Atlassian prepared for downturn, say Mike Cannon-Brookes, Scott Farquhar
Despite a downbeat profit forecast, Atlassian’s billionaire founders say they’ve survived major downturns and have a plan for this one.
Shares in software giant Atlassian slipped by 3.5 per cent in after-hours trading on the NASDAQ due to a less than upbeat earnings forecasts, but billionaires Mike Cannon-Brookes and Scott Farquhar say they can adopt lessons from previous downturns to get their company through the current downturn by “playing offence during stormy weather”.
Headed by 40-year-old Sydney-based billionaires, Atlassian reported earnings per share of US25c on Friday morning, compared to the US21c result analysts had been forecasting.
Revenue for the quarter was $US411.6m, up 33 per cent compared to the same period last year and above consensus analyst estimates of about $US395m.
But the company’s guidance for the current June quarter – adjusted profits in the range of US17-US22c per share and revenue of $US400 to $US415m – came in below analyst forecasts, as Atlassian remained cautious about the impact of an economic downturn on its customers.
“Should customers see an increased adverse impact from the macroeconomic environment, we believe the associated impact on our results would also increase,” Atlassian said in its letter to shareholders on Tuesday morning.
Mr Farquhar told an analyst call on Friday morning that he and Mr Cannon-Brookes had started their company during the dot.com bubble in the early 2000s and come through the global financial crisis of 2008, cutting prices during those times and offering free editions of their software which customers then paid for in the longer-term.
In March, Atlassian fast-tracked the planned rollout of free cloud editions of core products such as Jira and Confluence, which more employees are using as they work from home during the coronavirus shutdown. Atlassian also cut the prices of some core products.
“Early results are promising with new sign-ups increasing approximately 125 per cent in recent weeks,” the Atlassian duo wrote in a shareholder letter released on Friday.
“Just as with starters in 2009, free cloud editions have the potential to significantly expand our user base, build new long-term relationships, fuel word-of-mouth advocates, and drive millions of user insights to improve our products. We’re happily making the trade-off again, choosing long-term gain over short-term [return on investment],” he said.
Mr Cannon-Brookes and Mr Farqhuar each own about $15bn worth of shares in Atlassian, which has its headquarters in Sydney and has been seen to be relatively well exposed to the COVID-19 shutdown, with a share price rise adding $2bn each to their wealth since markets started plunging worldwide last month.
The pair said they want to “play offence in stormy weather” during the COVID-19 shutdown and take advantage of tough trading conditions by potentially hiring new staff and investigating any merger and acquisition targets which may become available.
“We’ve built Atlassian to be an enduring company focused on driving long-term results,” said Mr Cannon-Brookes, Atlassian’s co-founder and co-chief executive with Mr Farquhar. “Through efforts like launching free cloud editions of our core products, we will support our customers through challenging times, and position ourselves to drive durable growth.”
Mr Farquhar told analysts that Atlassian could hire new key staff “who may not have previously been available” as rivals struggled during the economic downturn, and that similarly acquisition opportunities could also present themselves as long as the companies they target fit with their culture and helped them towards their “big, hairy goal of 100m active users”.
March was already the strongest hiring month in Atlassian history, as the company took on about 200 new employees, all of whom are now working remotely.
“We’re just getting started. Over the coming months, we’ll continue to maintain hiring momentum and up-level our talent, just like we did in 2009,” the billionaire duo said. “We’ll look for innovative ways to leverage our competitive advantages and lessons learned from the past.”
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