Atlassian abandons some products while doing business with Slack – The Motley Fool

Collaboration and Productivity Software Vendor Atlassian (NASDAQ: TEAM) released its fourth quarter financial results after the market closed on July 26. The turnover and the adjusted profit continue to climb However, this growth will be motivated by a category of products in less: Atlassian out of the communications market by concluding an agreement with Slack.

Atlassian results: Gross figures

Data source: Atlassian. IFRS = International Financial Reporting Standards

What happened with Atlassian this quarter

• Atlassian ended the quarter with 125,796 customers under active subscription or maintenance contract, gaining 6,638 new customers net in the fourth quarter.
• The maintenance business turnover amounted to $ 87.3 million, up 21.8% from a year ago. other.
• The perpetual license business figure was $ 22.5 million, up 16.3% from a year ago. Cash, cash equivalents and short-term investments reached $ 1.73 billion at the end of the fourth quarter, up from $ 764 million at the end of the second quarter. The company raised cash by selling $ 850 million of senior notes in April
• . Atlassian generated $ 82.2 million in cash flow from operations and $ 64.4 million in free cash flow. Free cash flow increased by 45% from one year to the next

Atlassian announced a strategic partnership with Slack. Here are the details:

• Slack acquired the intellectual property of Stride and Hipchat Cloud, Atlassian's communication offerings. Atlassian leaves the market after deciding that the investment needed to compete effectively would likely result in poor returns.
• Stride and Hipchat Cloud will be stopped, as will Hipchat Server and Data Center. Atlassian and Slack will work to migrate users to Slack's platform
• Both companies plan to deepen existing product integrations and build new integrations, particularly between Confluence Cloud and Slack
• Slack and Atlassian plan to work together on marketing.
• Atlassian made an equity investment in Slack

Atlassian provides the following information:

• For the first quarter: Revenue between $ 258 million and $ 260 million, up 33.6% from One year on the other mid-term; non-IFRS EPS of $ 0.19, up from $ 0.12 the previous year; non-IFRS gross margin of 86%; and non-IFRS operating margin of 21%.
• For FY 2019: Revenue between $ 1.146 billion and $ 1.154 billion, up 31.6% from 2018; non-IFRS EPS of $ 0.77, up from $ 0.49 in 2018; non-IFRS gross margin from 85% to 86%; What management had to say

  When calling for profits, co-CEO Mike Cannon-Brookes kept things vague when he discussed how the deal's agreement Slack will affect the results of the company: [W] I will not make any specific comments today about the possibilities of working with Slack on the marketing opportunities. I would just like to say that they are included in the guide we published for fiscal 2019 "

  Cannon-Brookes also declined to give details of Atlassian's investment in Slack:" No, we do not let's not reveal it, it's a relatively modest investment but we're not going beyond it. "

  the impact of cloud computing on gross margins:" We have already said that we would expect a gradual and very gradual decline in gross margin as clouds become a greater proportion of the whole of the Atlassian combination of incomes. "

  Looking to the future

  Atlassian's Deal with Slack will not have much effect on its growth. Beer said during the conference call that there would be a headwind of close to a million dollars in 2019, with revenue from the migration process to Slack offsetting revenue losses due to closure. from Stride and Hipchat.

  cashed in by selling senior debt earlier this year, which could eventually be used for a major acquisition along the way. Management has avoided a question about mergers and acquisitions during the teleconference, but I would be surprised if the company does not plan to enter into an agreement.

  Atlassian expects to exceed the $ 1 billion revenue threshold in 2019 under IFRS. But with revenues growing at a brisk double-digit pace, investors will likely not be bothered by continued red ink.

Timothy Green has no position in any of the actions mentioned. The Motley Fool owns shares and recommends Atlassian. The Motley Fool has a disclosure policy.