According to a Mordor Intelligence report, the enterprise collaboration market was estimated at $36.24 billion in 2020. It is expected to grow at over 10% CAGR over the next few years accelerated by the adoption of cloud-based technologies as a result of the work-from-home conditions propelled by the current pandemic. Atlassian (Nasdaq: TEAM) is looking to expand in this market through product release and acquisitions.
For the third quarter, revenue grew 38% to $568.7 million, ahead of the market’s forecast of $531.92 million. Net income was $159.8 million, compared with net loss of $158.8 million a year ago. Adjusted EPS was $0.48, better than the market’s forecast of $0.29.
By segment, Subscription revenues grew 43% to $350 million and maintenance revenues grew 11.1% to $132.9 million. License revenue grew 49% to $31.3 million and other revenues increased 103.7% to $54.6 million.
During the quarter, Atlassian added a record number of 12,815 net new customers, up 105%. The significant growth in customer metrics is indicative of the positive impact the Cloud-first focus and free tier have had on its market expansion. Its total customer base increased 19% to 204,290. Including the single-use Trello customers, it has almost 213,000 customers, up 24%.
For the fourth quarter, Atlassian expects revenues of $513-$528 million with an adjusted loss per share of $0.08. The market was looking for revenues of $498.86 million for the quarter with an EPS of $0.22. It expects Atlassian to end the year with revenues of $2.01 billion and an EPS of $1.19.
Atlassian has not shared details on its marketplace revenues, but the above forecast reflects the impact of the lower take rates from its developer platform. Last year, Atlassian reduced the rates on app sales from 15% to 5% to promote more development for the cloud portfolio. The 95% revenue share split is among the most generous in the industry and is inspired by Atlassian’s belief in the platform ecosystem.
Recently, Atlassian announced its acquisition of Australia-based ThinkTilt for an undisclosed price. Founded in 2016 by Simon Herd, ThinkTilt offers the Jira app ProForma, allowing teams to quickly build forms to publish on the Jira Service Management portal. ThinkTilt’s no-code/low code form builder for Jira is used by more than 700 companies. It helps teams control the way they collect information in Jira issues. Developers can also leverage the platform to build and design forms based on business needs.
Atlassian plans to integrate ProForma with Jira Service Management to deliver improved service experiences at a faster rate. With an advanced form validation capability, it will be able to enable teams to quickly collect and validate the information needed about a request and then automatically fast-track it to the right teams for resolution. The acquisition will help Atlassian expand its foray into the IT Service Management (ITSM) market. ThinkTilt has been privately held so far and has raised $1.1 million in a round of funding from Queensland Investment Corporation.
Besides acquisition, Atlassian continued to release new products. Recently, it released Jira Work Management, a new collaboration tool focused at the enterprise segment. Jira Work Management expands collaboration capabilities to multiple teams within an organization including marketing, HR, finance, and design employees. It will allow tasks from teams and projects in Jira Work Management to be linked together to reveal dependencies and connections. Teams will be able to create dashboards that reflect organization-wide progress and include details on features such as workload, heat map, filters, and charts.
Jira was traditionally built to help IT and development teams manage projects and build-outs. With this new offering, Atlassian has expanded those capabilities within the entire organization. The recent pandemic has accelerated the need for enterprise-wide remote collaboration, and Jira Work Management is geared toward addressing this growing demand.
It also introduced its new program, Point A, that helps customers collaborate with Atlassian product development teams and create products that will power the future of teamwork. The program uses Atlassian’s investment in its cloud platform to provide cross-product capabilities, including unified search and common user interfaces to speed up the process of new product development. The program includes Atlassian’s previous products, Jira Work Management, Jira Product Discovery, Team Central, Compass, and Halp.
Atlassian’s stock is trading at $225.02 with a market capitalization of $56.27 billion. It touched a 52-week high of $262.40 in February and a 52-week low of $151.40 in August last year.
Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.