Expanding ecosystem of products is fueling the long-term opportunity.
Businesses are trying to recruit the best IT talent from across the globe to be competitive, and they’re perfectly fine with their employees not showing up in the office every day. One companycentral to powering this distributed workforce model is Atlassian (NASDAQ:TEAM), a leader in IT collaboration and work management tools. Since its IPO in December 2015, the Australian giant has rewarded its investors handsomely, and there are three key reasons why that trend is likely to continue. Atlassian makes teams productive and scalable
Historically, IT departments have struggled to coordinate work effectively, develop software without engineers stepping on each other’s toes, and document and share knowledge. COVID-19 exacerbated those challenges as more and more people began working remotely. And the steadfast focus on building IT systems faster, as companies try to gain an edge on each other in an increasingly digital world, makes the need for collaboration and work management tools is more dire than ever. Image source: Getty Images. Traditional tools such as emails and spreadsheets are incapable of supporting the needs of today’s IT teams; they don’t allow real-time interactivity, scalability, quick and easy access to information, or software code management capabilities. That’s where Atlassian and its suite of products helps IT and other departments in over 225,000 companies effectively collaborate, develop software, and resolve production issues with reliability, speed, and quality. Expanding product ecosystem is growing the lead
Atlassian, founded in 2001, started out by providing tools for developers to collaborate. Since then, the company has grown its suite of offerings, either internally or via acquisitions, with the mission to help teams around the world unleash their potential . The company began its journey with its collaboration tool Jira, and then systematically expanded its offerings to address the most pressing needs of IT teams: Confluence : Document and share content such as product specifications, blogs.
Trello : Assign and track work items with a visual workflow.
Bitbucket : Store, share, integrate software code.
Opsgenie : Report and respond to technical issues.
Developers love Atlassian’s products. Once customers start using Atlassian, it becomes very difficult for them to get away. It takes time, effort, and expense for companies to adopt its comprehensive suite of tools, and even more for them to replace them with a rival product. And in many cases, no competitor can easily meet all the customer needs that Atlassian can; switching would require customers to adopt multiple other solutions. This one-stop-shop simplicity helps Atlassian establish long-term relationships with its customers, and keeps its competitors at arms length.
Atlassian’s products are now also being adopted by non-IT departments. Atlassian’s customer base is growing quickly, and customers are paying more and more for the value they’re getting: Total customers 152,727 159,433 204,754 226,521 Customers paying > $50,000 4,091 5,892 8,246 – Customers paying > $500,000 171 267 412 – Customers paying > $1,000,000 59 104 178 – SOURCE: COMPANY EARNING RELEASES. FISCAL YEAR ENDS IN JUNE. Robust execution is driving growth and financial resilience
Atlassian, capitalizing on its growing ecosystem, has grown its revenue by more than30% per year over the past three years. Total revenue (in millions) $1,210 $1,614 $2,089 31% SOURCE: COMPANY EARNING RELEASE. FISCAL PERIOD ENDS IN JUNE. GROWTH: COMPOUND ANNUAL GROWTH RATE.
A key factor for investors to take note of is Atlassian’s growing percentage of higher-margin cloud product revenue. Cloud revenue grew 58% year over year in the recently reported quarter, faster than the 37% growth in total revenue, and it now makes up 53% of total revenue, relative to 46% in the year-ago quarter. This profit boosting trend bodes very well for the company.
Atlassian has also built a big advantage with its freemium model. Atlassian makes limited versions of its products available at no cost, and developers, after seeing the value in the company’s products, promote its sales within their companies and developer communities. Thanks to this word-of-mouth campaign, Atlassian spends only about 18% of revenue in sales and marketing. Compare that to another player in the work management space, Asana, which spent 72% of its revenue on sales and marketing expenses for the first nine months of 2021. Atlassian’s well-oiled execution machine is generating over $0.30 in free cash flow for every dollar of revenue it is producing.
SOURCE: COMPANY EARNING RELEASE. FISCAL PERIOD ENDS IN JUNE. GROWTH: COMPOUND ANNUAL GROWTH RATE.
Strong cash flow allowed the company to plow a whopping 46% of its sales in research and development in fiscal 2021, […]
Protected by Patchstack