The company sees a bright future despite slowing short-term revenue growth
No company is completely isolated from the macroeconomic fallout of COVID-19, but we are seeing some companies doing better than others, particularly those that provide ways to collaborate online. Count Atlassian in that field, as it provides a suite of tools focused on smarter work in a digital environment.
At a time when many employees work from home, Atlassian's product approach sounds like a recipe for great success. But in its latest earnings report, the company detailed the slowdown in growth, not the acceleration we might expect. Looking ahead, he predicts more or less the same, at least in the short term.
Part of the reason for this - beyond some troubled small business customers transitioning to its new free tier introduced last March - is the pain associated with moving customers from legacy license revenue to subscription revenue. more predictable. The company has shown that it is willing to sacrifice short-term growth to accelerate that transition.
We sat down with Atlassian CRO Cameron Deatsch to talk about some of the challenges his company is facing as it goes through these crazy times. Deatsch pointed out that despite the turmoil and push to subscriptions, Atlassian is well positioned with plenty of liquidity on hand and the ability to make strategic acquisitions when needed, while continuing to expand the recurring revenue slice of its revenue pie.
The COVID-19 effect
Deatsch told us that Atlassian it could not completely escape the impact of the pandemic on businesses, especially in April and May, when many companies warned it. His company has seen the biggest impact from smaller businesses, which have cut back, moved to a free tier or in some cases shut down. There was no escaping the market cut that SMEs experienced during the early stages of COVID and he said it impacted Atlassian's number of new customers.
However, the company believes it will recover from the slowdown in new customers, especially when it starts converting a percentage of its new free tier users into paid users along the way. For this quarter it only translated into about 3,000 new customers, but Deatsch didn't seem worried. "The customer numbers were sparse, but the overall financials were pretty solid [fiscal] Q4 if you have watched it. But the number of people who are trying our products now due to the free tier has also increased. We saw a radical change when we launched for free, "he said.
