily of compensation expenses for our employees, including stock-based compensation, consulting and contractor costs associated with our software development teams, facilities and related overhead costs, and certain IT program expenses. We continue to focus our research and development efforts on building new products, adding new features and services, integrating acquired technologies, increasing functionality, enhancing our cloud infrastructure and developing our mobile capabilities.
Current wording
Research and development expenses consist primarily of compensation expenses for our employees, including stock-based compensation, facilities and related overhead costs, consulting and contractor costs associated with our software development teams, and certain IT program expenses. We continue to focus our research and development efforts on building new products, adding new features and services, integrating acquired technologies, increasing functionality, enhancing our cloud infrastructure and developing our artificial intelligence capabilities.
Previous wording
There have been no other significant changes to our critical accounting policies and estimates during the three and nine months ended March 31, 2024, as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Results of Operations included in our Annual Report on Form 10-K for fiscal year 2023.
Current wording
There have been no significant changes to our critical accounting policies and estimates during the three months ended September 30, 2024, as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Results of Operations included in our Annual Report on Form 10-K for fiscal year 2024.
Previous wording
Total revenues increased $273.7 million, or 30%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Growth in total revenues was primarily attributable to increased demand for our products from both new and existing customers. Of total revenues recognized in the three months ended March 31, 2024, over 90% was attributable to sales to customer accounts existing on or before December 31, 2023.
Current wording
Total revenues increased $210.0 million, or 21%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Growth in total revenues was primarily attributable to increased demand for our products from existing customers. Of total revenues recognized in the three months ended September 30, 2024, over 90% were attributable to sales to customer accounts existing on or before June 30, 2024.
Previous wording
Subscription revenues increased $310.7 million, or 41%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase in subscription revenues was primarily attributable to additional subscriptions from our existing customer base, and customers migrating to subscription services for our Cloud offerings and term-based licenses for our Data Center offerings.
Current wording
Subscription revenues increased $280.0 million, or 33%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase in subscription revenues was primarily attributable to paid seat expansion from our existing customers, migrations and price increases.
Previous wording
Cost of revenues increased $122.0 million, or 26%, in the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. The overall increase was primarily attributable to an increase of $69.1 million in hosting fees paid to third-party providers, and an increase of $50.0 million in compensation expense for employees (which includes an increase of $7.4 million in stock-based compensation).
Current wording
Cost of revenues increased $39.6 million, or 22%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The overall increase was primarily attributable to an increase of $22.5 million in hosting fees paid to third-party providers, an increase of $6.2 million in compensation expense for employees (which includes an increase of $1.4 million in stock-based compensation), and an increase of $4.3 million in amortization from acquired intangible assets.
Previous wording
Research and development expenses increased $54.1 million, or 10%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The overall increase was primarily attributable to an increase of$87.5 million in compensation expenses for employees (which includes an increase of$28.3 million instock-based compensation), partially offset byrestructuring charges of $43.3 million recorded during the three months ended March 31, 2023.
Current wording
Research and development expenses increased $121.4 million, or 25%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The overall increase was primarily attributable to an increase of$105.8 million in compensation expenses for employees (which includes an increase of$43.0 million instock-based compensation).
Previous wording
Marketing and sales expenses increased $70.7 million, or 12%, for thenine months ended March 31, 2024, compared to thenine months ended March 31, 2023. The overall increase was primarily attributable to an increase of$78.3 million in compensation expenses for employees(which includes an increase of $7.8 million in stock-based compensation), and an increase of $9.1 million in advertising and marketing event expenses, partially offset byrestructuring charges of$24.2 million recorded during the nine months ended March 31, 2023.
Current wording
Marketing and sales expenses increased $58.8 million, or 30%, for thethree months ended September 30, 2024 compared to thethree months ended September 30, 2023. The overall increase was primarily attributable to an increase of $34.9 million in compensation expenses for employees (which includes an increase of $3.7 million in stock-based compensation), and an increase of$17.9 million in advertising and marketing event expenses.
Previous wording
Cost of revenues increased $44.8 million, or 27%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The overall increase was primarily attributable to an increase of $33.3 million in hosting fees paid to third-party providers, and an increase of $10.4 million in compensation expense for employees.
Current wording
General and administrative expenses increased $3.3 million, or 2% in thethree months ended September 30, 2024 compared to thethree months ended September 30, 2023. The overall increase was primarily attributable to an increase of $3.1 million in compensation expense for employees (which includes an increase of $2.5 million in stock-based compensation).
Previous wording
Other expense, net increased $10.0 million, or 1,065%, in thethree months ended March 31, 2024, compared to thethree months ended March 31, 2023. The increase in other expense was primarily attributable to an increase of $4.5 million related to our share of loss from an equity method, and higher contribution to Atlassian Foundation.
Current wording
Other expense, net increased $11.1 million, or 133%, in thethree months ended September 30, 2024, compared to thethree months ended September 30, 2023. The increase in other expense was primarily attributable to an increase of $8.5 million related to our share of loss from an equity method investment, and an increase of $1.9 million in contributions to the Atlassian Foundation.
Previous wording
Interest income increased $6.4 million, or 42% in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily attributable to an increase in investment income as a result of increased investment balances and increased interest rates.
Current wording
Interest income increased $3.3 million, or 13% in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily attributable to an increase in investment income as a result of increased investment balances.
Previous wording
As of March 31, 2024, we had cash and cash equivalents totaling $1.9 billion, short-term investments totaling $163.3 million andaccounts receivables totaling $646.1 million. Since our inception, we have primarily financed our operations through cash flows generated by operationsand corporate debt.
Current wording
As of September 30, 2024, we had cash and cash equivalents totaling $2.1 billion, marketable securities totaling $161.4 million andaccounts receivables totaling $484.1 million. Since our inception, we have primarily financed our operations through cash flows generated by operationsand corporate debt.
Previous wording
Net cash used in investing activities increased by $967.9 million during the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. The net increase was primarily attributable to cash consideration paid for acquisitions, net of cash acquired, of approximately $844.7 million, an increase in net outflows of $157.6 million related to marketable securities activity, partially offset by an increase in net inflows of $30.1 million related to strategic investment activity.
Current wording
Net cash used in investing activities decreased by $38.2 million during the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The net decrease was primarily attributable to a decrease in net outflows of $71.8 million related to marketable securities activity, partially offset by an increase in net outflows of $26.1 million related to strategic investment activity and an increase in cash outflows for acquisitions, net of cash acquired, of approximately $5.0 million.
Previous wording
Net cash used in financing activities increased by$197.7 million for thenine months ended March 31, 2024, compared to the nine months ended March 31, 2023. The net cash used in financing activities was primarily attributable to an increase inrepurchases of Class A Common Stock of $171.3 million, and principal payments of our long term debt of $25.0 million during the nine months ended March 31, 2024.
Current wording
Net cash used in financing activities increased by $120.9 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The net increase was primarily attributable to an increase in repurchases of Class A Common Stock of $117.7 million.
Previous wording
In January 2023, the Board of Directors authorized a program to repurchase up to $1.0 billion of our outstanding Class A Common Stock (the “Share Repurchase Program”). During the three and nine months ended March 31, 2024, we repurchased and subsequently retired approximately 0.2 million and 1.1 million shares of our Class A Common Stock for approximately $41.1 million and $204.6 million at an average price per share of $199.35 and $188.57, respectively. All repurchases were made in open market transactions. As of March 31, 2024, we were authorized to purchase a remaining $641.2 million of our Class A Common Stock under the Share Repurchase Program.
Current wording
During the three months ended September 30, 2024, we repurchased and subsequently retired approximately 1.1 million shares of our Class A Common Stock for approximately $183.9 million at an average price per share of $162.57. All repurchases were made in open market transactions. As of September 30, 2024, we were authorized to purchase a remaining $267.9 million and $1.5 billion of our Class A Common Stock under the 2023 Share Repurchase Program and 2024 Share Repurchase Program, respectively.
Previous wording
We believe that our existing cash and cash equivalents, together with cash generated from operations, and borrowing capacity from the Credit Facility will be sufficient to meet our anticipated cash needs for at least the next 12 months. Our other future cash requirements will depend on many factors including our growth rate, the timing and extent of spend on research and development efforts, employee headcount, marketing and sales activities, payments to tax authorities, acquisitions of additional businesses and technologies, the introduction of new software and services offerings, enhancements to our existing software and services offerings and the continued market acceptance of our products.
Current wording
We believe that our existing cash and cash equivalents, together with cash generated from operations, and borrowing capacity from the 2024 Credit Facility will be sufficient to meet our anticipated cash needs for at least the next 12 months. Our other future cash requirements will depend on many factors including our growth rate, the timing and extent of spend on research and development efforts, employee headcount, marketing and sales activities, payments to tax authorities, acquisitions of additional businesses and technologies, the introduction of new software and services offerings, enhancements to our existing software and services offerings and the continued market acceptance of our products.
Previous wording
In addition to the measures presented in our condensed consolidated financial statements, we regularly review other measures that are not presented in accordance with GAAP, defined as non-GAAP financial measures by the SEC, to evaluate our business, measure our performance, identify trends, prepare financial forecasts and make strategic decisions. The key measures we consider are non-GAAP gross profit and non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per diluted share and free cash flow (collectively, the “Non-GAAP Financial Measures”). These Non-GAAP Financial Measures, which may be different from similarly titled non-GAAP measures used by other companies, provide supplemental information regarding our operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or that occur relatively infrequently and/or that management considers to be unrelated to our core operations. Management believes that tracking and presenting these Non-GAAP Financial Measures provides management, our board of directors, investors and the analyst community with the ability to better evaluate matters such as: our ongoing core operations, including comparisons between periods and against other companies in our industry; our ability to generate cash to service our debt and fund our operations; and the underlying business trends that are affecting our performance.
Current wording
In addition to the measures presented in our condensed consolidated financial statements, we regularly review other measures that are not presented in accordance with GAAP, defined as non-GAAP financial measures by the SEC, to evaluate our business, measure our performance, identify trends, prepare financial forecasts and make strategic decisions. The key measures we consider are non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per diluted share and free cash flow (collectively, the “Non-GAAP Financial Measures”). These Non-GAAP Financial Measures, which may be different from similarly titled non-GAAP measures used by other companies, provide supplemental information regarding our operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or that occur relatively infrequently and/or that management considers to be unrelated to our core operations. Management believes that tracking and presenting these Non-GAAP Financial Measures provides management, our board of directors, investors and the analyst community with the ability to better evaluate matters such as: our ongoing core operations, including comparisons between periods and against other companies in our industry; our ability to generate cash to service our debt and fund our operations; and the underlying business trends that are affecting our performance.
Previous wording
•Non-GAAP gross profit and non-GAAP gross margin. Excludes expenses related to stock-based compensation, amortization of acquired intangible assets, and restructuring charges.
Current wording
•Non-GAAP gross profit and non-GAAP gross margin. Excludes expenses related to stock-based compensation and amortization of acquired intangible assets.
Previous wording
•Non-GAAP operating income and non-GAAP operating margin. Excludes expenses related to stock-based compensation, amortization of acquired intangible assets, and restructuring charges.
Current wording
•Non-GAAP operating income and non-GAAP operating margin. Excludes expenses related to stock-based compensation and amortization of acquired intangible assets.
Previous wording
•Non-GAAP net income and non-GAAP net income per diluted share. Excludes expenses related to stock-based compensation, amortization of acquired intangible assets, restructuring charges, gain on a non-cash sale of a controlling interest of a subsidiary and the related income tax adjustments.
Current wording
•Non-GAAP net income and non-GAAP net income per diluted share. Excludes expenses related to stock-based compensation, amortization of acquired intangible assets, gain on a non-cash sale of a controlling interest of a subsidiary and the related income tax adjustments.
Previous wording
The following table presents a reconciliation of our Non-GAAP Financial Measures to the most comparable GAAP financial measure for the three and nine months ended March 31, 2024 and 2023 (in thousands, except percentage and per share data):
Current wording
The following table presents a reconciliation of our Non-GAAP Financial Measures to the most comparable GAAP financial measure for the three months ended September 30, 2024 and 2023 (in thousands, except percentage and per share data):
Previous wording
(2) In fiscal year 2024, we began to utilize a fixed long-term projected non-GAAP tax rate in our computation of the non-GAAP income tax adjustments in order to provide better consistency across interim reporting periods. In projecting this long-term non-GAAP tax rate, we utilized a three-year financial projection that excludes the direct and indirect income tax effects of the other non-GAAP adjustments reflected above. Additionally, we considered our current operating structure and other factors such as our existing tax positions in various jurisdictions and key legislation in major jurisdictions where we operate. For fiscal year 2024, we determined the projected non-GAAP tax rate to be 27%. This fixed long-term projected non-GAAP tax rate eliminates the effects of non-recurring and period specific items which can vary in size and frequency. Examples of the non-recurring and period specific items include but are not limited to changes in the valuation allowance related to deferred tax assets, effects resulting from acquisitions, and unusual or infrequently occurring items. We will periodically re-evaluate this long-term rate, as necessary, for significant events. The rate could be subject to change for a variety of reasons, for example, significant changes in the geographic earnings mix or fundamental tax law changes in major jurisdictions where the company operates.
Current wording
(1) We utilize a fixed long-term projected non-GAAP tax rate in our computation of the non-GAAP income tax adjustments in order to provide better consistency across interim reporting periods. In projecting this long-term non-GAAP tax rate, we utilized a three-year financial projection that excludes the direct and indirect income tax effects of the other non-GAAP adjustments reflected above. Additionally, we considered our current operating structure and other factors such as our existing tax positions in various jurisdictions and key legislation in major jurisdictions where we operate. For fiscal year 2025, we determined the projected non-GAAP tax rate to be 26%. This fixed long-term projected non-GAAP tax rate eliminates the effects of non-recurring and period specific items which can vary in size and frequency. Examples of the non-recurring and period specific items include but are not limited to changes in the valuation allowance related to deferred tax assets, effects resulting from acquisitions, and unusual or infrequently occurring items. We will periodically re-evaluate this long-term rate, as necessary, for significant events. The rate could be subject to change for a variety of reasons, for example, significant changes in the geographic earnings mix or fundamental tax law changes in major jurisdictions where we operate.
Previous wording
(3) The effects of these dilutive securities were not included in the GAAP calculation of diluted net loss per share for the nine months ended March 31, 2024 and three and nine months ended March 31, 2023, respectively, because the effect would have been anti-dilutive.
Current wording
(2) The effects of these dilutive securities were not included in the GAAP calculation of diluted net loss per share for the three months ended September 30, 2024 and September 30, 2023 because the effect would have been anti-dilutive.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
Total revenues increased $631.5 million, or 24%, in the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. Growth in total revenues was primarily attributable to increased demand for our products from both new and existing customers. Of total revenues recognized in the nine months ended March 31, 2024, over 90% was attributable to sales to customer accounts existing on or before June 30, 2023.
Previous report — wording carried elsewhere
Total revenues by deployment options were as follows:
Previous report — wording carried elsewhere
Total revenues by geography were as follows:
Previous report — wording carried elsewhere
Our future effective annual tax rate may be materially impacted by the expense or benefit from tax amounts associated with our foreign earnings that are taxed at rates different from the federal statutory rate, changes in valuation allowances, level of profit before tax, accounting for uncertain tax positions, business combinations, and changes in our valuation allowances to the extent sufficient positive evidence becomes available, closure of statute of limitations or settlement of tax audits, and changes in tax laws.
Previous report — wording carried elsewhere
A significant amount of our earnings is generated by our Australian subsidiaries. Our future effective tax rates may be adversely affected to the extent earnings are lower than anticipated in countries where we have lower statutory tax rates. Changes in our global operations could result in changes to our effective tax rates, future cash flows, and overall profitability of our operations.