Atlassian (TEAM 83.33, -1.99, -2.33%) is a tech stock that has held up better than most
in recent months. It has actually made a decent move higher since mid-November.
That tells us that investors understand the story here and have been slowly
getting back into the stock after the tech sell-off in October.
Atlassian is a cloud software developer focused on creating collaboration platforms for organizing, discussing, and completing shared work. Basically, its products help software development teams work with non-development teams involved with software innovation.
One quality that distinguishes TEAM from other cloud software developers is that it does not use an army of sales people to sell its software. Rather, it implements a self-service model in which it distributes products online, where users can test and use the products without the need for assistance. Consequently, its sales & marketing expense is far lower than most cloud software companies, allowing for it to drive strong profits. On the demand side, TEAM has been gaining new customers at a fast clip.
On the M&A front, TEAM recently acquired OpsGenie, which has developed a platform that enables companies to better plan for and respond to IT service disruptions. Dealing with IT outages and downtime is one of the biggest technical challenges of the modern era. Today's world of interconnected cloud services and microservice architectures has created infinitely more opportunities for something to go wrong and disrupt service. When that happens, there's an urgent need to alert the right people or teams to fix things. OpsGenie's technology quickly routes alerts to the appropriate IT teams. TEAM paid $295 mln ($259M in cash and the rest in stock.)
In October, TEAM reported solid 1Q19 (Sep) results although the stock traded lower on the report. Revenue rose 37% yr/yr to $267.3 mln. Atlassian ended the quarter with a total customer count, on an active subscription or maintenance agreement basis, of 131,684, having added 5,888 net new customers during the quarter.
On the new product front, TEAM recently introduced Jira Ops, a unified incident command center for IT teams to coordinate response and resolution. Alongside other offerings, these two products (Jira Ops and OpsGenie) support TEAM's efforts to deepen its focus on IT teams.
Looking ahead to the rest of FY19, a key initiative is that TEAM is doubling down on supporting the needs of IT teams. Serving IT departments is an adjacent market TEAM has been serving for years yet the company feels it has barely scratched the surface of this significant opportunity. This year, TEAM will place more emphasis on the IT market through R&D investments, partnerships and marketing. The OpsGenie acquisition is a big part of this.
Overall, TEAM continues to see strong demand across its product line, and most notably, its core JIRA product for planning, tracking, and managing projects. Revenue in FY19 looks promising as it's expected to cross the $1 bln milestone: $1.146-1.154 bln from $874 mln in FY18. TEAM also has good margins with non-IFRS (similar to non-GAAP) operating margin of 19% in FY18 vs 17% in FY17.
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