Atlassian (TEAM) 4 Nov 222023 Q1 Earnings call transcript

Company Profile

Participants

Martin Lam	Head, Investor Relations
Scott Farquhar	Co-Founder and Co-CEO
Mike Cannon-Brookes	Co-Founder and Co-CEO
Cameron Deatsch	Chief Revenue Officer
Joe Binz	Chief Financial Officer
Keith Weiss	Morgan Stanley
Michael Turrin	Wells Fargo Securities
Fatima Boolani	Citigroup
Arjun Bhatia	William Blair
Alex Zukin	Wolfe Research
Gregg Moskowitz	Mizuho Securities
Brent Thill	Jefferies
Michael Turits	KeyBanc Capital Markets
Steven Koenig	SMBC Nikko
Ari Terjanian	Cleveland Research
Peter Weed	Bernstein
Fred Havemeyer	Macquarie

Call transcript

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Operator

Good afternoon. And thank you for joining Atlassian’s Earnings Conference Call for the First Quarter of Fiscal 2023.

As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Atlassian’s website following this call. I will now hand the call over to Martin Lam, Atlassian’s Head of Investor Relations.

Martin Lam

Welcome to Atlassian’s first quarter fiscal year 2023 earnings call. us joining for you today. Thank

Chief of the Joining financial the Co-Founders Revenue shareholder we Binz. results and Atlassian’s letter and with commentary today, you Co-CEOs, blog for available on me Officer, is also today, Scott our our published shareholder Deatsch; Chief and and Investor on and our earnings Farquhar including The have the letter related Cannon-Brookes; first where Joe investor quarter release release call the and we Officer, XXXX. Financial of press sheet. our Cameron Relations other Earlier Mike find earnings section Work will and fiscal Life website, data year materials, Atlassian’s supplemental press

for always, the quarter. As letter and shareholder our contains management’s commentary insight

call brief then have the during forward-looking opening Q&A. call will we our focus will today, and statements. This include on time remarks So

involve Forward-looking we results results uncertainties implied unknown If or and uncertainties risks the expressed assumptions statements incorrect, such the if known any statements from forward-looking the and of by differ materially prove or assumptions. materialize make. or risks, any could our

should upon forward-looking statements as You not of future predictions rely events.

affect could represent our the such Factors undertake and included recently and to is Risk results factors annual most in make financial cease are information assumptions section management’s other only from Commission quarterly Exchange Further on Securities filed our time-to-time, with our reports. date we such we and update as no the they made, of that and including these in and titled filings or to the or change beliefs statements obligation revise statements should Forward-looking statements be current.

prepared we participate to These mind for financial performance also discuss shareholder website. of earnings A in sheet measures keep GAAP. do During in to To will the a GAAP substitute or available of and Please many IR at today’s another would like call, if possible. a to later question not on between allow the that, are is as are come we non-GAAP financial Please non-GAAP you or letter, queue to investor release measures measures. session. the in and financial Q&A over superior will will With we have in in with as we in measures that non-GAAP you reconciliation and rejoin to follow-up take one financial to will time. our turn question call you data facilitate accordance best that, back addition our to opening for and I a the remarks. Scott

Scott Farquhar

Thank for joining today. us you

of We focused against subscription into execution Together, proud QX Atlas general first large-scale market. on long-term Atlassian our single a customer and are event our our initiatives. Work in We new held offering announced availability Life, launched a in

we to but an not are and shareholder right products already As the us. immune you our is poised shake we Atlassian that opportunities read and have in broader, place pay steadfast leaderboards Turbulent letter, opportunity in macroeconomic offense. environment, front of long-term capitalize have in on our the leaders, to to to incredible strategies conviction markets remain provide up in the we

and investments We share to our will strengthen position focus environment. market this take in our

will, overall business to We the our and balance with our be macroeconomic of investments course, growth the of responsive conditions. continued

much sight incredibly CFO. the short to Q&A. Operator out stint since of will as of billion but line the here in revenue early been for only the that, He’s September, call am environment thrilled welcome I speed market to come have and me this better quickly annual Joe I to than up call. earnings gotten With has will pass do Atlassian who to interim to I and continue stronger inaugural his far believe to will my want CFO We pass baton a we to $XX to position. Binz, in in

Operator

[Operator Instructions] ahead. Weiss question comes Stanley. go Your Keith from Morgan first Please from

Keith Weiss

bottomline guys the a taking I Excellent. Thank the topline and kind of question. guess question. for you

with the the impact down You NRR some it in that Free-to-paid XXXX? operating well? as letter as are increased I are margin funnel feeling guys you. conversion you you the trends? slow down guide of about upfront areas slowed year, What macro you kind seeing top kind coming the expected think paid, Thank for mentioned a and sustaining little and as in we seeing. are full of the little down efficiencies guys of then FY looking being the about shareholder bit. slowed bit. Is to have sounds or of even guys you get kind down been the And revenues of appreciate like the Where that did a are the

Cameron Deatsch

Sure.

First then this hand will is please speak off, to to the Cameron. talk I topline I Joe to off about expenses. and

and down, signing mentioned, plenty of continue XXth versions we to to quarter, see we using while about in getting to as actually back earnings, people are we trying our more that trend seeing saw and previous Jira, trying that in coming today. user, their paid entering our we them . yeah, people August and So, products, up and how -- product we in free card our starting coming information of our customers. credit spoke Many and becoming to slow

it which saw today quarter, The the slower free the we customer. have in the grow, we expansion bit coming in definitely quarter towards our people new paying of previous through we to little to piece actually accounts. see of was that, in we saw plenty continues actual user a growth is converting existing trend where and end the but great, throughout quarter Year-over-year came that still in. of just the instances So

users, slowing from to right? people already IT users in Confluence internal they largely to So And trying XXX own using going to this XXX of their is constrain budgets the hiring, largely more have. company and that’s due license down

seen historically. what Now have just user that we as we continue to see nearly strong wasn’t growth growth as

slowed planned, to are from while as Service along specifically people migrations side, working enterprise Management versions adopted to other to and well. products, strong be premium topline, Jira and additions on our down, growth cross-sell. continues see the do standard On tracking the of continue user so we

we how while organizations, are to-date. management their hiring by their the like service we do handle big the seen are no Joe, or So new rates projects quickly IT have people adding in you efforts tools, choosing people to migrations and expenses compensation? to affected want those slowdown basically

Joe Binz

thanks, Cameron. Thanks, Thanks, Cameron, Yeah. and Keith.

areas. two really So there’s focus

the half and discretionary First making eye to towards we strengthening we we position And and enabling we about and of allocated, will the resources gross talking reductions of our moderating high then, things. position or out in headcount most a in. with impactful that this highest you targeting second are to FY driven across be with terms resource areas, resources are were I process XXXX. planned going markets Scott the have Board, make is Keith, we large, sure of are our in those whether our in all in an looking there’s ROI prioritizing mentioned, emerge stronger foremost, non-headcount growth moving say are I’d us the be constantly the the and think, spending, or and growth right, downturn even of margins in secondarily, where efficiencies rate at efficiencies found allocation, we as as investments

principles. it’s gives broad very So, those two hopefully, primary that would and a based I you say, sense, on but

Keith Weiss

That’s so super helpful you it. guys. Got much. Thank

Operator

Wells Turrin Please from comes question Michael next go Your Securities. from Fargo ahead.

Michael Turrin

little differently. for I Hey, sure bit am And question. there. will one, Appreciate to similar a somewhat taking be Thanks to the a ask it’s it. but construct I of first going the

So, couple a of parts.

expansion like The are in migrations first clarifying of seeing just from that it changing you that’s fair it’s It the rate. more trajectory is target assume less pace of one the here sounds the like influencing comments Cameron’s first is it’s it’s than year question. for some for cloud the -- cloud that revenue change migration to the the

a So your And with XXX% around investment company to Joe you giving fair I first just continuing is views call, that the that customers that part the just is then to more think I the versus second know potentially that, margin, the know are new -- seeing discussion is tends that to in what’s stay part would moderation what long-term. course relatively the for but inform large cycle? impact? the is assumption we XXX% causing are for to just just

useful So thinking your just in the seeing? a is of bit, here the context Thank what given you are think, I macro is changing you.

Cameron Deatsch

I no rates. be have am happy to very, our -- migrations just very speak the we to change Yes, clear. in seen

in last on to program, loyalty as track another well step be the end which been server quarters June. XXXX, it’s coming continues up of with discount migrations take our down as life as the few Our basically February will progress to

customers right our with compelling We that migration day have those series better and couple get over last years. every of along been with We of events in continue efforts have the we to be conversations working the plan. a

impact is So people a bit no to use largely the due migrations, existing that products adding their expansion user slow that purely down quarter. our within have users, focused over of it seen we last on

Joe Binz

for question. Great, Michael. the This is Joe. Thanks

question. question, NRR the On the expansion rate

very don’t a above we As know, it on healthy we you discussed the provide XXX% on the and at quarterly Day. updates Investor basis. Directionally, rates remains expansion

within macro And particularly indicative about additions existing relative customers, the premium on paid absolute while new absolute products to good fundamental an customers the that’s health seat and to think of adding on upgrades impact there talked enterprise growth very growth rates. business, still churn are I the our of around expectations, and basis. rates we

to talk rates. about a a big trade-off And discussion. a expansion those margin that’s big healthy little also -- driver to over turn So Scott bit I will that’s the it behind

Scott Farquhar

us if bit are going leaderboard we you In XXXX, shaking have through on that and so multiple a in you -- us. and downturns period. you about for the out during went we like, the in we time, can of lot up leaderboard through through sort the is higher terms little can the And about what can the how have a back we informs now in the with of terms third those in think business, dotcom come side this in that in learned like, come crash, periods long-term, went invest wisely, we other investments of you downturn like, that been than of out XXXX, and stepping yes, we XXXX, XXXX of started thinking

is, in pick shedding of those only can are up may pick that and the the staff a couple have lot an staff to areas. now. market opportunity of we incredible One market a decade staff. So up companies There’s we come where a on there’s other who once think we people

other really people is come can we that by where other out many but really -- there so that And on of how experience side are kind we hire, thoughtful picking may strongly we hire the go. and be letting up around selectively our stuff

terms in good this said, also the Day we about We what but we have and point three A we said platform were cloud really the like we invest that of and going there. in opportunities long migrating time to we Investor ago a our kind opportunities early can, of think to JSM products building seems that ITSM more that was our the new now, with rate fastest customers our behind to at year, program in investing

And invest long-term do we long-term, continue in are that investments to going to to those those continue that. to off are so, and areas medium- we want so pay we short-, again, think and

through with we And the about philosophy in investing thoughtful staff. like, within that. We in priced sure cost attractive so market, be use. fit we having products for That are cycle. that need a and our picking the does long-term are low be to But this around this conscious about up about what make particularly changed very the to cost again, hasn’t certain macro want environments, board going envelope to that

Michael Turrin

the Appreciate you. all Thank detail.

Operator

question Fatima Your Citigroup. from ahead. from Please next go comes Boolani

Fatima Boolani

question question. This my counter Thank little It’s a for you. factual. is afternoon. of taking for bit Good you a Hey, Cameron.

most your migrations see to-date So I is in to the area. But we proportion cloud on to have growth a you expansion the are why cloud committed sensitivity user the staying that know coming the conversely, wouldn’t you seen if slowdown migration. of from

model an out other the that sweat existing short-term be where to just higher. in potentially versus much have wouldn’t the capacity sort customer of seat could they per in why going a user TCO need words, So, the or

you. wouldn’t the on of why cloud. couple migration actually there a Thank cadence impair the Just that to thoughts

Cameron Deatsch

well-engineered that migration primary over So, minute. end rates rephrase of and years The the the we And the, we released ensure the partners ago, customers, of many slowdown between change our server to exactly is now is the with seen customers that had new we loyalty cliff, been customers that why years incentivizing more have cloud last various migration two their to enterprise sitting in wait programs the we incentivizing years set is haven’t since engagement them. discounts, almost basically, make versus of a let for tooling, reason me it life, that try for a last just very effort over last for in renewals proper have them the stages. cloud two our our just announced and ever a and when destination on have until an two

very, moved Some very quickly.

building today. plans are Some

the Some Board, like, But we that minute. last largely are the on waiting, have track. entire to approach across like, you said, seen being,

while more go It’s whole fact they as to looking strategic seeing that value and cloud, the go users, been cloud have. if versus the productivity users users that capacity we So cloud. the unlock they the not a we can on-premises we users add the the to to and there’s need have add they for have to they more want XXX like cloud in been we challenge. migrate decision a adding of users, cloud should on lot we made It’s to haven’t more more the, to hey, more more might

go to tools that teams let’s hired the available have if continue So finish so more best operate through less the even we this and in efficiently them going and were to future. have project to people our

for choosing to in long-term, it’s and wasn’t cloud. really them best to in solution course, to to room, them it to market how programs compel are tied to put So them the reacting we the many of the tied people the that more move

Fatima Boolani

Thank you for that.

Cameron Deatsch

Welcome.

Operator

question. state from question your Your next comes Arjun from Please Bhatia Blair. William

Arjun Bhatia

broader help further any multi-product customers earlier just for are you the have that one taking us rest more the Hello. their that deployment Yes. it of questions. you then forward the year provided, guidance impact Thank curious, there in and when the numbers? you Thank versus I committed than the about can Joe, break just down am way larger are perspective you from understand seeing, smaller incorporating thinking that when is behavior are are a are my to in customers just And journey? you are of a macro that you, the are maybe you. for that what between any just about seeing macro you you you think from that

Scott Farquhar

want I can single open to have that take been quarter we company, philosophy Arjun. Look, right? re-stress our no of I Hey, one. We public. bullshit, every told you have

are being think good customers customers and open about be the optimizing all. with is right? stay of no is, to and you the change best are and tuning to part for that likely XXth secondly at rate dealing addressed right? in I where converting bit. that We are said. been to we anecdotally going the down If to them areas continues user, These will they of that think we their migrations, at to us free with paid, guess who The you are quite for rates. front of leaving be in churn These The is on. user two historical we are some we customers seeing clear the we expansion do for that is is, has clear that strong. going both and as rate the you opportunities and a own XX. growth, have see offense number can to best and of we We Atlassian usage aren’t spend are add us, also their which highlighted in users of more today have, going the with decrease that optimizing what’s Cameron instances, see about you where slowing areas go turbulence are to or us tried rate you The the about pretty their of great letter, just consistent sort in playing right? again, impact, the spend, We reason and

looking If per spend, if can is can monthly are place perspective, you optimizing that a to pay you you than -- do on-premise, there user, et cetera. pay -- an are customer cloud think you because at about it from easier and

optimization, do much So it’s terms easy secondly, slightly We that ROI the all you that of a gives in you. and a software. higher running for

So that’s why tracking continued which see we opportunities strongly. are and migrations,

really for really have Secondly, in lastly, enterprise. that for years us. ITSM, XX of on And enterprises, optimize of the continuing we we we great a a to certainly see mentioned seeing as are opportunity huge of significant back strong That’s repeatedly opportunity the in work growth. area

play into and hopefully, some but we about, that about color environment gives those the all in market positioned that well about share are to this So future. think talked excited you background really we enterprise gain the you where

Cameron Deatsch

Cameron, little is a on. this And I will add

Arjun Bhatia

Thank you. Oh! Sorry.

Cameron Deatsch

view Just more do give the our customer base over of growth little how you a we growth. enterprise SMB

Now see in growth to the I geographies, all broad users, seems and cohorts. the across the we base. of industries rate said, do largely foremost, across all customer be customers, constraints first and that Like it sized

and do impact fact comes are a when due see have outsized in we for medium-sized migrations, due an enterprise to to few However, it enterprise dynamics. primarily to business continue going business to as to our compared which business, our the planned, that strength our simply reasons, small- pricing

one our applications, with also of see global just On which we grow partnership their when continues enterprise massive gives over of is that, we of our products Quadrant, the their migrations, to cloud we month, standardize as in today, have the Accenture, more their a with named even choose massive or announced enterprise. last scale IT operations enterprise our system top that that’s the customers in the we service inputs. us their And move credibility growth leader to whether to transformation in which the the market, were our large to customers second they look shows that industry the enterprise Gartner and continue Magic business continue agile management The additions on in that transition. mentioned, IT through to transitions, in management into as Mike integrators help service our expand cases just use which to in the

Joe Binz

this the then Joe, about is the you guidance. asked And assumptions Arjun, underpinning

in assuming fundamental our things two are guidance. We

secondarily, trends or better paid customers get around First, the the It current the year. expansion rates QX does business worse. in saw throughout we does not environment the on persists free-to-paid then, conversion the existing year and macroeconomic throughout macro materially better And worse. or impact not at get materially seat the and also and persist

status So, most, on are to on Like monitor side words, and business the in side both other quo we on and we those adjusting guidance closely, to two the macro responding assumes the factors. continue things and it.

an As performance there’s and performance QX we have what in now right saw range, know, appropriate both of you is QX think there. our and we uncertainty trends given underlying lot a the this we seen and to-date quarter-to-date

Operator

from Please Your from comes ahead. Zukin Alex Research. next go question Wolfe

Alex Zukin

questions. the SMB, there say it’s the if the couple year, for mid-market, the Yeah. the at trend, exiting the year, want years. year is a cloud talked takedown? perspective, does XX% quarter, we from taking started can And answer would -- incremental correctly it last about additions being see cloud dissect last when and growth that dive to kind a -- adds for the in weeks give impact, -- seat in a maybe this for it enterprise, of adds, Help guess, this seat both is just the from the growth unpack Analyst is if module the us in cloud sense others. issues, is financial compensated Hey, where headwinds that’s growth, enterprise the the revenue think that I by into maybe I October? the of the we about for Cameron these how for the trended you that I to Day, you the remember more guys. Thanks you two at like, because wasn’t but and that from little that Is the are us enterprise? of

assuming just but for years. for clarify, next for is Apologize couple the the I questions. it’s multiple So to am year, this coming also of off I want that off

Cameron Deatsch

address off No at the and part first hand to I problem Joe. all. then will

coming products easy So as you think growth, they to to customers is it’s those have the adding in, purchased. know, our cloud customers users that that new

piece of our In either XX% to premium other growth, migration addition the of growth of products. cross-sell products. of big to to additions is or their cloud upgrading version expanding due course, Also, enterprise and is out migrations, to our our another roughly

saw user So slowed the over that and as we was saw to diagnose starting rate. X,XXX the to saw free net QX we conversion still what but we We new somewhat customers in growth. QX, paid we customers slow specifically saw to specific the areas net their new in slowing customers that customers, down added

is see our an added who rate to not in existing or We did motions. someone So cross-sell they cloud users. migrations down customer on or upgrades the edition slowing either major any more which impact

So just to tied additions it’s the user hiring. largely primarily

adding more growth. customers planned. their other and Joe? we down, slowing FX as our more are Those -- user on originally employees then which track and right efforts Our that business down slows into

Joe Binz

range. going exit QX to exit the to your rates Alex, on XX% we we growth are then in XX% how with expect And to QX, question Cameron. Thanks, revenue cloud

Alex Zukin

Perfect. Thank you, guys.

Operator

question from comes from ahead. Mizuho go Please Gregg Your Securities. next Moskowitz

Gregg Moskowitz

the Okay. taking Thank you for question.

of a and tremendous I the think usage patterns. very are one, reasons as into Atlassian company customer quarters linear, and of two, So have being software couple way, visibility in your good an buying a that, unusual typically you

quarter. to And than to whether macro a or to enabled like the has investors the others? you this slowdown to that do navigate question make wondering there have adjustments was paid you. midway I ability that anything growth difficult through what that that here see surprised believe you I’d are were the with you to unfolded, the spirit said, is, the as so, early results the Thank had it better very from slowdown is Atlassian? am the question user warning you began that the of And pretty and have so mitigate of And able

Cameron Deatsch

This is again. Gregg. Cameron Hi,

Scott Farquhar

I will…

Cameron Deatsch

Sorry.

Scott. Go ahead. Sorry,

Scott Farquhar

here. Scott It’s

to sort of many quarters They philosophically, say, of of things how sales are we and many at, do a sales Gregg, business. run want how many and our of one team. drive back I peers sort from people I company there we long-term are got have Just that’s how really their the reps look and they their the

much it If you our priced of at on basis look really from model out more long-term day a also self-serve are our our than where is reasonably business, a a much customers come more we and perspective, many first price there. competitors

quarter so, affect the have good linearity we you many the And there results, aren’t that and why last year. which in do of, a seen the over terms things is quarter’s bad, within you can from the years for to see

really product, so macro adding by And down segment. they geo, this about cut changed market by environment to I to has because not every are we Atlassian. the It seats look way, the and that when add the them, which and are we environment way have used by hiring of customers what comes seeing, outside heads

-- we so, can have there, we -- And products long-term to we customers. we we that, more see really are trend sell got

a product A pipeline products. great We have point in

in to strongly. them, though migrations reasons is in strongly ROI And still We have market going The cost one their environment things centers. they going money. to they because so managing where us an is they people and opportunities data down, are overall the ITSM. compelling that just pay got TCO of less goes are to manage great or the The they service them own more had

something and the long-term. really of short-term the products at over then adding now, great versus we opportunities those seen on And of not that. our we are that share, opportunity, for so take here mostly again, cost and to And we like, And it’s market opportunities great so, materially competitors that’s we what they I changed great also a products seeing in think points so are out look They for stickiness are a are competitive within and because any have sort quarter. us to haven’t there. do is about that’s play all when seats us the churn, that, the way out

Gregg Moskowitz

Thanks, Very helpful perspective. guys.

Cameron Deatsch

I saw. the can on that timing just things to of add also we

upgrading users leverage their of advantages not our do see adding continuing have to that’s great other upgrading in holidays last have ones thing in in adding August, over base, seasonality, everyone vacations be people even is was were going to and trend what our and due free whether it’s instances users. As migration timeframe August to tend additions, on normal continue we actually largely is and few work, our normally business, one the have that, plenty the few normally we wear customers see we upgrading through that customers, we off drivers August. mentioned growth of July we down is usually efforts user growth slowing escalate normal released summer net We down uptick people the to slow season, relying can in into converted products paid August seeing across that, the we are user slower our customer new expansion are again, the just tends It August that as which years you do the we to and quarters. and the was is and when where a when to come to in back seasonal July other start holidays. we did not a most coming we instances, or September. more What back The noticed September, new to growth that of

other plenty user levers expansion see that when slowdown. tend we So we pull to

Gregg Moskowitz

both. you Thank Great.

Operator

Jefferies. question next Your comes ahead. go Brent from from Please Thill

Brent Thill

growth in the about nine to face comment to EMEA through X then what can I Headcount do months Thanks. you had XX looked how quarters that of thinking into months biggest talk geography like seeing kind are investment in next you Can accelerated it pace? to six a versus on the this fastest you follow-up slowdown. perspective, on And quick of are you the to the just had hit, and going are EMEA what you U.S.? the just the

Scott Farquhar

the side take will I headcount the talk geo can and of about things. Cam

our On right? I are who seasonality lot the mean, out quarter. the headcount perspective U.S. a in headcount, coming this on high a is started We graduates watermark do of it you have growth. from

So our ensuring are growth our numbers moderation are conditions going forward, Cam? of that going we And of people the this projects. sort still productive thinking light are of most boost. be those going that and about gives we does macroeconomic on course, to like but quarter’s what the growing moderating headcount, look a of headcount in

Cameron Deatsch

trends geographic Yeah. base been the geographies. customer all From see largely across segments, as has and across our to I a we tend industries mentioned perspective, prior,

constant That we or down slow projects those into Plenty this uncertainty the largely see about areas with a So going down, but look our Europe are than get other we programs and perspective. cross-sell the have discussions has quantitative quantitative we efforts definitely seen we upgrades, already Qualitatively, to conversation point, are about, plenty to financial a have no next or macroeconomic of impacting their spoken it’s to user when the be what slow to we expansion of continue track APAC, customers, on do variety see migrations year. but cost to our businesses. change we slowing related have customers. at from specifically not to we that we addition migrations, concerns when talk concerns having that

Brent Thill

Thanks.

Operator

Your next Capital from ahead. Please from comes go Turits question KeyBanc Markets. Michael

Michael Turits

Hey, guys.

or there to expansions subject anything customers slower world? slowdown headcount the see in the tied your customers themselves. you in is have we growth in in you conversions, cloud perhaps, trying be development words, and may of headcount for among and both the say, heard of quarter? in customers spend Can growth software how in that among or to other the of not particular may terms what the On not if you about developers this are In

Scott Farquhar

question and the are Does into is appreciate that our our factor slow. headcount headcount where are that seeing I I that of forth. growth we customers, customers direction other cloud the slowing Michael, so asking, are which you is, spends of think seeing departments

have base sort across entire to opinion any of our in us I customer on the think like, strong it’s too that, early customers. we for feel

specific of developers. speaking to to hard But haven’t away sort take are is, the is to migrations. the about it’s slow people thing selling for course, from decide that, our we year’s we customers, to history our last of seen to more us really So be result

people try that sort to of haven’t We that. you seen which detail cancel to on any just or reduce tied But really It headcount couldn’t give or is I department is. growth. anything contracts more like

Michael Turits

between But a question, where also big ability difference customers mean, of any spending have But or the you you with about fairly big some fall another part the in the companies is a maybe you Okay. there’s small? the are one se, Do terms Can think of with underneath lot thinking per company’s you see money ones. to I way all therefore, seeing senses I of are different people of in small across I segments it budgeting there just too? but you of radar with not to budget spend. have segments. obviously ask decisions. Atlassian, additional and in you said small sizes versus a And spend big some

Cameron Deatsch

This like, and instances users, users, put base, eight of and that have across if users answer a the Management not Service look in you plans, these free with have we then XX small Align credit card Yeah. about you this conversations relatively pay nine our And that. they customers, Jira end, large cases, really, largest Even if actually coming willingness our having to in their or minimal customers free see when to to product on-premises Cameron we Jira their customers. the use to on our is paid plenty or with our down. are conversations whether amount migrations new are that’s of our expanding largest to get get slow we most into seen users,

XXX to and they have users big So a because them have adding or more X,XXX our expanded discussions tied revenue are you. Where portion with users, of discussions have based they less or rapidly what development teams them, project their that. are ask we

is, no. answer the So

expansion their how not how wallet people It’s and expanding share overall people businesses. to user their spend are footprint much many We tied the are have more with definitely seen much directly hiring current tied technology Atlassian. of in or to

Michael Turits

much. very Okay. Thanks

Operator

from comes Steven question Koenig next Please Nikko. Your SMBC from go ahead.

Steven Koenig

Hi, for gentlemen. taking my Thanks questions.

fewer to affected velocity people existing of earlier the Thanks XX of am at are going cloud be most monthly like are net seats, your I months and expansion for in higher renewing about the like motions you those look customers? the how with if the seemed steps rates think much. look adding sales you we the do maybe work here. of like wondering at different annual that you cloud to annuals, the slippage Given monthly two the very to customers customers through versus any and seeing need kind

Cameron Deatsch

of advantage we plans. of business customers that monthly our One on plenty is have Yeah. model

We option to And the make plans let go across have Board. we the customers the annual largely choice.

annual good every we come year one like like up have -- all news have is, we plans but it’s plans. at single every we renewing We just plans the have time have not monthly annual as month

success are expansion saw and challenge those given the no, and allows go proactively engage plans. two. to across where to customers. customers We run if for programs monthly to and cloud, watch plans have and customer we the monthly our see like, delta is to starting user with see much users with allows that paying plans us see of between activities or the With usage tied that continue largely even and the will we within into those abilities major have even more quarter, product more annual we both us health number about the accurately us So, telemetry of can exactly products, they we to Difference the continue using incredible we the any to previous we be, that, to annual unhealthy programs, the don’t over territories, customers alike. usage tend training the

Steven Koenig

much. it. Thank very Got you

Operator

Terjanian question Ari from question. Cleveland comes Please your next state Research. Your from

Ari Terjanian

Thank question. the you for taking

to user at break looking slowing on bit or of the far. like tech hiring, the Stripe exposure estimate I letting I all Amazon of Any mean, off little differently expansion, out Shopify, a have headlines, the appreciate asking like Just like color vertical, thus it you you you the kind kind can seems way given people. have

COVID. curious, companies of those hiring aggressively like, during obviously, kind Just were pretty

So kind Thank from cohorts expecting baking seen in user or any benefit of here? during the kind coming of in those months accounted from you COVID tech have growth kind you. curious and just the cohort have like if a if are of for you

Scott Farquhar

-- company, of understand that coming are line are or are tailwinds at this and have sort be you Ari, of becoming we looked days is a we there should company a from whether off COVID thinking your are every is these software transport And a whether you retailer company. questioning what would or think whether that are almost yeah, you like I about, and we about? company a car

sell to we ago every Just a it aspect large people down industry. economy large years when company think products. don’t We lot anytime like, banking, becoming to. we of was don’t and have the -- manufacturing, all our It that’s turned to a vertical of tech, the I than industry soon is changing sort is trend XX started. tech every tech and I And sell why is that to think secular to

teams they to those long their like, that a build to was overly lot talk are the to taken and But also most do retain our to there. with time start teams are again And company companies to are technical up, wouldn’t IP I have technical sell technical products these technology to best restart. say be are they help when people have teams every those that during we customers, are out more hard of the I teams. so they We in ones And that and exposed a doing single effective workers. to are to our downturn, history very

first And and industry, sell but headwinds. be in line sort so do teams on the the Board teams of early to we are across those tech of technical terms think to reduced macro think we that, we last

Ari Terjanian

you. Thank

Operator

question James. next comes ahead. Your Raymond from Please [ph] go Mark from Hatch

Unidentified Analyst

wanted is these cloud. understanding And Thanks you the you the ongoing, are but would This would question. to when Adam. on Yeah. this ask discounts are potential is size Mark about discounting off still see overall I to uplift to doing for how to rolling customers and to Thank for that impact? migrate and loyalty the really you. start margins revenue you as

Cameron Deatsch

Yeah.

So this is Cameron here.

to effectively life, have you that as a down had we So aggressive the server life. when and basically end a we for over of the every loyalty Xst those of the loyalty following end period announced July we three-year been discounts while, server led rolled as discounts

list sooner roll our move bigger and to over discount would all for get the still and that a So that’s discounts eventually to they the as three-year of down, choose would effectively, period our the customers. to they get customers the cloud, then the price loyalty truth

up June So loyalty a of the last going we have still discount XXth. loyalty discounts It’s place. until in year

up well. customers contracts, will did terms three-year on to of list paying anything? be you add all Joe, as paying next one-year of want year, contracts As on at of price to customers, are who are existing their All list. effectively new . be July the three-year at end

Joe Binz

was and around, do in changes the just going those question we see that the start those to immediate. to impact Yeah. it’s when of and Cam, is to answer price not the I the model mention

there’s reasons So two that, for Mark.

which our recognition First and that the post foremost subscription, ratable is And those XX% secondly, throughout of is renewals on timing changes. revenue. happen year of the the

you when through types to into it So those an run will won’t impact over the of we pricing model immediate changes, see tend go time.

Unidentified Analyst

Thank Yeah. you.

Cameron Deatsch

Yeah. Thanks.

Operator

Peter comes Weed Bernstein. from ahead. Please question next from go Your

Peter Weed

that XXX% and net revenue you NRR you XXX% on retention over previously referenced XXX%. and talked seeing Earlier were and back to about you. touched still you enterprise, Thank

that I cloud for were obviously, just was from you still you base that of on? XXX%, comes said or because Was large- the than report when not businesses, for medium- revenue clarify, you Now or your entire more businesses that. to whether that kind large-sized wanted mid-sized revenue that exceeding and and

Joe Binz

This question. was base Peter, thanks Yeah. that the is the That Joe. report we for entire customer on. for

Peter Weed

frustrating, seeing transition you things I the certainly, as paid, but trying Okay. in pressures are like there are there, that it mean, smaller But taking alluding look that hear that being competitive to is I any get within how certainly, into to the think thrown And were you here. you then note you you customers GitLab use do a are try to to a concerned or not that what it upgrading customers alternative lower if be are paid these are they to that get solutions people you with better? Is are could an using able seeing just may as that to situations be people they Thanks. around where have sophisticated other of you done some Atlassian organization. genuinely at

Cameron Deatsch

And customer position. existing This customers, no Board, see across we Cameron. competitive first yes, or whether foremost, Yeah. is it’s in change overall real our This new acquisition the the Cam. and is

of Also our make that to at of We part we to We them of incredibly budgets applications level also vendor program see the dynamic where a you the Atlassian across as alternative that us and going strong if looking products. users people products, getting we any converting into of be compared an choosing of our incredibly to into seen and our across our still to are customers constrained save happy free have dollar are environments. our products. entire highly It’s money, customers will our their and paid. base, the using Specific free have critical what product definitely core users version and more products and Board. are mentioned, competitive one there, advantages free the certain haven’t integrated because actually one free we

attractive So less most is alternatives. that relatively priced, are we than expensive

change dynamics, nor conversion impact competitors seeing being direct to in So free-to-paid no we our competitive are rates. any

Peter Weed

Thank you.

Mike Cannon-Brookes

one little This wanted just a is maybe is what saying. thing add stronger message in a bit Cameron of Mike. to to I add to

right? again, talked on We and playing about have now, actually see in an a letters same. our share quarter, we think the a few behavior, actually We this markets. in environment I chance opposite as this our of positioned shareholder for lot upcoming up offense period think to actually all markets. very a the in strongly good it’s of major us are X We pick market

in affordable, are an is great chance environment that high extremely market share where optimizing value to customers spend. us Our a up investment for in for products R&D pick customers are

So very that’s area are bullish we and going an after.

Operator

Please Havemeyer ahead. next from [Operator comes Instructions] Fred Macquarie. Your question from go

Fred Havemeyer

you are ask, to we sorry, you. I Thank saw Hi. net what terms conversion, now wanted well as of just What it’s compare hiring seeing intensified, were now you and if and businesses to with what consider have when or then? versus COVID are just wanted seeing that to in slowdown free-to-paid seeing say, are contrast or you what you you freeze ask, layoffs the seeing new, certainly of expansion. compare I to could you began of now in capital start to XXXX the we to generally ahead froze. like, seen But at just the user respect layoffs, as How are pandemic.

Cameron Deatsch

into year, the right So, XXXX, saw just this Obviously, is we of Cameron. that the only kind COVID, happened. back to I of area. two going back that will had this do beginning looking to things at best my we

small is but you COVID, uplift and of so products, shutting and based trials saw from in a the business new with when that resulted impact our businesses also free actually in on. line remember, in going our that free, sign-ups down huge we to model we activations which of changed If

pre COVID later, significantly trends, had and launch. the renewing. going the If of out QX net our smaller dynamics, higher to as we XXXX, Two not our or of see slowest of two now our new actually our those year conversion number free quarters are to we business tail ever well customer fiscal was than you largely because looking end remember, are it one years growth our new we as is customer of customers at free, of still

if that to altered pieces dynamic the see two models you out into new COVID that even took attracting change of the acquire business ability significantly So of free our the and unknown over all customers today. go years, has last and uncontrolled our we

I dynamic back coming same that, to customers more into clicking up, button to single we store, is which year-over-year, every day, continue the fact still addition the then. our the see say, as and is try signing and more In we saw

that is other all have our later. don’t products, that piece of. we important that ability be kind to most that is to we and for they that the environments are on XXth card, they the to revenue. see between control early always now years see and consistent using getting value enter is are we credit out And months we it we However, of few are of what what can COVID a look their dependent user, is, they get significantly The patient

Fred Havemeyer

not that think, Thank to you. then follow-up think, I one it. Cameron, explaining I was, try on job, that. at And great just just, a Also,

or have Atlassian is But of announced just and that very enterprise-focused quarter, an opportunity solution use Together, there it’s more bundled opportunity these cloud outside customers enterprise know like this days. a of to to of some of either offering to this just from of center in on-premise or onboard them early transition driving an terms In the the data potentially into Together? it launched sales into and I you seems that’s add

Mike Cannon-Brookes

Mike it’s for answer. you Super the out to Yes managed a here. doing strategy Fred, that. it is product Thank you put glad question.

at So, a conference offering. targeting announced reminder, an Atlassian Work enterprise-focused management. Together We Life, work is a

products, we work than the doubt continued, have customers arena, we strong we us. differently that so very our no as platform, for say, XXX,XXX together. make in seen work a have our have more There’s you management in to market as Now

to all to to our customers of purchase in also significantly that the work the think to the [ph] survey spend their Atlassian to used on per customers continue and the targeted well we use offering we topped we -- are products all or it’s customer, believe customers with the largest them to it’s an in latest is each increasing own works terms incredibly allow go work other generally going XX and number other So Together focused as of number products team and work of their management in work applications up, we all applications together users. want that third-party XX want way, and believe. our with OCTA of I products who our together of every

across individual to from applications way your out maybe that, Obviously, Work center coming realm. because base. usage from only It’s Management employee Confluence X,XXX to early employees applications an or they incredible center, very server data XX,XXX data have really server you mentioned, don’t employees, to the manage you have it’s when you days. to access Atlassian’s as rolling are do So for customers on and

includes So Confluence Jira together Atlassian Atlassian which offering. is Management, Access, new our Work Atlas, and Trello,

products five the So Atlassian come those package. together in

have If you from you moving only coming are to cloud, on-premise the Confluence. and

it all hope especially and was it results only collaborate feedback, far ability say, offering, is yet. who is out. offering ago. So our moving Management terms you Work a customers have them updates to their But are each larger as for those of in rolls to employee up that we with significantly will applications other. the for we the any access for do that more announced that are compelling Initial very will for month of customers People I early customer migrating in too to that space, actual positive. understand see Again,

Fred Havemeyer

you. Thank

Operator

concludes session. turn that I And to over for Mike question-and-answer will you. Thank our now closing remarks. call the

Mike Cannon-Brookes

employees you to have the quarter you wanted I thank for and attending Atlassian Thank I shareholder we today. to questions hope great another for the talk for letter all you world just our and and will for you weekend, say you detailed in all reading wherever to a are quarter. next [inaudible] the and

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