Atlassian shares skid despite ‘flat tack’ third-quarter result

Atlassian shares have plunged in after hours trade, despite its third-quarter result topping expectations.

Atlassian co-founders Mike Cannon-Brookes and Scott Farquhar. Picture: Supplied

Shares in Australian tech darling Atlassian have plummeted almost 10 per cent in after hours trade, despite the company yet again beating Wall Street guidance for its third-quarter results.

The team software maker, which last week held its 5000-people Summit event in Las Vegas, posted revenues of $US309 million ($430m) for the March quarter, up 38 per cent on the same period a year earlier.

It was a result co-CEOs Mike Cannon-Brookes and Scott Farquhar said showed Atlassian was driving “flat tack” towards the future, but still wasn’t enough for investors who sent the shares sharply downward.

“Atlassian is driving flat tack (Australian speak for “at maximum speed”) towards the future as we work to unleash the potential of every team. Q3 2019 was no exception, with many product and feature releases, innovations and other announcements,” the pair said in a statement.

Atlassian shares fell 8 per cent after hours, following a 1.6 per cent decline which saw it close the regular session at $US111.19 per share.

The company told investors that earnings per share for the next quarter would fall below Wall Street expectations, despite revenue tracking ahead of guidance.

The company, whose products include Jira and Confluence, said it expects adjusted fiscal fourth-quarter earnings of 16 cents a share on revenue of $US329m to $US331m.

Analysts surveyed by FactSet said they expected 19 cents a share on revenue of $US327.6m.

The company booked an operating loss of $US27.6m for the third quarter of fiscal 2019, up from $US10.3m a year earlier, while its operating margin was -9 per cent compared with -5 per cent from a year earlier.

In the past quarter Atlassian said it added over 5000 new customers, bringing its total customer count to 144,038.

And this month the company acquired software management start-up AgileCraft for about $US166m.

Baird analyst Rob Oliver said his firm had a positive outlook on what he described as the company’s unique business model, customer excitement around the Atlassian portfolio of products and the large opportunity that lays ahead.

Atlassian last week briefly passed Telstra in total valuation, and Mike Cannon-Brookes (recently listed as Australia’s fourth richest person in The List - Australia’s Richest 250) told The Australian that it marked a significant moment in the company’s growth trajectory.

“Growing up in Australia, obviously Telecom Australia was an industrial giant,” he said. “It’s an interesting point on the journey and it’s mind blowing that we’re joining these great Australian perspectives.

“From a global perspective it shows software and technology is the biggest industry in the world and continuing to grow really, really fast. Everything is becoming a technology problem now, and that’s something we’re right at the centre of.”