Q1 2021 Atlassian Corporation PLC Earnings Call

Is being recorded and will be available for replay from the Investor Relations section of Atlassians website. Following this call I will now hand, the call over to some thought Atlassians head of Investor Relations. Please go ahead.

Good afternoon, and welcome to our Q1 of fiscal 2021 earnings call. Thank you for joining us today on the call today, we have Atlassians co founders and co Ceos, Scott Farquar in light Cannon Brooks, our Chief Financial Officer, James Beer earlier today, we issued a press release and shareholder letter with our financial results and commentary for our first quarter of fiscal 2021.

These items were also posted on the Investor Relations section of our website on our our our our IR site. We have also posted a supplemental data sheet. During the call will make brief opening remarks and spend the remainder of time on QNX.

This call will include forward looking statements forward looking statements involve known and unknown risks uncertainties and other factors that may cause actual results performance or achievements to be materially different many future results performance or achievements expressed or implied by the forward looking statements you should not rely upon forward looking statements as predictions of future events forward looking statements represent.

Management's beliefs and assumptions only as of the date such statements are made and we disclaim any obligation to update or revise them should they change there seems to be up to date further.

Further information on these and other factors that could affect companies' financial results is included in filings, we make with the Securities and Exchange Commission from time to time, including the section titled Risk factors in our most recent form 20-F and quarterly form 6K.

In addition, during today's call we will discuss non IRS financial measures. These non IRS financial measures are in addition to not a substitute for or superior to measures of financial performance prepared in accordance with perhaps there are a number of limitations related to the use of these non IRS financial measures versus their nearest IRS equivalents may be different from non IR.

Yes, and non-GAAP measures used by other companies a reconciliation between IRS Enanta. After us financial measures is available in our earnings release, our shareholder letter in our updated investor sheets on the IR web site.

During Q and eight please ask your full question upfront. So that we can easily move through to the next speaker also please be patient we encounter any disruptions or challenges lastly, we've announced two additional items in conjunction with our financial results. This quarter first we have filed a form 6K announcing a successful close of a $1 billion senior unsecured delayed draw term loan and a $500 million senior unsecured.

Our revolving credit facility second we've announced that we will host a fiscal 21 virtual Investor day on Tuesday November 17th at two P.M. Pacific time, we'll be able to RSVP for that over the next 24 hours to our IR website, we hope to see you there.

With that I will turn the call to Mike for opening remarks.

Thank you everyone for joining today and for your continued support.

We hope you and your loved ones I healthy during more continues to be a dynamic time for everyone, including our customers partners and employees.

We hope you've taken the time to read the shareholder letter.

This quarter.

We've been transparent in describing the many different long term initiatives that we're focused on as a company.

This includes our recent announcement focused on migrating customers from server products through the cloud.

In Q1, we posted strong results, adding over 8600, net new customers generated $460 million in revenue up 26% year over year.

And realizing solid non I FRS profitability of 61 million in free cash flow.

We scored several product wins as well, including achieving fed ramp certification for Trello enterprise strengthening our partnership with slack launching a lasting ventures.

Closing and closing the mindful acquisition, which accelerates our ability to offer customers a comprehensive rts and experience.

Looking forward to the rest of risks for fiscal 2021, we were.

We'll continue to focus on playing offense for the long term.

All of our choices and actions focused on making our customers successful can drive us through $5 billion and beyond.

Before we move to culinary Scott and I, both want to thank our employees, who continue to be an inspiration for us in these challenging times UK.

You could share your passion with our customers, especially as they move to the cloud.

You make unleashing the potential of all teams possible.

With that I'll pass the call to the operator for Qunar.

At this time, if you would like to ask your question. Please press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the culinary roster.

Your first question comes from the line of Michael turn from Wells Fargo. Your line is open.

Hey, there thanks and good afternoon.

On the cloud migration I'm sure there will be a number of questions on it of obvious.

Obviously super early and appreciate Theres, an investor day upcoming which we're certainly all looking forward to but any initial feedback you've gathered from customers and partners early on to share and.

Right.

I think it's unquestionably the right strategic decision, but in terms of the risks to be aware of how do you. How do you think about the potential friction hot.

A hard and fast timeline can add to the equation and you mentioned some of this in the letter as well, but can you talk through some of the steps you're taking to help ensure this transitions as frictionless as possible. Thank you.

Sure.

[laughter].

I've been in a cloud platform and we really believe as we show from from all the 95% of new customers choosing today.

Right particular time to move our customers across.

But necessarily this is you know this is an announcement that for some customers is.

Is it a little interesting to receive and I think they tend to have done a fantastic job and we will we will succeed in guiding everyone's for that all the time.

Great color best of luck. Thank you.

Your next question comes from the line of Keith lives from Morgan Stanley. Your line is open.

Excellent. Thank you guys for for taking the question.

It really nice courted this quarter and in terms of the new customer at I don't think we've seen a number that strong in in quite some time.

A few questions well one question on that and in in the letter. It sounds like you guys don't expect that level of customer against to.

It can maintain on a go forward basis, if we talk about why not like sort of what what what is going to bring those back down on a go forward basis, and then maybe one for James on the and it got instead of a full year.

And the the slowing down it seems to him that like there's a sufficient line is gonna have to slow down for the remainder of the year like I get what's going on with license I get what's going on with maintenance and ends in the marketplace.

Might get kind of what the pressures are on subscriptions Kiki big into that a little bit for us and sort of why the the shift towards cloud doesn't have a more immediate positive impact we found the subscription like.

[noise], Yeah, Keith I'd, given I'd say both of those so.

First of all on the customer adds yes, we were very pleased with with that figure out a couple of things, though that I think probably did help it somewhat in this quarter festivals, you'll recall the den cute full we had a relatively low customer at number.

And what we talked about there was covid related shown effects impacting some of cloud customers in particular and I think part of what we've seen here is in essence, a little bit of a poll for all of that shone from Q1 in the queue for.

Customers were experiencing obviously very tough macro economic conditions.

I think some of those who perhaps might've chundin Q1 under normal circumstances ended up chatting earlier in queue for the other thing I point too.

Is that we obviously as you know have really established a free versions of general software comfortable Huntsinger service desk in the market now and those are results of doing that we've curtails, our cloud stossel off right and so for those folks we've seen in a nice.

Portion of them moving up to a full standard cloud license and therefore being counted you know definition of a customer so both of those things wouldn't expect those to be a recurring necessarily in the coming quarters, but suddenly yeah. We're very pleased with that that customer number.

That's a nice illustration of the power of Orlando expand model.

To the to the revenue picture a few thoughts on this one.

During this next phase of the cloud translation, we've really given our 30000 also serve our customers the control.

To pick their migration path on the on the timing of that move and so this will introduce a degree of variability into a a financial model likely over the coming handful also of courses and so.

This variability we wanted to.

[noise] provide everyone with with something of a framework cause you consider Ah Ah revenue growth. During this this transitional period and I I think of back framework cause having five seems to it but we pretty generally discussed with you previously first of all.

Consider COVID-19, and the the resulting challenging macroeconomic environment.

That's crazy for our customers Q1 in this regard was quite encouraging versus Q4 of the last fiscal year in terms of the the figures and based on what we've seen in queue too and those numbers. So FA. Yeah. We continued to be encouraged and so we're assuming that this.

Headwind it diminishes steadily, but we'll still be a factor in our revenue results, including the ships subscription line in particular, because we we've seen obviously a smaller customers generally use our cloud products, we would see that being still affects or over the next.

Handful of courses also but that said as you know we are seeing COVID-19 cases continue to grow around certainly Europe and the Americas. So we're remaining watch full of any building impact on our financials from impacted industries or some of our small and medium sized business.

Customers the the second point as we've discussed before.

Yeah, we very much taken the stance of investing through this challenging macro economic period for our customers with very much the strong belief that will drive long term competitive advantage for us and a good example of that investment focus which is really a consistent theme right across these next four drivers.

I'll mention was the broad rollouts of those free versions of juror software comfortable and singer or a service desk. We've been very pleased with the resulting expansion of the top of the marketing funnel. That's gonna create an excellent source of new customers forest over the long term, but in the short term this will create a raw.

Revenue headwind.

We expect will moderate in the next year also sad. We've also talked about another investment the we've been making and this macro economic environment and that is to drive less F. Y 21 revenue growth for the price increases the most of the case in fiscal twin.

See now the sofa and data centre price changes that we announced just recently will largely benefit F Y 22, and beyond so we expect the F Y 21 pricing related growth headwind to neutralize in the coming courses fourth.

As we discuss 90 days ago, we expect a service business will decline, especially you know give them the end of life announcements and specifically the F. Y 21 license revenue line, we expect to be down around 50% five zero percent year over year and then.

Maintenance revenue line will be approximately flat ear over yeah, then FY 21, as a sort of a customer's gradually migrate and we expect a similar effect on the house suffer app's business, which we account for in the other revenue line based on.

A recent announcement, where you would expect the license revenue to trend down towards zero and the next one and a half years or so and the significantly larger maintenance revenue line to do the same over approximately the next three and a half years and then the fifth point is the one where it.

Cited by the long term benefits of clouds for both our customers and it lasted.

[noise] again, taking a very customer focused approach to gradually phasing in these benefits to our financials. So for example, the launch our customers will off material discounts to a cloudless prices for a multiyear period, depending on the timing of the customers moved to the.

Loud this approach will Brady gradually growing revenue benefits those discount levels subsided over the coming three or so years.

And then for smaller customers, making that transition, we've really designs the sofa and cloudy economics is somewhat similar so it was these customers grow in the cloud bellicose enjoy more of the benefits of a cloud offerings and wheelchair isn't that additional value creation. So.

The NASA of all of that I realized that was quite a mouthful than that of all of that I would say is that revenue generation will be driven in part by the timing of customers electing to migrate I would expect beneficial migration revenue effects to gradually build over time, especially.

It was a larger customers increasingly migrates to the cloud in coming years and my current expectation is that all revenue growth rate.

Begin improving beyond the next year or so.

So that's probably a little more color than you're expecting case, but I wanted to really get that out though.

That was a robust dancing one quick follow you up.

I was thinking about [noise] license revenues, if you're getting couldn't have or that down. Thank you for sending you on your does that included assumption of any potential pull forward by the server customers. They tried to like top up on server licenses in the near term or do you not think that's gonna happen.

Well I think that will be some pull forward activity as in previous years, we're giving customers time to think about how to step in front of those price increases the come into effect on this coming February the second so yes in our.

In a modeling we do try to predict some amount of that pull forward, but that's you know always challenging exercise and I'd say, it's more difficult. This year because this time, we've actually announced the end of life of suffer so how customers will adjust in in the pool for what activities so that.

Really remains to be seen over the next several weeks.

Got it.

That's very helpful. Thank you.

Okay. Thanks.

Your next question comes from the line up at Walter Pritchard from City. Your line is open.

Hi, Thanks, just to build on the last one that we talked a lot about server and that's pretty clear with the end of life and so forth around data centre. How are you expecting that's been years that you put out around Serb will impact a larger customers who are datacenter, who may look at this move and say you know datacenters next and that and that's just the the path.

Thing going for the innovation is and so forth and cloudy expect even though it's not direct announced that there that you'll have sort of induced I behavior change in there as well.

Ah Scott there I'll I'll try that.

Will come in what we've said for our customers as you know it's not at all well I just customers are choosing to remain on data center, you know because they have a longer time frame that they want to migrate and we're continuing to invest in you know got us in a product just reminded for some of those are having.

Right over the announcements random like I said, a a product put out got us in a product continues to be something that last me and build upon and supports and continues to invest in now.

No. That's it I have to talk to a whole number of salaries over the last three months from everything from regulated industries Bang, you're paying customers and every single one of those they are always has I plan to move to a cloud.

They are you know and when they're in a regulated industry or you know a European customer and it's just a matter of when and sorry about a finished product is going to be you know critical and make sure and show those customers are supported over the top line for migration, but we expect that all our customers will migrate to cloud over the medium term.

Your next question comes from the line of Greg Moscowitz from Mizuno. Your line is open.

Okay. Yeah. Thank you very much for taking the question games I wanted to circle back I guess on physical 22, because clearly there are some Clinton takes and you will be there to some of them, but I guess as I think about it on one hand, you know.

Will be an additional loss of perpetual license revenue there will be significant ongoing migration incentive but on the other hand, they're gonna get more benefit from the upcoming price increases more conversion from free to paid and the loyalty as counting here too for large customers naturally won't be as significant now and the shareholder.

The letter he said that physical 22 will also be negatively impacted by all of the changes that you've recently made the kids to be clear on this point any revenue headwinds will be greater than physical 21, and fiscal 22 correct.

Well, what I was trying to think about that great as I kind of walked through that five point framework with a different time frames that I feel.

Feel that will be relevant to each of those factors as you as you frame there in the question you've got a lot of moving parts.

I'd say the NASA of all of this is that the revenue growth rate would begin improving again.

Beyond the next year or so so in the in the lesser we use.

Use similar words in my section, but that's how I I think you should consider the trajectory of the of the revenue growth rate pattern.

Okay. That's that's helpful. Thank things and then just a quick follow up it was on a comment that the current expectation is that it will be lower take right on the sales of cloud apps through the the atlassian marketplace I suppose over there the rest of the year for that then your term anyway, and just kind of wondering why that would be the case.

Yeah.

There, which is very much looking to continue to provide a rich incentives for our app ecosystem partners to build more cloud apps and have them Vietnam marketplace, obviously that marketplace started out life many years ago or so it was a survey based.

Marketplace more recently within the last year and a half or so we've really focused on expanding the data center apps as well and with this very clear focus we have is accompanying an hour on the cloud transition obviously, we wanted to make sure.

Customers can gain access to the same sort of functionality, but they really benefit from and the current haps behind the firewall.

Available in the cloud as well so we just wanted to make sure that the financial incentives for our App developers line up with that.

As we mentioned in the lesser.

Design those as temporary incentives.

Okay perfect. Thank you.

Okay.

Your next question comes from the line of Alex Kurtz from Keybanc capital markets. Your line is open.

I think for taking the question I just wanted to round back to the the blog posts that he'd put out a couple of weeks ago about changing the server pricing, but you also have a comment on the blog posts around future cloud pricing and no today in the shareholder letter.

[noise] blog posts, which.

Seems to imply that the that the customers any advantage pricing program might eventually be moved up the list price.

Maybe it has helped me navigate that in and what that could mean for Ah.

A potential clouding for.

Price increase up for those crowd customers.

This is James I'll I'll take a crack at that Alex but you you broke up there in in the middle part of your question. So you can stand me, if I'm not answering sorry about that but in terms of what we've.

Talks about it isn't that blog posts posted a couple of weeks ago. Yes, we are raising prices effective February the second for our survey and data center products and.

And we notes in the shareholder lesser the while Ah, yes, he's gonna be very thoughtful about use it is in product combinations.

Specific price outcomes.

If you are a customer directionally from a modeling perspective, they they equate to about 15% increases yeah, Oh yeah.

We're very explicitly not raising clouds prices this year.

Versus the case, where we have done that in whole or in part in previous years and in terms of your reference to advanced each pricing, yes, there was some pre.

Price lists for parents customers. When we wrote some of these price increases through we've always wanted to be thoughtful about the degree of change the the customer is taking on in terms of price and.

And so.

Each of these situations. The end result is list price, but it just takes a longer than just in the immediate step function up to the new list price just reflective of.

People customers current budget some of those sorts of things. So does that get what you are asking yeah. It does it just to be clear the advantaged pricing plan is probably for a very small subsegment of your cloud customers.

Yes, so the advantaged clouds customers, where those are.

You may recall, a year ago for the higher use a chair pass of out cloud pricing structure.

Suddenly a year ago, we had relatively few customers in that part of our customer base.

And yes, we moved prices up for those high a cloud T is so.

So for those customers who had.

Gone early too you know the largest scale end up the cloud, we're giving them more time to come up to list, yes, that's a relatively small proportion of the overall cloud use of ice.

Thank you.

Oh, it's it's got to talk about here, just anytime in and and I had to to James like that's a great question of the day, but philosophically you know.

We want to get accustomed to the crowd when I talk to companies big and small old I Wanna move across to the crowd. We know that all the time, because we solve a lot more problems you know for them and take a lot of the management overhead from them. The scalability issue. The hardware cough, you know because we do all that on their behalf.

You know, they're willing to pay you know high prices in order for us to get a hold of them. The cost savings are significant many guys, who they will you know cause I'm tainment five O six people managing how products. When you were 19 yourself. That's down you know Rebecca study with a standard under a person now and so you know those cost savings you know, we we can capture some of that.

The I N as in the short term, though to make it an absolutely easy decision for people to move across without trying to get an atheist guestrooms in their organization, it's like what's the point across and withdrawn might be cost and price you know relatively to sign you know instead of both your transfer and all the time skip them back out you know unconscious and have more of a.

The way providing pulled them.

So it really you know there's a lot of ways. He could have a slot differently and we think this one is very tough my friend, William we've always sort of like a longtime customer of life.

Have you know from talking about.

I have to say I was a very large organization. So we want to have their Greg relationships as we provide more and more products for them and you know some of them more more things.

But also that Ah Ah you know one of them as possible without any sort of broth Gary thing something in Hawaii.

That's what are the thoughts on for food Honda.

Thank you.

Your next question comes from the line of.

Ty could run from Oppenheimer. Your line is open.

Thanks, and good corner guys.

Leaving the cloud on the side for a second.

Like maybe you can talk about trillo and.

And the work management space you know, maybe we can talk about progress over there and.

Maybe fine tune to kind of differentiation over there now that does sound nice public how do you see the landscape how do you see a competitive positioning there.

Ah and opportunities ahead, and then for James just kind of them falling off of the data center side of the equation correct me if I'm wrong that is a term business. So that shows up in subscription revenue, but can you tell us the the magnitude of how much of a subscription revenue.

East high too on premise not the cloud perhaps number of customers I think it talks about 30000 enterprise customers what would be the account's under their the central science.

Yeah.

Sure.

Sure. It's this is this is my can begin well.

On the work management side I can I can give you some color wasn't a specific Christian I suppose obviously look you saw us in the corner on specifics, we got support for a trailer in federal.

For obvious reasons of trailers Ah you know doing wrong with the government sector and continues to grow there I'd say the broader story there is around churilla in the enterprise.

And as the.

You know the extremely large trailer userbase continues to grow apace, how that is starting to get into a larger organizations like the government obviously indicated from that.

At the same time trailer continues to.

Sort of broaden the appeal of its product so you've seen I do a lot of work with what we called Trillo views. So changing the way that you see the data that's inside shallow and also embedding trillo into a lot of other places.

In in a broader sense I would say.

Looked at that area work management for all continues to be one that we are spending a lot of time in confluence continues to grow very well you've seen us with the the help acquisition in terms of providing a.

Sort of service management experience inside of slackening side of of messaging tools, which is used by I'd say suddenly but used increasingly by other teams were that's a much more familiar interface for them to provide a a service management capability.

So I.

I think you know.

Probably positive about all of the things we have going on in that area continue to invasion and continued.

Enterprise growth of of work management for all tools, I think bodes very well for us in that in that space.

And to tell you. This is James I can jump in on the second part of your question.

Yes data center is accounted for in the subscription revenue line and I think the way to already you think about that as the subscription in Q1 represented 60% of total revenue.

And recall the in the past, we've said that the cloud business is just a little shy of 50 per cent of total revenue at this point.

So that gives you directionally a sense for the the scale of the the data centre business and in terms of customer accounts you know some of the other data points. We've all set now we have 182000, plus total customers and we've talked about 160000.

Cloud customers. So again it gives you a little bit of a census, directionally the customer count.

Your next question comes from the line of Brenda Phil from Jeffries. Your line is open.

Hey, guys does love soda on Brentsville.

Nice quarter and great investments on the cloud side wanted to ask a couple of questions. One was in terms of Sir you provide great color on server to cloud pricing I was wondering like what would be the you know in terms of any color you could provide on server datacenter pricing and tons.

What's the difference and what the migration process and kills there and then the second question was around the mindful acquisition that you're close this quarter you know obviously, how did the position you relative to the competitors in that marketplace in yet.

Thank you.

Well I can perhaps take the first part of the question.

And tell.

Ah Ah Ah the economics of moving from so that's a data center.

You really quite similar to the situation when our customers I liked him to move over to the cloud for a larger customers in the thousand plus seats cancer, great. We would again look to offer material discount levels you know less.

And those that we would be offering someone moving over to the cloud, but still material discount levels.

Over a multiyear period. So it's a it's a similar approach reflecting the comments a skunk Mike made earlier that you know the data centers very much fill up a deployment option that we continue to invest in for the future. So Ah Passover so.

Michael Scott for the minds old pop Mike.

Thanks Love. Thanks Love for the question I can I can certainly take that look.

We continue to be incredibly started about what's going on in the yard kiss and stripes.

As we.

You know continue how long term journey in that space. It really has been a series of US now I think it'd be zoom out you can you can look at that and say a whole kaleidoscope of options. There are many many a wise the companies can provide I tend so ikea some solutions I do think what we're.

Doing is bringing that into pretty sharp focus.

And if you look at our offerings continuing to mature in the way we've taken juror service desk and then adding.

Satisfied for accidental communication and an opportunity to provide raw.

Raw stirring in real time management capabilities of your team and bringing it into two incidents.

And then obviously, adding montville for C. N debate capabilities, so asset management of all talks alongside our service management capabilities that'd be released so not only managing the services that are outbound, but also providing a registry it'd be in in inside services. The technology services that you have inside your company what was starting to do is.

Really provide.

A single pane of glass that can look across your I T operations and development teams as teams and companies are increasingly bringing their development teams closer to their I'd say things, we'd providing a single instead of offerings that run across that and as we continue to integrate them and add the atlassian platform under Oregon, where obviously incredibly sad.

About the growth of the space, but also the uniqueness and clarity that are offering brings to the to otherwise quite quite blurry spice. It is around it in the uniqueness does that offering so really excited about that space going forward and you'll continue to see us investing there and continue to see us having having big announcements in that space.

Your next question comes from the line of Jack Anders from Nida Mirror line is open.

Good afternoon, and thanks for taking my question I wanted to ask about it work you're doing or initiatives you have in place to gain more leverage with some global systems integrators, and particularly thinking about something like you're a line I mean, how is it how important is it to engage with these types of partners for you. These days.

Scruffy I'm fixing question Duck.

The systems integrators Ah wait will go out partners' partners I've been a huge part of Alaskans success.

We've you know we have a great document work hundreds of partners around the world.

Go in Europe, as a real big strength for US and you know there as we say with with some of our lives her engagements with.

With customers on though I decide like most of them are bringing and I'm working with the system scenic writer on those transformation tendencies, particularly if you'd think about digital transformation a lot of what needs to get done and I was organization does not seem pointed the deployment of software, it's actually changing the way that these organizations work to do I don't all transformational Scott.

That whole framework and so forth and so there is systems integrators are really important to be on the ground to help out with some of these transformations, but that hasn't happened and so you know like maybe particularly happy with you know the systems integrators them you would also say I'm migrations people margret.

And to the cloud is a huge opportunity for our systems integrators, when we're saying some of our best partners build migrations practices already on American picked out of the crowd and and that's been a great source of the business for them and also a great way for our customers to get across to the crowd Foster.

Cause you know you continue al.

Of portfolio that we provide to say I always in terms of everything from you know the juror framework in consequence, but all the way out to draw a line, which handles effective way to see he always got bored about how their organization who's going in and did you go transformation again that makes it more strategically customers and you know in a minute or customers. They worked.

To our partners to help and deploy and drove it out.

Your next question comes from the line of Reshoot jewelry I'm from D. Davidson Your line is open.

Hey, guys. Thanks, so much for taking my questions. Just just two quick ones first you know if we do kind of the back of the envelope math and you've gotta roughly 60% instead of your customer base, that's using Ah Hi, Brandy you know some products on premise some products and the clouds can use a little bit more color on.

On what these sort of situations look like is it a function of.

They might be using cheer on premise and travel in the cloud or is it a departmental level thing where the initial adopted or using G. Our survey data center, new teams or jumping straight to jail cloud and then the second is just on thinking through the longer term covid impart over the past couple quarter and he identified some of the headwinds from from.

S M b exposure in pain and duration when they when they look out maybe longer term, especially given that is smoking likely that that we're gonna be in a much more distributing workforce, even even post pandemic. How do you think that that shapes, maybe the the necessity.

Four four year solutions and within that environment. Thanks.

He was quite questions first of all I'm not sure on the back of the envelope and 60% of customers is necessarily right, but we said in the past of 95 per cent of our new customers us out quite offerings and while we don't disclose the overlaps like but what I can talk through the reason for that.

If you you know one of the advisers of cloud is that you can get going really quickly you don't need to deploy a hardware you don't need to kind of you can find spicy new data center and so you know what we find is even amongst got a lot of his customers that might have deployed you know wall to wall without a doubt a central server offerings, we'd need projects where.

I Wanna get off the ground quickly. They are in many cases will deploy out a cloud does she.

So we find that Ah you know, there's even when it comes to discussing with you find you should have a cloud products and in many cases that sort of the White House, you know department inside of those companies as able to migrate to crowds. So I I think it really speaks to the ease and speed of which customers can get going in that crowd that you say that the hybrid and kind of course out of a time, we'll see.

I was on cloud think so scale.

Under distributed workforce side of things what we saw in the initial days of Covid was Spock in our web traffic and I think they are in the order of roughly 10%, where we saw you know no because we had a huge fucking customers within days of the pandemic, but because our existing customers were using out products with a high frequency.

And you know got started is that there was no talk to notice my Whiteboards and.

I'm Gonna try Oh, the work that they're inside al tools, and there's a huge opportunity for that because once you track work in a product like year old trailer cough once or any of our products. These awful.

Unity, so automation, which will Saint or August maintain automation I don't watch seems automation products.

Since the smarts and it was seen some announcements recently around how we're using my daughter machine wanting to better route.

Work to the right people and so we think there's a huge opportunity for our products to help with.

The workforce.

And the other thing, which was surprising familiar when I tried to with a C. I O is is that the C. I always agenda has never been more aligned with the C E OS agenda.

You know if you went back to the 15 use the C. E O N C. I always agenda would be you know instead of margarine overlapping whereas today the same problems that he always just struggling with Richard how do I make my workforce productive Huawei remote.

How do I said, our customers you know new why particularly if I've had to move out you know transactions with our customers online how do I make sure my employees are unhealthy how do I make sure the workforce across the organization are moving fast like these are all C. E O conversations and board level conversations that are happening when the C. I a is now on the hook for.

Doing that and now the C. I used to be that I childless responsible for the water cooler now see I always are responsible for the digital water cooler and so what does it surprised me is how much interest has been around culture.

You know from say traditionally you wouldn't be thinking but that would be fun of mine for them and because of the last scene in the way, we worked and how we work ultimately and how all products promoted and aren't gonna transparent culture, you know they've turned off as a trusted partner could help them transform their organizations.

Your next question comes from the line of Derek would from counting company. Your line is open.

Great. This is actually in the government on for Derek Thanks for taking our questions. You guys have talked about your hiring plan for for this year and you said the bulk of the high rate, it's gonna be going into R&D I guess, let me look at the product portfolio, where the pockets that you guys will be for.

Just on the most from an R&D perspective, and how much of the offer is gonna be directed around furthering the cloud enablement of the portfolio versus you know not new offerings.

Yeah I think.

Firstly, I I think I would zoom out to stop and and so as we said a few times are in three very large market between work management for all the.

The the software agile that up.

Ah market and then into obviously, the I T and Ikea and market.

One of our advantages.

Is not any of these three fantastic market that are incredibly critical to customers and companies out. There is Scott mentioned they are all connected at various different points one of the strengths. The last thing has is having products.

Comprehends runs across all three Jura as a platform runs across all three.

Charlotte is increasingly used in lots of different places across all three so having products and connection between these market as we mentioned software coming closer to I'd say, obviously, the I T department being more involved in all sorts of work management capabilities.

These kind of activities huge strategic strengths of ass, but require R&D investment.

For us to continue to bring products closer together to allow customers to to reuse daughter across across different spices.

And building out a cloud infrastructure to handle all these enterprises made the customers as well as the work management and the automation data platforms Ah Scott has mentioned so yes, we will certainly continue to invest in our in day across a lot of both.

Both areas.

Our platform is a continued place of some significant investment but to bring a microplace up to speed, but also as I mentioned to look across the the increasing amounts of data, we have and providing better answers.

Automation I-i, there's lots of things that we're doing in building that we.

We are always.

Looking at building, new new products, we always have a series of different prototypes in things working on things internally, sometimes does become products for the outside world, sometimes actually get merging of existing application to become.

As of what we're already doing so one of the advantage of our business model, obviously is our ability to invest in our in day and continue to keep that innovation going.

One of the advantages of a day and I belong to I'm thinking and then he put both together I think that's part of the reason was being so successful for.

Two decades, now and intend to.

Continuing to cause they saw it so we don't generally provide any specifics, but hopefully that gives you a little bit of color about where our way somebody that r&d's going and why we're excited about about a possibilities in in the market for it.

Your next question comes from the lineup Robert Magic firm at Raymond James Your line is open.

Great. Thank you up there on the customer transition from standard to premium skewed when it's customer feedback and like on premium what's the next today and where can that Mexico as they look out a few years.

Robert discuss here.

We're really pleased with the customer adoption the premium and as as you know in the last probably I didn't answer it introduced premium and enterprise versions about cloud excuse. So previously there was really only one price you could pay for you know I'd say Gerald components, you know if your service there.

And we've now so they got hearing you notice the instructors premium we necessarily them because that ramping up now so that is a widely available and widely adopted product an enterprise is really the only stages like with the announcement and we've got to me only customers using it but it's still ramping up.

I would say, we're doing specific numbers, where you've been extremely happy with the premium adoption of our products and we're still undecided as we add more features they get adopted at a higher right and the satisfaction for those customers is getting really high.

As a reminder, the premium version of their products.

<unk> feature differentiation that I also include higher otherwise you.

You know for our customers wear mission critical I'm, sorry, we've seen.

Kind of a combination would be a really.

Even when desirable one for our customers ice or yeah, I'm very excited and very happy with it.

And with the launch of it lapping ventures can you help us frame the positive impact that might have an ecosystem as well as future marketplace revenues.

Sure I just want to add one thing I'll get to adventures on on premium and enterprise additions into cloud a reminder, that most customers will tend to migrate.

And obviously you know my aggressions going very well, we're up about 90% year on year in terms of the number of uses that didn't mind riding.

And obviously off a small basement as we continue to increase backwards with tools and with partnerships. That's gonna grow most customers will migrate probably to cloud standard.

And then over time as a cloud journey.

Increase their confidence in a lot of things cloud and they need more features and capabilities once they're in the cloud they'll then sort of move up through premium and enterprise depending on the company.

And the journey, so just to be clear I I'm not sure people will necessarily moved from on prime strike to climb premium that that'll be you know as they mature in their atlassian Jenny.

Mm on Atlassian venturous. According to the incredibly excited about it we've done a few investments in the past is it lasting.

This is I would say a sign of a maturation as a as a company.

Having a formal brand a formal budget and attain that is focused on doing this.

Laos us to you know better serve the ecosystem an economy around atlassian right. It's not all about acquisitions, there's a lot of work to be done in investments and partnerships.

And we just continue to to.

Sure and grow in stature in all of those areas as we become a part of the you know the largest caltech economy and I think it's a great step for us to continue to go, albeit done with it lessens general.

Sort of pragmatic Ah Ah long term long term focus on how we did it. So obviously that's not a not a short term short term and shit.

Your next question comes from the line of Jim a fish from Piper Sandler Your line is open.

Hey, guys. This is clinton on for Jim. Thanks for taking our question just to to high level questions from US you know first Ikea operations is a massive and somewhat newish opportunity for a laugh and is there any way to think about the revenue contribution today outside of the core software.

Market and then Additionally, wondering if you guys have seen any material changes in the hiring of developer there I T professionals in general that may help expand at laughing usage.

Scruffy when Clinton credit credit questions, what we're seeing in the they've an arcade market to continue a lot of those markets I'm sorry.

If you know people.

People I can put them in Detroit buckets, but these days most of what I see people are doing Jews involving software and one of the like the operation stuff is running a managing software and that's an area, where we believe we have a unique advantage as these and the powers more software teams and anyone else in the on the planet and we think you would have a huge all.

The community that everybody notice those two things cost will be there at all.

Think about how we.

Prevention is before you know in terms of planning and managing work you know Joe during conflicts come in we do an incredible job.

There and we handle everything from someone putting something on that sprint backlog all the way up through the general line and managing 10000 people. Then you know through development. Why you know there are a lot of ended up there and we actually partner with a huge number of vendors and that sort of code and test and deploy side of things and then the run side of things right Ron managed to Pee.

Port area, that's what you're saying is Michael Eisner investments over the past couple of years everything from your service desk, which at the end of the market now for for quite a while to opportunity to satisfy age and you know the.

The restaurants that my talked about with my Bill recently, and so you know that is a huge area.

Basement for us.

And as you say like you know every round to build software now has to monitor them and those things are closer than ever before so we don't break them out as much I'm into if anything.

As long as they more blood you know develop as an hour on call in on support there's not a separate you know team sitting in the network operations Center any more it's the people to build it now run it and you know so the developer when I was in our products huh like there cause I was on the on the first thought on the hiring of developers.

Now what you what you say across the entire industry. Now is you know 10 years, the digital transformation happened in in 10 weeks and so the demand for you know I think professionals any developments and people can build software is higher than it's ever been and you know what you're saying is organization, saying well we went to high you know developers.

And if we can't do that how do we did have it open to be more productive and so you see the rise of worthwhile applications.

Like Alaskans, where you.

You know you can take you don't necessarily need to software developers to make sure. We're classifications happened and ran across your organization, you say wildcard opportunities, which people using the last few platforms automate things across their entire.

Organization, and you know automation, which was heavily and to make sure that all of the busy work. It goes away and so you know in terms of we don't have specific numbers for many third party and design developers, but I would expect that to be I pinch point for most organizations for the foreseeable future.

Your next question comes from the line of origin body I'm from William Blair. Your line is open.

Hey, guys. This is John Becker on for Orange and I. Appreciate you taking the time to question just one quick one from us and I Kinda wanted to touch on trillo, unless you've made some kind of changes here in 2019 with the pay was an acquisition of Butler, but they're kind of thinking how was the monetization of the product changing and how are you.

Measuring and that kind of success from this product looking into fiscal 2021. Thank you.

Thanks doing.

Look as we've we've been on a long term journey with killer. We've always said the most important thing is to keep the product growing as a whole.

Hello is.

Amongst the product tens of millions of users and continuing to growing fast and for them in a long term perspective, having those tens of millions of users continuing to grow is is the number one priority and we've been pretty clear about that that said we have continued to.

[noise] apply latvians expertise in pricing and packaging to work out how we get.

The best customer outcomes and the best it must be an outcome. So that we can continue to invest in the product.

That journey has been going quite well as you mentioned we've changed.

Some of the the ways that it is charged in a couple of times now over the years and that continues to drive.

The top one the trailers contributing to chew atlassian.

Things like Butler provide more differentiation, so that's the sort of automation capabilities.

Four four trailers.

And you're saying that with the continuing to work we're doing around churilla views. So it providing more wise to look and you know we've got a calendar view and a map to you at the moment, we've got a title view that in a in a public beta at the moment, so continuing to have different ways to look at the data that things on trailer also gives us some capabilities to look at the different.

Paid additions.

And at different view the capabilities that you'd go through there so.

I think I can see number one focus petrillo as I've said is is the the userbase and continuing to just make it a you know.

A standard.

The other thing we're also doing a trailer is continuing to bring it closer to the life and family as you were saying with.

The identity stack underneath moving to the Atlassian identity platform, which you know by itself handle tens of millions diseases. So is is very helpful to bring that trailer userbase closer to the Atlassian userbase over time.

And obviously things like access is a monetization angle across trailers.

As well as connections too obviously did you ever software onto your.

The service desk to help and the consequence, obviously, so bringing it closer to the same family is is a part of the the amount of possession journey patrol as well.

Once again, if you would like to ask a question. Please press star that's number one on your telephone keypad. Your next question comes from the line of I read Trinian from Ah Cleveland researcher line is open.

Hi, Thanks for taking the question and that's on the results.

Just wanted to double click on the comment around brokered.

On it you know, it's an area routine increasing spring certainly.

This year round, you know crisis communications are cracking trace et cetera.

Any thoughts around you know furthering efforts here, obviously towards the great for that but any more color you can share a new use cases and wages seen people use it lasts in in the local platform in this environment. Thanks.

Okay and.

Mmm.

Mm wait blustery Scott [noise].

I'm talking with you Sir sorry, one of the benefits we've had over the long term of Alaska and you've got a products are incredibly flexible and our customers have used them for all manner of things and so we say laughing products use everything from HR recruiting and on boarding.

Employees, we've seen them for.

People a matter of fact listed company uses the last name's products to handle that quarterly closed process and finance and the advantage, though I guess, there's that products are very fast to roll out. They are widely deployed inside an organization and as customization that varies from <unk>.

Changing internal.

The bird interface, and configuring workflows and custom fields, all the way through too al.

Rotting faunch witches and affords application through to a building you know complicated applications that or you can deploy and he was from a market clients and so what are you, saying that sort of thing you use cases would be too numerous to get into on the skull, but we've seen lasting product be used across the entire organization.

Another example weeks previously Twitter users Ah.

The last thing for you know hundreds of service or something it was 140 service starts started having from illegal senator steps to HR across the entire organization. So we'll see Iraq as a platform where people do move work across their organization and if Michael waited too as we continue to build outback platform. It gets used for more and more use cases.

There are no further questions at this time I passed the call back to Scott Farquar for closing remarks.

Thanks, everyone for joining uncle today, we appreciate your ongoing support and we really hope that you and your loved ones from my end so healthy.

To see all of you an investor day on November the 17th Thanks a lot.

That concludes today's conference call you may know disconnect.

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