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PaaS: Atlassian has a Strong Start in 2020

Posted on Monday, Jan 27th 2020

Among our list of the Top 20 Cloud Stocks for 2020, Atlassian (NASDAQ: TEAM) is the top mid-sized player for PaaS. Last week, it reported a strong second quarter that beat estimates.

Atlassian’s Financials

For the second quarter, revenues grew 37% to $408.7 million, ahead of the market’s forecast of $389 million. Net income was $124.1 million, compared with $45.2 million a year ago. Adjusted EPS was $0.37, better than the market’s forecast of $0.27.

By segment, Subscription revenues grew 50% to $228.7 million and maintenance revenues grew 20% to $116.9 million. License revenue grew 13% to $29.1 million and other revenues increased 45% to $34.1 million. Total Billings grew 39% to $487 million, ahead of estimates of $431 million.

It ended the quarter with 164,790 customers on an active subscription or maintenance agreement, adding almost 5,003 net new customers during the quarter, over 90% of which chose its cloud products. It had added 7,060 customers in Q1. The slower pace of new customer adds is most likely due to the introduction of free editions of the company cloud products.

For the third quarter, Atlassian expects revenues to grow 31%-32% to $395-$399 million with an adjusted EPS of $0.20. It expects to end the current year with revenues of $1.59-$1.6 billion and an EPS of $1.03-$1.09.

Atlassian’s New Offerings

Atlassian’s Marketplace has reached massive scale, recently surpassing $1 billion in lifetime sales. It is now one of the largest enterprise software marketplaces alongside AWS and Salesforce. To boost its efforts, Atlassian in December announced Forge, its new cloud app development platform. Forge makes it easier and faster to develop cloud apps by providing compute, storage, security, and ready-made UI components. Forge is built on Amazon Web Service’s Lambda serverless function-as-a-service (FaaS) platform that also helps in managing infrastructure and elements such as authentication, identity and scaling.

Forge is expected to increase the number of third-party cloud apps available on the Marketplace, creating more value for cloud customers. There are currently over 4,000 apps available on the Marketplace. In addition, developers have built 28,000 apps for their in-house teams. Across Jira Software and Confluence, over 60% of customer instances use at least one Marketplace app.

During the quarter, Atlassian announced template releases for Trello and Jira Service Desk. Trello Board, Card and Community Templates – Teams can now get started on Trello with over 100 pre-loaded board templates. They can also now share and create both board and card templates with other teams. Companies like Salesforce, SurveyMonkey, and The Telegraph have created templates for use cases including sales forecasts, editorial calendars, and project management.

The new Jira Service Desk Templates are built for HR, legal, and facilities teams. The templates make it easier to for general business teams manage tasks including employee onboarding, maintenance requests, and contract negotiations.

Atlassian’s long-term goal is to engage 100 million active users. During the quarter, Confluence reached 60,000 customers! Over the past year, it has added over 10x more Confluence cloud than on-premises customers. Trello crossed over 50 million registered users, up from 19 million at the time of its acquisition three years ago. Trello is now used by teams across 80% of the Fortune 500.

According to a recent MarketsandMarkets report, the global enterprise collaboration market size is projected to grow from $31 billion in 2019 to $48.1 billion by 2024 at a CAGR of 9.2%. With its strong focus on its fundamentals, Atlassian has cemented a strong position in the market.

Atlassian’s stock is trading at $146.79 with a market capitalization of $35.8 billion. It touched a 52-week high of $150.71 last week following the results. It hit a 52-week low of $92.42 a year ago.

This segment is a part in the series : PaaS

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