TEAM Q2-2018 Shareholder Letter
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From the CEOs Fellow shareholders, We closed out calendar year 2017 with another strong quarter of fnancial, customer and product growth. Revenue for the quarter was $212.6 million, up 43% year-over-year, with free cash fow of $67.8 million. As of December 31, 2017 we counted 112,571 companies as customers, 4,825 of whom were added in the quarter. This is the most net new customers we've ever added in a single quarter and another milestone on our way to unleashing the potential of every team. We saw solid demand across all our deployment options—Cloud, Server, and Data Center. We continue to land and expand with customers of all sizes, and across numerous industries and geographies. Of course, results like these don't “just happen.” They're driven by product innovations that make our customers more productive, the incredible ecosystem of vendors that partner with us, and the vibrant community of users we connect with through events like the upcoming Team Tour—all of which you’ll hear more about below. We'll also touch on our expanding U.S. footprint and the newest member of our executive team. Jira Service Desk embedded portals: coming to a site near you No matter what business you're in, whether your customers are internal or external, they're demanding easier access to service. That's why Jira Service Desk users can now embed a mini help portal that lets their customers raise service requests from any web page on their website or intranet, without having to navigate to a separate page on a diferent part of the site. It's like a help button at each customer's fngertips when they need it most. The embedded portal frst responds with answers stored in a knowledge base, so customers get the help they need without creating a barrage of new service tickets. With in-context help and fast access to troubleshooting information, Jira Service Desk is creating better experiences for both customers and service teams. Q2 FY18 2 Atlassian Home surfaces your most important work Imagine opening your computer each day and seeing all your highest-impact items collected into one place, no matter which tools you use to do your work. That is the vision of Atlassian Home—one of the exciting pillars of the Teamwork Platform we announced at Summit in September. By analyzing user interactions and data from across our products, we can now automatically surface the work that is most important to you, such as relevant Confuence pages or Jira issues. We began testing Home in October with our Jira and Confuence Cloud customers, and have received promising early feedback that will shape its development. In the words of one customer, “I mainly live in the new Home. The notifcation center is probably one of the best features that you could have introduced.” We’ll soon be adding Stride, Bitbucket, and Trello data to Home. The more data and products we add to Home, the more insights and value we can add to our customers’ experience over time. Completion of our new Cloud foundation We're pleased to announce the completion of the cloud infrastructure overhaul we mentioned last quarter (and which our CTO, Sri Viswanath, covered at our investor and fnancial analyst session in September). We began the migration of Jira and Confuence Cloud customers in early CY17 and are now running all instances on Amazon Web Services (AWS). The migration of Jira and Confuence rounds out our family of Cloud products that are running multi-tenanted on AWS. Along with the ability to ship product updates more efciently while being more cost-efective over time, the new cloud foundation ofers customers better performance and reduced latency thanks to the global Q2 FY18 3 distribution of our AWS data centers. Indeed, over 25% of Jira and Confuence Cloud customers are now hosted in the new AWS center we established in Ireland last May, which will serve a growing proportion of European customers. Our amazing ecosystem Our ability to serve teams of all types is seen not only in the breadth of our customer base but also in the vibrant ecosystem surrounding Atlassian. Our Atlassian Marketplace vendors ofer more than 3,500 apps that allow customers to tailor our products to their specifc needs. The Marketplace has generated over $350 million in total lifetime sales since its inception in 2012. The growth of the Atlassian ecosystem has enabled many Marketplace vendors to build thriving businesses in their own right. We profle a few of our super-star partners below. Adaptavist is a Platinum Solution Partner, exclusively serving the Atlassian ecosystem. They ofer Atlassian customers professional services, training, managed services, and road-tested, enterprise- friendly apps through the Atlassian Marketplace. With more than 15,000 copies actively running, their app ScriptRunner for Jira (available for Server and Cloud) is one of the most popular apps in the Marketplace. Adaptavist makes ScriptRunner apps across the Atlassian suite which allow for easy, powerful automation, UI customization, and complex workfow confguration. They launched ScriptRunner for Jira Cloud in September 2016, and the app has seen over 55% customer growth and more than 100% revenue growth in under a year. Portugal-based Xpand IT’s bread and butter was providing consulting services to larger markets in countries like Germany and the United Kingdom, until they discovered the Atlassian Marketplace. In 2013, they started building apps for Atlassian products, most notably Xray for automated test management in Jira Software. Since then, Atlassian apps have grown to become a multi-million dollar business for Xpand IT, and they expect to see continued exponential growth for the foreseeable future. Their four apps have netted more than 3,000 customers, including Tesla, Boeing, Intel, Nike and Walmart. Tempo started as just a few IT consultants working for a frm in Iceland who wanted to use Jira Software to track their hours, since they were already using it to manage their projects. Taking advantage of Jira's freely accessible APIs they built a time tracking app, initially just for their own use. When the Atlassian Marketplace was just getting started, they decided to ofer "Tempo Timesheets" there in case anyone else wanted to use it. Turns out a lot of people did. More than a decade later, Tempo has spun of into a standalone company with approximately 100 employees Q2 FY18 4 and 11,000 customers using their core products (their Atlassian apps), as well as the accompanying mobile apps, Chrome extensions, and integrations. To ensure that we have a ready-made ecosystem in place once our newest product, Stride, becomes available to all users, we hosted StrideCon this past quarter: a week-long event in Saratoga, California that brought Atlassian Marketplace vendors together with members of the Stride team. Over the course of that week, vendors worked with Stride’s API, building prototype apps and getting feedback on them. Look for apps that help teams turn conversation into action with Stride in new ways—coming soon to the Marketplace. Introducing Trello to Japan In 2013, Atlassian established an ofce in Yokohama, Japan ofering local sales and technical support. Japan has been an important international growth market for us ever since. In November, we were excited to ofcially introduce Trello to the Japanese market by launching an improved localized product, as well as partnerships with local companies like knowledge-sharing platform Qiita and group chat tool ChatWork as they build integrations with Trello. Engaging the Atlassian community with the Team Tour For the past nine years, we’ve brought teams together at Atlassian Summit to talk tools, practices and all things teamwork. Now we're taking the show on the road. The Atlassian Team Tour starts February 8th in Amsterdam, and will cross the globe with a total of ten stops on three continents. You can fnd out more at: https://www.atlassian.com/company/events/teamtour. Q2 FY18 5 The Team Tour serves to augment the thriving community we're creating both on the ground and online. Already, we have more than 1.1 million members registered with the Atlassian Community website—a user-driven Q&A forum (which you can fnd at https://community.atlassian.com/). Meanwhile, local Atlassian User Groups (AUGs) which meet regularly to share tips and learn about product updates, have grown to include more than 30,000 members in over 150 cities. In just this most recent quarter, more than 3,600 AUG members got together at over 175 events. We’re excited to strengthen our relationships with users such as these by engaging with them in person on their home turf. Expanding our U.S. footprint We are undergoing expansions that will allow us to continue scaling our employee base in the Bay Area, with Atlassians in San Francisco and Mountain View gearing up for new ofces. We’re committed to investing in engineering and product development, and recently moved to a bigger space in Mountain View—the heart of Silicon Valley—to help us continue to attract and retain top talent. Just north in San Francisco, we’ve signed a lease for a larger ofce, which will be ready for move-in late in CY 2018. Welcoming new CFO James Beer We are thrilled to announce that James Beer will join Atlassian as chief fnancial ofcer on February 20, 2018. Since 2013, James has served as executive vice president and chief fnancial ofcer of McKesson Corporation, overseeing all fnance functions. Prior to his tenure at McKesson, James spent eight years as the executive vice president and chief fnancial ofcer of Symantec Corporation, managing the worldwide fnance organization.