We last took a look at Atlassian at around $2B ARR, and more subtly has changed than you might think.  Atlassian has gone almost 100% Cloud since then, and has held up nicely in the overall public markets even as others have taken bigger hits.  Perhaps because it combines strong growth with significant free cash flow.

At $3B ARR it’s growing 37%, and free-cash flow is running at $800m a year.  That’s insanely cash-creating, with a 29% free-cash flow margin.  Wow.

5 Interesting Learnings:

#1.  30% New Customer Growth Fueling 37% Revenue Growth.  Atlassian isn’t just “riding” on its existing customer base to grow.  It’s new customer base is growing at a very impressive rate at $3B in ARR.  Atlassian added 50,000 new customers last year.

#2. Generating incredible free cash-flow.  Just incredible.  Not having a traditional sales team sure helps.  With almost $200m in free-cash flow a quarter now, Atlassian will soon generate a billion of free cash flow a year.  Never let it be said that SaaS can’t generate a lot of cash at scale.

#3.  5%+ pricing increases help fuel growth.   Cloud product pricing went up 5% a year last year, and legacy server products went up much more.  Should you have annual price increases in SaaS?  I’d argue No until you are at scale.  But once you are at scale, they can have a massive impact.

#4.  Transition to Cloud takes time at scale.  And it can be to your own Cloud.  Even though Atlassian today is selling almost entirely Cloud and Data Center-based products, it started off as products you installed on your own servers.  That transition doesn’t happen overnight for legacy customers.  30% of their revenues are still from customers running Jira and friends on their own servers.  But it’s now finally in decline, shrinking 12%.  And interestingly, its “Data Center” product line is growing even faster than Cloud.  A reminder many customers want to run enterprise software in their own cloud.

#5.  Hiring acclerating, but still not as fast as revenue.  Atlassian maintaining its leverage here.  Atlassian added 476 employees in the past quarter, primarily in engineering.  That’s a lot of growth annualized, as much as 25%, but still less than which revenues which went up 37%.  That’s the way software works — without a salesteam.  You get leverage.

And a few more learnings:

#6.  Not trying to over-monetize their $2B Marketplace — revenues flat there.  I like to see this, going long here.  Atlassian does not project an increase in its Marketplace revenue as it incentivizes partners to build on their platform.  Even though Atlassian has now crossed $2 Billion in lifetimes sales on its Marketplace across 1,250+ partners, they aren’t pushing to over monetize their partners.  Go long here in SaaS.

#7.  Back to in-person events.  It’s time, folks.  It’s time to get your customers together, and your team.  Atlassian is one of the first major Cloud companies to get back to its big in-persin Team ’22 event in Las Vegas.  They work.

#8.  Channel partner sales growing 130%.  While Atlassian hasn’t had a traditional sales team of any size, its channel partners have done a lot of selling for it over the years, and that’s accelerating now.  You can see a deep dive on that with Atlassian’s CRO below.  The further acceleration is driven both by larger customers, which need more services and help deploying, and by the mix of services moving mainly to the Cloud.

#9.  Haven’t seen a material increase in employee churn even during the “Great Resignation”.  The effects here aren’t even.

Wow, what an engine that just keeps on going — after 20 years!!

And check out the A+ session below from Atlassian’s CRO on how they do it:



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