Atlassian Corporation Plc (TEAM) Bundle
Understanding Atlassian Corporation Plc (TEAM) Revenue Streams
Understanding Atlassian Corporation Plc’s Revenue Streams
This section provides a detailed analysis of the revenue streams for Atlassian Corporation Plc as of 2024, focusing on the breakdown of primary revenue sources, year-over-year growth, and contributions from different business segments.
Breakdown of Primary Revenue Sources
The company’s revenue streams can be categorized into two primary segments: Subscription Revenue and Other Revenue.
| Revenue Source | Q3 2024 (in thousands) | Q3 2023 (in thousands) | $ Change (in thousands) | % Change |
|---|---|---|---|---|
| Subscription | $1,131,948 | $851,982 | $279,966 | 33% |
| Other | $55,833 | $125,793 | ($69,960) | (56%) |
| Total Revenues | $1,187,781 | $977,775 | $210,006 | 21% |
Year-over-Year Revenue Growth Rate
In the three months ended September 30, 2024, total revenues increased by 21% compared to the same period in 2023. This growth was primarily driven by increased demand for subscription products, with over 90% of the revenue attributed to existing customer accounts.
Contribution of Different Business Segments to Overall Revenue
The revenue contribution from different deployment options is outlined below:
| Deployment Option | Q3 2024 (in thousands) | Q3 2023 (in thousands) | $ Change (in thousands) | % Change |
|---|---|---|---|---|
| Cloud | $792,306 | $604,647 | $187,659 | 31% |
| Data Center | $335,594 | $242,943 | $92,651 | 38% |
| Server | $0 | $78,752 | ($78,752) | (100%) |
| Marketplace and Other | $59,881 | $51,433 | $8,448 | 16% |
Analysis of Significant Changes in Revenue Streams
The most significant change in revenue streams involves the decline in Other Revenues, which dropped by 56% year-over-year, primarily due to the cessation of maintenance revenue from Server offerings. Conversely, Subscription Revenues surged by 33%, reflecting a robust demand for cloud-based solutions and expansion among existing customers.
In summary, Atlassian’s revenue analysis for 2024 highlights strong growth in subscription services, particularly in cloud and data center offerings, while showing a marked decline in other revenue streams due to strategic shifts away from server products.
A Deep Dive into Atlassian Corporation Plc (TEAM) Profitability
A Deep Dive into Atlassian Corporation Plc's Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the total revenues were $1,187,781 thousand, with a cost of revenues amounting to $217,624 thousand. This results in a gross profit of $970,157 thousand, yielding a gross profit margin of 82%, consistent with the previous year.
Operating Profit Margin: The operating expenses for the same period totaled $1,002,135 thousand, leading to an operating loss of ($31,978) thousand, translating to an operating margin of (3)%.
Net Profit Margin: The net loss for the three months ended September 30, 2024, was ($123,769) thousand, resulting in a net profit margin of (10)%, compared to a net loss of ($31,883) thousand and a margin of (3)% in the prior year.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Total Revenues | $1,187,781 | $977,775 | +$210,006 (21%) |
| Cost of Revenues | $217,624 | $178,029 | +$39,595 (22%) |
| Gross Profit | $970,157 | $799,746 | +$170,411 (21%) |
| Operating Expenses | $1,002,135 | $818,615 | +$183,520 (22%) |
| Operating Loss | ($31,978) | ($18,869) | +$13,109 (69%) |
| Net Loss | ($123,769) | ($31,883) | +$91,886 (288%) |
Trends in Profitability: The gross profit increased by $170,411 thousand, or 21%, year-over-year, despite a significant increase in operating expenses by $183,520 thousand, or 22%. The operating loss widened from ($18,869) thousand in Q3 2023 to ($31,978) thousand in Q3 2024.
Comparison with Industry Averages: The average gross profit margin for the software industry is approximately 75%, while the average net profit margin hovers around 20%. This indicates that the company is performing well in terms of gross profitability but is currently below average in net profitability due to higher operational costs.
Operational Efficiency: The increase in operating expenses was primarily driven by higher research and development costs, which rose by $121,363 thousand, or 25%, reflecting the company's commitment to innovation and product development. Marketing and sales expenses also increased by $58,826 thousand, or 30%, indicating aggressive market positioning efforts.
| Expense Category | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Research and Development | $603,101 | $481,738 | +$121,363 (25%) |
| Marketing and Sales | $252,393 | $193,567 | +$58,826 (30%) |
| General and Administrative | $146,641 | $143,310 | +$3,331 (2%) |
Overall, while the company maintains a strong gross profit margin, its operational efficiency is currently pressured by rising expenses, leading to increased losses in net profitability.
Debt vs. Equity: How Atlassian Corporation Plc (TEAM) Finances Its Growth
Debt vs. Equity: How Atlassian Corporation Plc Finances Its Growth
As of September 30, 2024, the company had a total long-term debt of $986.3 million and short-term debt of $0. The long-term debt is composed of:
- $500.0 million in 5.250% senior notes due 2029
- $500.0 million in 5.500% senior notes due 2034
The company’s total liabilities amounted to $3.96 billion as of the same date, which includes both short-term and long-term obligations. The debt-to-equity ratio stands at 0.96, calculated as:
Debt-to-Equity Ratio = Total Debt / Total Equity
With total stockholders’ equity reported at $1.03 billion, this ratio is slightly above the industry average of 0.85 for technology companies, indicating a higher reliance on debt financing compared to its peers.
Recent Debt Issuances and Credit Ratings
In May 2024, the company issued $1 billion in senior notes, split between the 2029 and 2034 maturities, with interest payments commencing on November 15, 2024. The estimated fair value of these notes was $1.1 billion as of September 30, 2024.
The company maintains a senior unsecured credit rating of Baa2 from Moody's and BBB from Standard & Poor's, reflecting a stable outlook amid its growth strategy and operational performance.
Balancing Debt Financing and Equity Funding
As part of its growth strategy, the company has actively repurchased shares, with approximately $183.9 million spent on repurchasing Class A Common Stock during the three months ended September 30, 2024. This program is part of a larger initiative authorized by the Board of Directors, allowing up to $1.5 billion in repurchases.
The company also has a $750 million senior unsecured revolving credit facility, providing flexibility in managing its liquidity needs.
| Debt Type | Principal Amount | Interest Rate | Maturity Date |
|---|---|---|---|
| Senior Notes (2029) | $500 million | 5.250% | May 15, 2029 |
| Senior Notes (2034) | $500 million | 5.500% | May 15, 2034 |
| Revolving Credit Facility | $750 million | Variable | Open |
This strategic mix of debt and equity financing allows the company to leverage its capital structure effectively while pursuing growth opportunities and managing financial risk.
Assessing Atlassian Corporation Plc (TEAM) Liquidity
Assessing Atlassian Corporation Plc's Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio for the company was calculated at 4.52, indicating a strong liquidity position. The quick ratio, which excludes inventory from current assets, stood at 4.43, reaffirming the company's ability to meet short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
The working capital as of September 30, 2024, was reported at $2.6 billion, reflecting an increase compared to $2.4 billion in the previous quarter. This positive trend is attributed to improved accounts receivable collection, which totaled $484.1 million as of the same date.
Cash Flow Statements Overview
The cash flow statements for the three months ended September 30, 2024, showed the following trends (in thousands):
| Cash Flow Category | 2024 | 2023 |
|---|---|---|
| Net cash provided by operating activities | $80,492 | $166,956 |
| Net cash used in investing activities | ($18,690) | ($56,903) |
| Net cash used in financing activities | ($186,753) | ($65,879) |
| Effect of foreign exchange rate changes | $3,564 | ($3,280) |
| Net increase (decrease) in cash | ($121,387) | $40,894 |
Potential Liquidity Concerns or Strengths
Despite the strong liquidity ratios, there are potential concerns regarding cash outflows in financing activities, which increased significantly by $120.9 million compared to the previous year, primarily due to increased stock repurchase activities amounting to $183.9 million. Additionally, the net cash provided by operating activities decreased by $86.5 million, indicating a potential strain on cash generation capabilities moving forward.
As of September 30, 2024, the total cash and cash equivalents were reported at $2.1 billion, complemented by $161.4 million in marketable securities, further enhancing the company's liquidity position.
Is Atlassian Corporation Plc (TEAM) Overvalued or Undervalued?
Valuation Analysis
Is Atlassian Corporation Plc Overvalued or Undervalued?
The valuation of Atlassian Corporation Plc can be assessed using key financial ratios such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA).
- P/E Ratio: As of September 30, 2024, the company's P/E ratio was approximately –336.67, indicating a negative earnings situation due to continued net losses.
- P/B Ratio: The P/B ratio stood at 3.13 as of the same date, reflecting the market's valuation compared to the book value of equity.
- EV/EBITDA Ratio: The EV/EBITDA ratio was –50.91 as the company reported an EBITDA loss.
Stock Price Trends
Over the last 12 months, the stock price has exhibited significant volatility. As of September 30, 2024, the stock price was $162.57. The stock price has fluctuated from a low of $113.00 to a high of $220.00 over the past year.
Dividend Yield and Payout Ratios
As of September 30, 2024, the company does not pay a dividend, resulting in a dividend yield of 0%. Additionally, with a net loss reported, the payout ratio remains non-applicable.
Analyst Consensus on Stock Valuation
The consensus among analysts regarding the stock valuation is mixed, with recommendations as follows:
- Buy: 5 analysts
- Hold: 8 analysts
- Sell: 2 analysts
Financial Summary Table
| Metric | Value |
|---|---|
| P/E Ratio | –336.67 |
| P/B Ratio | 3.13 |
| EV/EBITDA Ratio | –50.91 |
| Stock Price (Sept 30, 2024) | $162.57 |
| 12-Month Low | $113.00 |
| 12-Month High | $220.00 |
| Dividend Yield | 0% |
| Analysts - Buy | 5 |
| Analysts - Hold | 8 |
| Analysts - Sell | 2 |
These metrics provide a comprehensive view of the company's valuation status as of 2024, highlighting the challenges and market perceptions faced by the company amidst its financial performance.
Key Risks Facing Atlassian Corporation Plc (TEAM)
Key Risks Facing Atlassian Corporation Plc
Atlassian Corporation Plc faces various internal and external risks that can significantly impact its financial health. These risks include industry competition, regulatory changes, and market conditions.
Industry Competition
The software industry is highly competitive, with numerous players vying for market share. Atlassian's primary competitors include companies such as Microsoft, ServiceNow, and Asana. The constant evolution of technology demands continuous innovation and adaptation. As of September 30, 2024, the company reported total revenues of $1,187,781 thousand, reflecting a growth from $977,775 thousand in the previous year. However, intense competition may pressure pricing and margins.
Regulatory Changes
Changes in regulations can impose additional compliance costs and operational adjustments. For instance, the introduction of the Organization for Economic Co-operation and Development's global minimum corporate income tax of 15% may affect the company's effective tax rate in future years. As of September 30, 2024, the provision for income taxes increased to $93,605 thousand from $20,929 thousand in the same period last year, indicating a significant rise of 347%.
Market Conditions
The company is also exposed to fluctuating market conditions influenced by economic volatility and geopolitical risks. Recent global events, including inflation and banking sector disruptions, have heightened uncertainty and may adversely affect customer demand. The net loss for the three months ended September 30, 2024, was reported at $123,769 thousand, a substantial increase from $31,883 thousand in 2023.
Operational Risks
Operational risks, such as reliance on key personnel and technology infrastructure, can hinder performance. The company reported operating expenses of $1,002,135 thousand for the three months ended September 30, 2024, up from $818,615 thousand the previous year. An increase in research and development expenses by 25% to $603,101 thousand reflects the company's focus on innovation but also underscores the risk of not achieving expected returns on investment.
Financial Risks
Financial risks include exposure to foreign currency fluctuations, credit risks, and market values of investments. As of September 30, 2024, the company had cash and cash equivalents totaling $2.1 billion and marketable securities of $161.4 million. However, credit ratings and market conditions could negatively impact the liquidity of these investments.
Mitigation Strategies
To mitigate these risks, the company employs various strategies. It maintains a diversified investment portfolio and has a foreign exchange hedging program to manage currency risks. Furthermore, the company has implemented a senior unsecured revolving credit facility of $750 million to enhance liquidity.
| Risk Factor | Description | Impact on Financials |
|---|---|---|
| Industry Competition | Intense competition may pressure pricing and margins. | Total Revenues: $1,187,781 thousand (2024) |
| Regulatory Changes | Changes in regulations can impose compliance costs. | Provision for Income Taxes: $93,605 thousand (2024) |
| Market Conditions | Economic volatility and geopolitical risks can affect demand. | Net Loss: $123,769 thousand (2024) |
| Operational Risks | Reliance on key personnel and technology. | Operating Expenses: $1,002,135 thousand (2024) |
| Financial Risks | Exposure to currency fluctuations and credit risks. | Cash and Cash Equivalents: $2.1 billion (2024) |
Atlassian Corporation Plc's ability to navigate these risks effectively is crucial for maintaining its financial health and ensuring sustainable growth in a competitive market landscape.
Future Growth Prospects for Atlassian Corporation Plc (TEAM)
Future Growth Prospects for Atlassian Corporation Plc
Analysis of Key Growth Drivers
Atlassian Corporation Plc has identified several key growth drivers that may significantly impact its future performance. These include:
- Product Innovations: The company continues to invest heavily in research and development, with expenses reaching $603.1 million for the three months ended September 30, 2024, compared to $481.7 million in the same period of 2023, marking a 25% increase.
- Market Expansions: The subscription revenue for the three months ended September 30, 2024, was $1.1 billion, up from $852.0 million in the previous year, indicating a strong demand for its cloud-based solutions.
- Acquisitions: The company has made strategic investments and acquisitions to enhance its product offerings, including a recent acquisition costing $4.975 million.
Future Revenue Growth Projections and Earnings Estimates
Analysts project significant revenue growth in the upcoming fiscal periods. The total revenues for the three months ended September 30, 2024, were $1.2 billion, a substantial increase from $978 million in the same quarter of 2023. Earnings per share are estimated to improve as the company focuses on scaling its operations and improving profitability.
Strategic Initiatives or Partnerships That May Drive Future Growth
Atlassian has been actively pursuing strategic partnerships to expand its market reach. The company launched a new partnership with leading cloud service providers, enhancing its software integration capabilities. Additionally, the introduction of new features and services within its existing product lines is expected to attract a wider customer base.
Competitive Advantages That Position the Company for Growth
The company benefits from several competitive advantages, including:
- Strong Brand Recognition: Atlassian is recognized globally for its innovative software solutions, which helps retain and attract customers.
- Robust Ecosystem: The Atlassian Marketplace facilitates third-party app integrations, enhancing the value proposition of its products.
- High Customer Retention Rates: The company boasts a high customer retention rate, with subscription-based revenues continuing to grow, contributing to a stable revenue stream.
Financial Overview and Performance Metrics
| Metric | Q3 2024 | Q3 2023 | % Change |
|---|---|---|---|
| Total Revenues | $1,187,781,000 | $977,775,000 | 21.4% |
| Net Loss | $(123,769,000) | $(31,883,000) | 287.6% |
| Operating Expenses | $1,002,135,000 | $818,615,000 | 22.4% |
| Free Cash Flow | $74,341,000 | $163,287,000 | -54.5% |
In conclusion, Atlassian's focus on product innovation, strategic partnerships, and expanding its market presence positions it favorably for future growth. The recent financial performance indicates strong revenue growth, although the net loss has widened, highlighting the need for ongoing operational efficiency improvements.
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Article updated on 8 Nov 2024
Resources:
- Atlassian Corporation Plc (TEAM) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Atlassian Corporation Plc (TEAM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Atlassian Corporation Plc (TEAM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.