Market Overview

Atlassian Announces Fourth Quarter and Fiscal Year 2018 Results

Share:

Quarterly revenue of $243.8 million, up 40% year-over-year

Quarterly IFRS operating margin of (2%) and non-IFRS operating
margin of 19%

Quarterly free cash flow of $64.4 million and free cash flow margin
of 26%

Atlassian Corporation Plc (NASDAQ:TEAM), a leading provider of
team collaboration and productivity software, today announced financial
results for its fourth quarter and fiscal year ended June 30, 2018 and
released a shareholder letter on the Investor Relations section of its
website at https://investors.atlassian.com.
The financial results for the fourth quarters and fiscal years ended
June 30, 2018 and 2017 contained in this press release are based on the
previous revenue recognition standard (IAS 18). The guidance for the
first quarter and fiscal year ended June 30, 2019 is based on the new
revenue recognition standard (IFRS 15), which Atlassian adopted on July
1, 2018. For comparability, Atlassian has provided historical financial
results under IFRS 15 on its investor relations website.

"Atlassian finished a tremendous fiscal 2018 with a strong fourth
quarter, adding more than 6,600 net new customers," said Scott Farquhar,
Atlassian's co-CEO and co-founder. "We ended the year with more than
125,000 customers and are passionately committed to serving teams of all
types and sizes across the Fortune 500,000. Our success in delivering
great products and value to our customers was reflected in our financial
results, as we grew annual revenue to $874 million, while generating
more than $281 million of free cash flow."

Fourth Quarter Fiscal 2018 Financial Highlights

On an IFRS basis, Atlassian reported:

  • Revenue: Total revenue was $243.8 million for the fourth
    quarter of fiscal 2018, up 40% from $174.3 million for the fourth
    quarter of fiscal 2017.
  • Operating Loss and Operating Margin: Operating loss was
    $5.3 million for the fourth quarter of fiscal 2018, compared with
    $32.3 million for the fourth quarter of fiscal 2017. Operating
    margin was (2%) for the fourth quarter of fiscal 2018, compared with
    (19%) for the fourth quarter of fiscal 2017.
  • Net Loss and Net Loss Per Diluted Share: Net loss was
    $25.9 million for the fourth quarter of fiscal 2018, compared with
    $20.7 million for the fourth quarter of fiscal 2017. Net loss per
    diluted share was $0.11 for the fourth quarter of fiscal 2018,
    compared with $0.09 for the fourth quarter of fiscal 2017.
  • Balance Sheet: Cash and cash equivalents and short-term
    investments at the end of the fourth quarter of fiscal 2018
    totaled $1.7 billion.

On a non-IFRS basis, Atlassian reported:

  • Operating Income and Operating Margin: Operating income
    was $47.5 million for the fourth quarter of fiscal 2018, compared with
    $24.3 million for the fourth quarter of fiscal 2017. Operating margin
    was 19% for the fourth quarter of fiscal 2018, compared with 14% for
    the fourth quarter of fiscal 2017.
  • Net Income and Net Income Per Diluted Share: Net
    income was $33.0 million for the fourth quarter of fiscal 2018,
    compared with $21.6 million for the fourth quarter of fiscal 2017. Net
    income per diluted share was $0.13 for the fourth quarter of fiscal
    2018, compared with $0.09 per diluted share for the fourth quarter of
    fiscal 2017.
  • Free Cash Flow: Cash flow from operations for
    the fourth quarter of fiscal 2018 was $82.2 million, while capital
    expenditures totaled $17.8 million, resulting in free cash flow of
    $64.4 million, an increase of 45% year-over-year.

Fiscal Year 2018 Financial Highlights

On an IFRS basis, Atlassian reported:

  • Revenue: Total revenue was $874.0 million for fiscal year
    2018, up 41% from $619.9 million for fiscal year 2017.
  • Operating Loss and Operating Margin: Operating loss was
    $53.7 million for fiscal year 2018, compared with $63.1 million for
    fiscal year 2017. Operating margin was (6%) for fiscal 2018, compared
    with (10%) for fiscal 2017.
  • Net Loss and Net Loss Per Diluted Share: Net loss was $119.3
    million for fiscal year 2018, compared with $42.5 million for fiscal
    year 2017. Net loss per diluted share was $0.52 for fiscal year 2018,
    compared with $0.19 for fiscal year 2017.

On a non-IFRS basis, Atlassian reported:

  • Operating Income and Operating Margin: Operating income
    was $166.4 million for fiscal year 2018, compared with $104.2 million
    for fiscal year 2017. Operating margin was 19% for fiscal 2018,
    compared with 17% for fiscal 2017.
  • Net Income and Net Income Per Diluted Share: Net income
    was $118.6 million for fiscal year 2018, compared with $84.9 million
    for fiscal year 2017. Net income per diluted share was $0.49 for
    fiscal year 2018, compared with $0.36 per diluted share for fiscal
    year 2017.
  • Free Cash Flow: Cash flow from operations for fiscal year
    2018 was $311.4 million while capital expenditures totaled $30.2
    million, leading to free cash flow of $281.2 million, an increase of
    53% year-over-year.

A reconciliation of IFRS to non-IFRS financial measures has been
provided in the financial statement tables included in this press
release. An explanation of these measures is also included below, under
the heading "About Non-IFRS Financial Measures."

Strategic Partnership with Slack

Atlassian today announced that it has entered into a strategic
partnership with Slack. Atlassian currently has two offerings in the
real-time communications market: Stride and Hipchat. With this
partnership, Atlassian will exit the communications space. Slack has
acquired the intellectual property for Stride and Hipchat Cloud, both of
which will be discontinued. Atlassian will also discontinue Hipchat
Server and Data Center and will be working with Slack to provide a
migration path for customers of all four products.

Atlassian products and Slack already work well together, and the
companies will form an even closer relationship moving forward. The
companies anticipate deepening their existing product integrations
between Jira Cloud, Bitbucket Cloud, Trello, and Slack, and also expect
to build new integrations between Confluence Cloud and Slack.

The companies expect to also partner in the areas of marketing, sales,
and channel enablement, and will provide more details on these plans in
the future.

Atlassian has also made an equity investment in Slack to reinforce the
long-term nature and significance of the partnership.

"We are excited to join forces with Slack to target the immense markets
for team collaboration and communications," said Mike Cannon-Brookes,
Atlassian's co-CEO and co-founder. "The partnership enables us to offer
our customers the best of both worlds - Atlassian's leading
collaboration products combined with Slack's business communications
platform. This decision also supports Atlassian's broader product and
investment strategy in fiscal 2019 as we continue on our mission of
unleashing the potential of every team."

Recent Business Highlights

  • Customer growth: Atlassian ended the fourth quarter of fiscal
    2018 with a total customer count, on an active subscription or
    maintenance agreement basis, of 125,796, having added 6,638 net new
    customers during the quarter.
  • Atlassian Access launch: Atlassian announced the general
    availability of Atlassian Access, a set of capabilities that gives
    administrators company-wide visibility, control, and security over
    their Atlassian Cloud products, while providing users easy access to
    the collaborative tools they rely on to get work done. Atlassian
    Access allows Cloud customers the ability to enable SAML single
    sign-on and enforce two-step verification and password policies.
    Pricing for Atlassian Access starts at $3 per user per month.
  • Atlassian Marketplace: The Atlassian Marketplace, one of the
    largest enterprise software marketplaces, passed a new milestone, with
    more than $500 million in lifetime purchases since its inception in
    2012. For fiscal 2018, the Atlassian Marketplace generated over $200
    million in purchases.

Financial Targets

Atlassian is providing its financial targets for the first quarter and
full fiscal year 2019 based on the new revenue recognition standard
(IFRS 15). The company's financial targets are as follows:

  • First Quarter Fiscal 2019:
    • Total revenue is expected to be in the range of $258 million to
      $260 million.
    • Gross margin is expected to be approximately 82% on an IFRS basis
      and approximately 86% on a non-IFRS basis.
    • Operating margin is expected to be approximately (5%) on an IFRS
      basis and approximately 21% on a non-IFRS basis.
    • Net loss per diluted share is expected to be approximately ($0.13)
      on an IFRS basis, and net income per diluted share is expected to
      be approximately $0.19 on a non-IFRS basis.
    • Weighted average share count is expected to be in the range of 235
      million to 237 million shares when calculating diluted IFRS net
      loss per share and in the range of 247 million to 249 million
      shares when calculating diluted non-IFRS net income per share.
  • Fiscal Year 2019:
    • Total revenue is expected to be in the range of $1,146 million to
      $1,154 million.
    • Gross margin is expected to be in the range of 82% to 83% on an
      IFRS basis and in the range of 85% to 86% on a non-IFRS basis.
    • Operating margin is expected to be approximately (4%) on an IFRS
      basis and approximately 20% on a non-IFRS basis.
    • Net loss per diluted share is expected to be approximately ($0.30)
      on an IFRS basis, and net income per diluted share is expected to
      be approximately $0.77 on a non-IFRS basis.
    • Weighted average share count is expected to be in the range of 240
      million to 242 million shares when calculating diluted IFRS net
      loss per share and in the range of 250 million to 252 million
      shares when calculating diluted non-IFRS net loss per share.
    • Free cash flow is expected to be in the range of $350 million to
      $360 million, which includes capital expenditures that are
      expected to be approximately $40 million in fiscal 2019.

With respect to Atlassian's expectations under "Financial Targets"
above, a reconciliation of IFRS to non-IFRS gross margin, operating
margin, net income (loss) per diluted share, and free cash flow have
been provided in the financial statement tables included in this press
release.

Shareholder Letter and Webcast/Conference Call Details

A detailed shareholder letter is available on the Investor Relations
section of Atlassian's website at: https://investors.atlassian.com. Atlassian
will host a webcast and conference call to answer questions today:

  • When: Thursday, July 26, 2018 at 2:00 p.m. Pacific Time (5:00
    p.m. Eastern Time).
  • Webcast: A live webcast of the call can be accessed from
    the Investor Relations section of Atlassian's website at: https://investors.atlassian.com. Following
    the call, a replay will be available on the same website.
  • Dial In: To access the call via telephone in North
    America, please dial 1-888-346-0688. For international callers, please
    dial 1-412-902-4250. Participants should request the "Atlassian call"
    after dialing in.
  • Audio Replay: An audio replay of the call will be available via
    telephone for seven days, beginning two hours after the call. To
    listen to the replay in North America, please dial 1-877-344-7529
    (access code 10121587). International callers, please dial
    1-412-317-0088 (access code 10121587).

Atlassian has used, and will continue to use, its Investor Relations
website at https://investors.atlassian.com
as a means of making material information public and for complying with
its disclosure obligations.

About Atlassian

Atlassian unleashes the potential of every team. Our team collaboration
and productivity software helps teams organize, discuss and complete
shared work. Teams at more than 125,000 customers, across large and
small organizations - including General Motors, Walmart Labs, Bank of
America Merrill Lynch, Lyft, Verizon, Spotify, and NASA - use
Atlassian's project tracking, content creation and sharing, and service
management products to work better together and deliver quality results
on time. Learn more about our products including Jira Software,
Confluence, Trello, Bitbucket, and Jira Service Desk at https://atlassian.com.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, which
statements involve substantial risks and uncertainties. All statements
other than statements of historical fact could be deemed forward
looking, including risks and uncertainties related to statements about
our products, customers, strategic partnerships, expansion, technology
and other key strategic areas, and our financial targets such as
revenue, share count and IFRS and non-IFRS financial measures including
gross margin, operating margin, net income (loss) per diluted share, and
free cash flow.

We undertake no obligation to update any forward-looking statements made
in this press release to reflect events or circumstances after the date
of this press release or to reflect new information or the occurrence of
unanticipated events, except as required by law.

The achievement or success of the matters covered by such
forward-looking statements involves known and unknown risks,
uncertainties and assumptions. If any such risks or uncertainties
materialize or if any of the assumptions prove incorrect, our results
could differ materially from the results expressed or implied by the
forward-looking statements we make. You should not rely upon
forward-looking statements as predictions of future events.
Forward-looking statements represent our management's beliefs and
assumptions only as of the date such statements are made.

Further information on these and other factors that could affect our
financial results is included in filings we make with the Securities and
Exchange Commission from time to time, including the section titled
"Risk Factors" in our most recent Forms 20-F and 6-K (reporting our
quarterly results). These documents are available on the SEC Filings
section of the Investor Relations section of our website at: https://investors.atlassian.com/.

About Non-IFRS Financial Measures

Our reported results and financial targets include certain non-IFRS
financial measures, including non-IFRS gross profit, non-IFRS operating
income, non-IFRS net income, non-IFRS net income per diluted share, and
free cash flow. Management believes that the use of these non-IFRS
financial measures provides consistency and comparability with our past
financial performance, facilitates period-to-period comparisons of our
results of operations, and also facilitates comparisons with peer
companies, many of which use similar non-IFRS or non-GAAP financial
measures to supplement their IFRS or GAAP results. Non-IFRS results are
presented for supplemental informational purposes only to aid in
understanding our operating results. The non-IFRS results should not be
considered a substitute for financial information presented in
accordance with IFRS, and may be different from non-IFRS or non-GAAP
measures used by other companies.

Our non-IFRS financial measures include:

  • Non-IFRS gross profit. Excludes expenses related to
    share-based compensation and amortization of acquired intangible
    assets.
  • Non-IFRS operating income. Excludes expenses related to
    share-based compensation and amortization of acquired intangible
    assets.
  • Non-IFRS net income and non-IFRS net income per diluted share. Excludes
    expenses related to share- based compensation, amortization of
    acquired intangible assets, non-coupon impact related to exchangeable
    senior notes and capped calls, the related income tax effects on these
    items, and changes in our assessment regarding the realizability of
    our deferred tax assets.
  • Free cash flow. Free cash flow is defined as net cash
    provided by operating activities less capital expenditures, which
    consists of purchases of property and equipment and acquired
    intangible assets.

Our non-IFRS financial measures reflect adjustments based on the items
below:

  • Share-based compensation
  • Amortization of acquired intangible assets
  • Non-coupon impact related to exchangeable senior notes and capped calls
    • Amortization of notes discount and issuance costs
    • Mark to fair value of the exchangeable senior notes exchange
      feature
    • Mark to fair value of the related capped call transactions
  • The related income tax effects on these items, and changes in our
    assessment regarding the realizability of our deferred tax assets

We exclude expenses related to share-based compensation, amortization of
acquired intangible assets, non-coupon impact related to exchangeable
senior notes and capped calls, the related income tax effects on these
items, and changes in our assessment regarding the realizability of our
deferred tax assets from certain of our non-IFRS financial measures as
we believe this helps investors understand our operational performance.
In addition, share-based compensation expense can be difficult to
predict and varies from period to period and company to company due to
differing valuation methodologies, subjective assumptions, and the
variety of equity instruments, as well as changes in stock price.
Management believes that providing non-IFRS financial measures that
exclude share-based compensation expense, amortization of acquired
intangible assets, non-coupon impact related to exchangeable senior
notes and capped calls, the related income tax effects on these items,
and changes in our assessment regarding the realizability of our
deferred tax assets allow for more meaningful comparisons between our
operating results from period to period.

Management considers free cash flow to be a liquidity measure that
provides useful information to management and investors about the amount
of cash generated by our business that can be used for strategic
opportunities, including investing in our business, making strategic
acquisitions, and strengthening our statement of financial position.

Management uses non-IFRS gross profit, non-IFRS operating income,
non-IFRS net income, non-IFRS net income per diluted share, and free
cash flow:

  • As measures of operating performance, because these financial measures
    do not include the impact of items not directly resulting from our
    core operations;
  • For planning purposes, including the preparation of our annual
    operating budget;
  • To allocate resources to enhance the financial performance of our
    business;
  • To evaluate the effectiveness of our business strategies; and
  • In communications with our Board of Directors concerning our financial
    performance.

The tables in this press release titled "Reconciliation of IFRS to
Non-IFRS Results" and "Reconciliation of IFRS to Non-IFRS Financial
Targets" provide reconciliations of non-IFRS financial measures to the
most recent directly comparable financial measures calculated and
presented in accordance with IFRS.

We understand that although non-IFRS gross profit, non-IFRS operating
income, non-IFRS net income, non-IFRS net income per diluted share, and
free cash flow are frequently used by investors and securities analysts
in their evaluation of companies, these measures have limitations as
analytical tools, and you should not consider them in isolation or as
substitutes for analysis of our results of operations as reported under
IFRS.

 

Atlassian Corporation Plc

Consolidated Statements of Operations

(U.S. $ and shares in thousands, except per share data)

(unaudited)*

   
Three Months Ended June 30, Fiscal Year Ended June 30,
2018   2017 2018   2017
Revenues:
Subscription $ 117,439 $ 72,502 $ 403,214 $ 242,128
Maintenance 87,268 71,648 325,898 265,521
Perpetual license 22,514 19,359 85,481 74,565
Other 16,562   10,822   59,357   37,722  
Total revenues 243,783 174,331 873,950 619,936
Cost of revenues (1) (2) 44,196   36,805   172,690   119,161  
Gross profit 199,587 137,526 701,260 500,775
Operating expenses:
Research and development (1) 111,046 90,691 415,776 310,168
Marketing and sales (1) (2) 49,062 45,887 187,990 134,908
General and administrative (1) 44,766   33,204   151,242   118,785  
Total operating expenses 204,874   169,782   755,008   563,861  
Operating loss (5,287 ) (32,256 ) (53,748 ) (63,086 )
Other non-operating income (expense), net (14,739 ) (536 ) (15,157 ) (1,342 )
Finance income 5,053 1,048 9,877 4,851
Finance costs (6,782 ) (24 ) (6,806 ) (75 )
Loss before income tax benefit (expense) (21,755 ) (31,768 ) (65,834 ) (59,652 )
Income tax benefit (expense) (4,096 ) 11,060   (53,507 ) 17,148  
Net loss $ (25,851 ) $ (20,708 ) $ (119,341 ) $ (42,504 )
Net loss per share attributable to ordinary shareholders:
Basic $ (0.11 ) $ (0.09 ) $ (0.52 ) $ (0.19 )
Diluted $ (0.11 ) $ (0.09 ) $ (0.52 ) $ (0.19 )
Weighted-average shares outstanding used to compute net loss per
share attributable to ordinary shareholders:
Basic 234,206   225,805   231,184   222,224  
Diluted 234,206   225,805   231,184   222,224  
 

(1) Amounts include share-based payment expense, as follows:

Three Months Ended June 30, Fiscal Year Ended June 30,
2018 2017 2018 2017
Cost of revenues $ 2,762 $ 2,159 $ 11,955 $ 6,856
Research and development 20,271 24,598 98,609 79,384
Marketing and sales 5,444 5,455 23,605 17,395
General and administrative 9,999 9,125 28,704 33,813
 

(2) Amounts include amortization of acquired intangible assets, as
follows:

Three Months Ended June 30, Fiscal Year Ended June 30,
2018 2017 2018 2017
Cost of revenues $ 5,299 $ 5,280 $ 21,188 $ 14,587
Marketing and sales 9,023 9,988 36,090 15,269
*Financial results based on the revenue recognition standard (IAS
18), prior to the company's adoption of the new revenue recognition
standard (IFRS 15) on July 1, 2018.
 

Atlassian Corporation Plc

Consolidated Statements of Financial Position

(U.S. $ in thousands)

(unaudited)*

   
June 30, 2018 June 30, 2017

Assets

Current assets:
Cash and cash equivalents $ 1,410,339 $ 244,420
Short-term investments 323,134 305,499
Trade receivables 46,141 26,807
Current tax receivables 12,622 12,445
Prepaid expenses and other current assets 28,219   23,317  
Total current assets 1,820,455   612,488  
Non-current assets:
Property and equipment, net 51,656 41,173
Deferred tax assets 64,662 188,239
Goodwill 311,943 311,900
Intangible assets, net 63,577 120,789
Other non-current assets 112,221   9,269  
Total non-current assets 604,059   671,370  
Total assets $ 2,424,514   $ 1,283,858  
Liabilities
Current liabilities:
Trade and other payables $ 113,105 $ 73,192
Current tax liabilities 172 2,207
Provisions 7,215 6,162
Deferred revenue 340,834   245,306  
Total current liabilities 461,326   326,867  
Non-current liabilities:
Deferred tax liabilities 12,051 43,950
Provisions 4,363 3,333
Deferred revenue 19,386 10,691
Exchangeable senior notes, net 819,637
Other non-current liabilities 214,985   4,969  
Total non-current liabilities 1,070,422   62,943  
Total liabilities 1,531,748   389,810  
Equity
Share capital 23,531 22,726
Share premium 454,766 450,959
Other capital reserves 557,100 437,346
Other components of equity (61 ) 6,246
Accumulated deficit (142,570 ) (23,229 )
Total equity 892,766   894,048  
Total liabilities and equity $ 2,424,514   $ 1,283,858  
*Financial results based on the revenue recognition standard (IAS
18), prior to the company's adoption of the new revenue recognition
standard (IFRS 15) on July 1, 2018.
 

Atlassian Corporation Plc

Consolidated Statements of Cash Flows

(U.S. $ in thousands)

(unaudited)*

   
Three Months Ended June 30, Fiscal Year Ended June 30,
2018   2017 2018   2017
Operating activities
Loss before income tax benefit (expense) $ (21,755 ) $ (31,768 ) $ (65,834 ) $ (59,652 )
Adjustments to reconcile loss before income tax benefit (expense) to
net cash provided by operating activities:
Depreciation and amortization 17,754 23,766 79,435 61,546
Net loss (gain) on sale of investments and other assets 62 25 (1,163 ) (397 )
Net unrealized foreign currency loss (gain) (93 ) 92 (188 ) 93
Share-based payment expense 38,476 41,337 162,873 137,448
Net unrealized loss on exchange derivative and capped calls 12,414 12,414
Amortization of debt discount and issuance costs 7,478 7,478
Interest income (5,053 ) (1,048 ) (9,877 ) (4,851 )
Interest expense 1,113 1,113
Changes in assets and liabilities:
Trade receivables (7,748 ) (295 ) (19,635 ) (10,208 )
Prepaid expenses and other assets (8,200 ) (2,788 ) (7,293 ) (5,647 )
Trade and other payables, provisions and other non-current
liabilities
9,908 1,639 43,477 10,947
Deferred revenue 34,178 23,252 104,223 72,604
Interest received 4,211 1,393 8,679 6,540
Income tax paid, net of refunds (542 ) (5,008 ) (4,246 ) (9,042 )
Net cash provided by operating activities 82,203 50,597 311,456 199,381
Investing activities
Business combinations, net of cash acquired (381,090 )
Purchases of property and equipment (17,802 ) (5,208 ) (30,209 ) (15,129 )
Purchases of intangible assets (925 ) (925 )
Proceeds from sale of other assets 1,775 2,775 342
Purchases of investments (55,798 ) (85,155 ) (347,822 ) (423,540 )
Proceeds from maturities of investments 81,015 31,215 206,119 111,403
Proceeds from sales of investments 22,897 54,911 123,862 488,672
Decrease (increase) in restricted cash 106 (2 ) (3,131 ) (3,371 )
Payment of deferred consideration     (3,290 ) (935 )
Net cash provided by (used in) investing activities 32,193 (5,164 ) (51,696 ) (224,573 )
Financing activities
Proceeds from exercise of share options 908 2,035 3,995 9,438
Proceeds from issuance of exchangeable senior notes, net of discount
and issuance costs
990,494 990,494
Purchase of capped calls (87,700 )   (87,700 )  
Net cash provided by financing activities 903,702   2,035   906,789   9,438  
Effect of exchange rate changes on cash and cash equivalents (1,272 ) 70   (630 ) 465  
Net increase (decrease) in cash and cash equivalents 1,016,826 47,538 1,165,919 (15,289 )
Cash and cash equivalents at beginning of period 393,513   196,882   244,420   259,709  
Cash and cash equivalents at end of period $ 1,410,339   $ 244,420   $ 1,410,339   $ 244,420  
*Financial results based on the revenue recognition standard (IAS
18), prior to the company's adoption of the new revenue recognition
standard (IFRS 15) on July 1, 2018.
 

Atlassian Corporation Plc

Reconciliation of IFRS to Non-IFRS Results

(U.S. $ and shares in thousands, except per share data)

(unaudited)*

   
Three Months Ended June 30, Fiscal Year Ended June 30,
2018   2017 2018   2017

Gross profit:

IFRS gross profit $ 199,587 $ 137,526 $ 701,260 $ 500,775
Plus: Share-based payment expense 2,762 2,159 11,955 6,856
Plus: Amortization of acquired intangible assets 5,299   5,280   21,188   14,587  
Non-IFRS gross profit $ 207,648   $ 144,965   $ 734,403   $ 522,218  

Operating income:

IFRS operating loss $ (5,287 ) $ (32,256 ) $ (53,748 ) $ (63,086 )
Plus: Share-based payment expense 38,476 41,337 162,873 137,448
Plus: Amortization of acquired intangible assets 14,322   15,268   57,278   29,856  
Non-IFRS operating income $ 47,511   $ 24,349   $ 166,403   $ 104,218  

Net income:

IFRS net loss $ (25,851 ) $ (20,708 ) $ (119,341 ) $ (42,504 )
Plus: Share-based payment expense 38,476 41,337 162,873 137,448
Plus: Amortization of acquired intangible assets 14,322 15,268 57,278 29,856
Plus: Non-coupon impact related to exchangeable senior notes and
capped calls
19,892 19,892
Less: Income tax effects and adjustments (13,823 ) (14,277 ) (2,150 ) (39,864 )

Non-IFRS net income

$ 33,016   $ 21,620   $ 118,552   $ 84,936  

Net income per share:

IFRS net loss per share - diluted $ (0.11 ) $ (0.09 ) $ (0.52 ) $ (0.19 )
Plus: Share-based payment expense 0.16 0.18 0.69 0.59
Plus: Amortization of acquired intangible assets 0.06 0.06 0.25 0.13
Plus: Non-coupon impact related to exchangeable senior notes and
capped calls
0.08 0.08
Less: Income tax effects and adjustments (0.06 ) (0.06 ) (0.01 ) (0.17 )
Non-IFRS net income per share - diluted $ 0.13   $ 0.09   $ 0.49   $ 0.36  

Weighted-average diluted shares
outstanding:

Weighted-average shares used in computing diluted IFRS net loss per
share
234,206 225,805 231,184 222,224
Dilution from share options and RSUs (1) 11,204   13,596   12,801   13,833  
Weighted-average shares used in computing diluted non-IFRS net
income per share
245,410   239,401   243,985   236,057  

Free cash flow:

IFRS net cash provided by operating activities $ 82,203 $ 50,597 $ 311,456 $ 199,381
Less: Capital expenditures (17,802 ) (6,133 ) (30,209 ) (16,054 )
Free cash flow $ 64,401   $ 44,464   $ 281,247   $ 183,327  
(1) The effects of these dilutive securities were not included in
the IFRS calculation of diluted net loss per share for the three
months ended June 30, 2018 and 2017 and the fiscal years ended June
30, 2018 and 2017 because the effect would have been anti-dilutive.
 
*Financial results based on the revenue recognition standard (IAS
18), prior to the company's adoption of the new revenue recognition
standard (IFRS 15) on July 1, 2018.
 

Atlassian Corporation Plc

Reconciliation of IFRS to Non-IFRS Financial Targets

(U.S. $)*

   
Three Months Ending
September 30, 2018
Fiscal Year Ending
June 30, 2019
Revenue $258 million to $260 million $1,146 million to $1,154 million
 
IFRS gross margin 82 %

82% to 83

%

Share-based payment expense 2 1
Amortization of acquired intangible assets 2   2  
Non-IFRS gross margin 86 %

85% to 86

%

 
IFRS operating margin (5 %) (4 %)
Share-based payment expense 20 20
Amortization of acquired intangible assets 6   4  
Non-IFRS operating margin 21 % 20 %
 
IFRS net loss per share - diluted ($0.13 ) ($0.30 )
Share-based payment expense 0.21 0.94
Amortization of acquired intangible assets 0.06 0.18
Non-coupon impact related to exchangeable senior notes and capped
calls
0.03 0.14
Income tax effects and adjustments 0.02   (0.19 )
Non-IFRS net income per share - diluted $0.19   $0.77  
 
Weighted-average shares used in computing diluted IFRS net income
per share
235 million to 237 million 240 million to 242 million
Dilution from share options and RSUs (1) 12 million 10 million
Weighted-average shares used in computing diluted non-IFRS net
income per share
247 million to 249 million 250 million to 252 million
 
IFRS net cash provided by operations $390 million to $400 million
Less: Capital expenditures (40 million)
Free cash flow $350 million to $360 million
(1) The effect of these dilutive securities are not included in our
IFRS calculation of diluted net loss per share for the three months
ending September 30, 2018 and fiscal year ending June 30, 2019
because the effect would be anti-dilutive.
 
*Financial targets based on the new revenue recognition standard
(IFRS 15), which the company adopted on July 1, 2018.

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