Q2 2022 Atlassian Corporation PLC Earnings Call
Yes.
Okay.
[music].
Good afternoon. Thank you for joining Atlassian earnings conference call for the second quarter of fiscal year 2022 as a reminder, this conference call is being recorded and will be available for replay from the investor relation.
Section of Atlassian website following this call.
I will now hand, the call over to Martin Lam Atlassian <unk> head of Investor Relations.
Welcome to Alaska in the second quarter of fiscal year 2022 earnings call. Thank you for joining us today on the call today, we had that locked in co founders and co Ceos, Scott Farquhar and Mike Cannon Brookes, Our Chief Financial Officer, James Beer, and our Chief revenue Officer Cameron Beach.
Earlier today, we published a shareholder letter and press release with our financial results and commentary for our second quarter fiscal year 2022.
The shareholder letter is available on that Watkins work lifeblood and the Investor Relations section of our website.
Where you will also find other earnings related materials, including the earnings release press release and supplemental Investor day This year.
As always our shareholder letter contains management commentary for the quarter.
During the call today will brief opening remarks, and then focus the rest of our time on Q&A.
This call will include forward looking statements forward looking statements include known and unknown risks uncertainties and other factors that may cause actual results performance or achievements to be materially different from any 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 globally.
These statements represent our management's beliefs and assumptions only as of the date such statements are made.
We assume no obligation to update or revise such statements should they change or cease to be current.
Further information on these and other factors that could affect the Companys 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.
<unk> form 6K.
During today's call. We will also discuss non <unk> financial measures. These non <unk> financial measures are in addition to a modest substitute for.
For or superior to measures of financial performance prepared in accordance with ISR I.
A reconciliation between <unk> and non <unk> financial measures is available in our shareholder letter earnings release, and Investor data sheet on our IR website.
During Q&A. Please ask your full question upfront so that we can.
Can be fair and be able to accommodate next speaker.
With that I'll turn the call over to Scott for opening remarks.
Thank you for joining us today happy new year to everyone.
Q2 was another strong quarter as we continue to see great momentum.
It's extremely encouraging to see many of our past long term investments reflected in our Q2 results.
The vaccine marketplace, which we started in 2012 recently surpassed $2 billion in Watkins titles.
Cloud apps now make up nearly half of all marketplace apps and the rate at which customers are adopting cloud apps is outpacing our own cloud products.
It's exciting to see our ecosystem grow at such a rapid pace and perhaps to be able to expand the economy around Alaska.
It was an area, we've committed to doubling down on three years ago.
Recently Juris <unk> management was recognized as a leader in the Forrester Enterprise service management wise without strategy for ESN, receiving the highest possible score.
We also recently added.
AI to bring AI powered virtual agent technology to expand Jason's frontline support capabilities.
Our continued investment in innovation that client platform are driving great results.
This quarter, we added more than 10000, net new customers with all lending and clouds and quarterly cloud revenue grew 58% year over year.
As you've already ready to announce shareholder letter, we're looking forward and laser focus on investing in future.
Hiring is our top priority.
We deeply believe in the massive market opportunity in front of us and investing in people you've got path to seize these opportunities.
Lastly, we hope you can join us for $2 22 in April .
We're cautiously optimistic to be back in touch with our partners.
Hope to see many of you there.
But we're thrilled to also be able to host viewing parties around the globe and also a virtual option as well.
With that I'll pass the call to the operator for Q&A.
Thank you have a reminder to ask a question. This fresh start and then the number one on your telephone keypad and to remove yourself from the queue. Please press the pound key.
Plus for a moment.
Further roster of Q&A.
Our first question comes from the line of Alex Zukin from Wolfe Research Sir Your line is open.
Hey, guys congratulations on another.
One other just wonderful quarter I guess, maybe for me how should we think about the results relative to your internal plan and what were the two biggest areas that outperformed your expectations and if you can any bottlenecks to growth at the moment and how are those different than maybe this time a year ago.
Well thanks for the question.
Got it up by saying I was really pleased with the performance against.
Plans really right across the board you see very strong.
Formats in both the cloud and data center businesses.
Yes.
Pick out one product BJ, Sam I think Thats, just really hitting the mark with customers a big opportunity for us.
Going forward.
That has given us the confidence to raise our full year subscription revenue guidance.
To around 50% Thats up from the.
The mid 40%, but we were talking about 90 days ago.
And the other thing I would really highlight as I feel we are very much on track with our migration timeline. So.
Pleased by that.
In terms of the last part of your question.
Demand continuing to be strong.
The cloud and data center businesses.
I don't see bottlenecks that in the future one of the other things I'm sure. We'll talk more about this is the continual progress we have with it.
Increasing the capabilities of.
Quarter by quarter, and as we do that obviously more and more about.
Currently behind the firewall customers are able to move.
Move over to the cloud its clear that they want to go in that direction and increasingly each quarter, we're making that possible. So we feel good about the opportunities in front of us.
Thank you. The next question comes from the line of Nikolay <unk> from Goldman Sachs. Sir Your line is open.
Hi, Thanks for taking my question James One for you when we will start seeing the migration impact from server and data center to cloud in the numbers.
Loyalty discount on.
Unwind over time I'll be talking maybe a year from now two years from now.
And as a follow up to the team in general.
The cloud you're pricing really changing and you started the company, probably 20 plus years ago.
The business model oriented there are very low priced compared to our competitors and now for example premium is 15 box enterprise profitability with higher approaching the pricing of competitors. So I would think that Scott made this shift in strategy here and how is that reflecting in the business model and the path of the company.
Going forward in light of that context. Thank you.
Well let.
Let me start.
The answer in terms of the impact from migrations.
What we're saying is that for fiscal 2002, so for the full year.
We would expect migrations to be driving mid to high single digit growth in our revenue year over year. So you can contrast that of course to what I would just.
Pointing out there in terms of our expectation of around 50% growth for subscription revenue in fiscal 'twenty two.
And then I would add that in the quarter just past Q2.
A very similar sort of.
Mid to high single digit type contribution.
Two the growth rate that we recorded in.
In Q2, so that 64% subscription revenue growth.
Q2.
About mid to high single digits coming from migrations.
Just a couple of other things I would add you referenced in your question the loyalty discounts so today.
Until the end of June .
Moving over to the cloud from the server data center, they would receive a 40%.
Discounts now once we get into July in a few months' time here.
Discount will half down to 20%.
So that's important to remember.
The other thing I'd say is that when a customer.
Migrates over to the cloud of course in the period that they make that migration.
That's a very modest impact on our revenue.
Obviously, the cloud business is recognized Ratably in terms of the accounting so.
Of the.
Three points to keep in mind.
Just on the back of trends around sort of out <unk> also seen that we've talked about.
So it sounds like there's no change to our pricing philosophy hasnt really over the 20 years I've been running Atlassian, we've always product volume and we've talked about reaching the fortune 500000, and reaching millions of people around the world and that's what we've always priced for and so what you're seeing sort of in terms of how that's manifested in al.
With prices or the year.
Cheaper at the Wellington consistently by making it more free.
At a time.
So you can capture more value at the higher end, where we are providing more and more value for our largest customer.
Estimates.
And it causes.
The cloud.
To provide more value for customers, where it takes a lot of the management or the head of licensed customers by providing the hardware inside our top tenants are happy philosophy, and I would continue to see us do more freight to low end and more optimization.
Thank you. The next question comes from the line.
Fargo, Sir your line is open.
Thanks, and congrats on results here.
Some of the commentary.
Okay around <unk> service management stands out in the shareholder materials, even ask Cameron picking a favorite which I'm sure is an easily maybe you could speak to what's driving the momentum there how thats impacting the model where that might be showing up.
And maybe what mixture of service management, the right product at the right time as you referenced in the customer section. Thank you.
Yes, Scott here I'll take that one.
Curious, though this madness.
To handle the converted conclude developers and IP.
We are seeing in the market. These days that <unk> is no longer an island over bottoms sold how long ago upgrading things that were handled on a CD over a weekend.
Well down dip.
<unk> and <unk> are working hand in hand to.
Transform their organizations and Theres no other vendor out there that has that sort of unique position to bring that.
Together.
The second aspect is the only company that allowance ops.
Handle the fortune.
500, all the way to the Fortune 500000, as we've talked about and that comes from us.
The focus on the end user experience like witches.
Which we've delivered across our product range for multi decades at the moment, we're bringing that to I would say.
And we're going to invest in <unk> and three.
You usually go when you have seen any consistent drumbeat of innovation.
Some acquisitions to add functionality.
Most of it's been kind of in house innovation and building out the feature sets.
We're super excited that that's being recognized by.
Analysts out there.
It is great, but more importantly, being recognized by our customers who are adopting it and try to I'm sorry.
I wasn't surprised I mean.
Plan three years ago to do this and.
And because we've got a great platform, we've been able to move relatively quickly in delivering all the value to our customers and so they expect the ICM to continue to grow into the future.
Thank you. The next question comes from the line of Keith Weiss with Morgan Stanley . Sir Your line is open.
Excellent. Thank you guys for taking my question and congratulations on another really really nice quarter.
Wanted to ask you that two of probably.
In a quarter full of a lot of eye-popping numbers to the numbers that really stood out to me.
One with data centers are seeing another acceleration in growth to 83%.
Anything kind of onetime in nature, we should be aware of the net debt number I know, there's a tough comp coming in Q3, so now because.
Because it seemed that growth.
Think about what drove that acceleration.
Two.
There was a comment about channel partner revenue growth accelerating to 130% growth year on year anything in particular.
Changing in that program that cause that acceleration and it can you give us some type of sense has that become more material channel that is that starting to move the needle a little bit more for the broader atlassian distribution strategy.
Thanks for the question so just Cameron here.
As far as the data center demand the best way to look at that is it's just showing further commitment from our customer base into the Atlassian ecosystem and also the highlights the mission criticality of our applications as we continue to say that that migration to cloud is a multiyear journey different customers are on different stages of that journey.
And thats half the data centers for many of them is a step towards cloud all of them are well aware that cloud our investments in cloud our strategy around cloud and that cloud is in our future.
They're at all different levels of maturity of whenever they are able to move over.
The reality is if you look to the last quarter, one third of our cloud migrations came from data center customers. So we have proven that we can take the data center customer base to the cloud.
The second one is around our solution partners and our channel.
Rich just absolutely critical to our overall efficient go to market model that we have everything we do directly with my teams in marketing sales and customer success gets amplified with hundreds of solution partners out there in the market.
And obviously as you see in the numbers. This solution partners have been increasingly critical to our cloud migration process. The reality is that we provide a variety of incredible self serve migration tooling for customers to move to the cloud, but many of our customers want help from planning out there with the migration to maintain the migration itself and partnering.
With Atlassian and that.
That has allowed for us to continue to show great growth in general for large customers.
We're talking to them. The first thing I'd say is hey, which partners are you working with who can we partner with to build this plan out hand in hand going forward.
And let me just add on to the SaaS part of camera was down so there in terms of data center growth.
A couple of things also to remember in terms of Keith you referred to something like a one time nature.
I think about the Rev Rec.
Remember that a portion of.
The data center activity that we would contract with us.
Customer is taken upfront.
Quite different to a cloud revenue accounting, which is fully ratable.
And then the other thing I just pointed out.
Recall, we raised prices.
Around this time last year on the data center the full effect of that is now slowly.
Going through and so both of those things give a little extra fuel.
So the inherent demand that Cameron is referring to the data center.
Thank you. Your next question comes from the line of Fred has with Macquarie. Sir Your line is open.
The hiring landscape for top tier talent, how is that evolving at this point I think you mentioned throughout Europe .
It seems there have been a strategic differentiator for your hiring practices.
<unk> hybrid remote work options are you.
Seeing anything out there to suggest that top talent is now weighing either compensation packages or stock comp packages.
Differently in this more volatile environment potentially favoring companies like Atlassian.
Thanks for that Scott Scott.
We'll go we've.
Been really happy with our team anyway policy.
To allow people to.
To work wherever they work with us in an office that's great. Although that's been a little harder through the pandemic and.
Or wherever we have the legal right to important I'm, sorry, we have seen a lot of our employees.
New employees working.
Remote from existing offices and we've seen are you seeing employees.
As well so that's really great, we think thats going to be a long term differentiator for Atlassian and <unk>.
I think thats going to be difficult for companies that don't have some more policies to attract and retain the best talent.
In terms of.
Compensation.
We have seen some minor upticks in compensation.
We're early to that I guess ahead of many of sort of peer companies, who have just waited to see attrition.
Pick out before I address the thing and so I'm really proud with how we've worked on that with our employees and.
Particularly North America.
Why is that al.
You have seen an uptick around that.
Now on the back of all that.
Goals for hiring into the future, we think until we have such great opportunities.
Please across all three of the markets that we have.
Talk to you.
Linked to that.
The way of going about that is building out our R&D functions to build out the product sets are needed to go after these baselines.
As markets and.
So.
You'll see an uptick in our investment.
Okay.
Quarter to use and we think thats.
That's going to pay off really well for us.
Thank you. Your next question comes from the line of Steve Enders with Keybanc you May ask your question.
Okay, great. Thanks for thanks for taking the question here I just want to add.
Ask about three exiting CTO.
But again.
What the plans are to manage his responsibilities going forward and how the company is thinking about.
That at this point.
Yes, Steve it's Marc I can take that one.
<unk>, obviously been an absolutely fantastic later in technology over the last.
<unk> use.
He's taken us.
Into the cloud and then continue to build a truly world class cloud platform. So we couldnt be happier with where we sit.
We'll say as students has been building high performance teams building.
Building a great leadership team. So we're in an incredibly good situation internal which is understandable, but we will.
I have no doubt, we'll be able to fund.
More talent internally externally we are in an incredibly good position we have.
Over the long term had a clear philosophy on culture and building a sustainable.
Company and a part of that is about leadership transition and.
Continuing to move forward in all of out of time.
Patents.
I feel incredibly confident about where we are and not technology and engineering functions.
Okay perfect. Thanks for taking my question.
Your next question comes from the line of Keith.
With bank of Morgan Joe Your line is open.
Many thanks, James I wanted to put this one to you if I could we announced pricing changes that would be effective on February 15th.
For data center and server and I Wonder if you could characterize.
What you think the impact has been or will be prior to the 15th.
For those pricing changes see some pull in of demand.
<unk> any characterization of close to put those two particular areas on data center and server. Thank you.
Yes sure Keith.
At the end of the day. It is obviously the customer that makes the decision as to whether or not that again too.
Lee renew.
Add to that.
<unk>.
At last year and ahead of.
These price changes.
So we really.
Comp predict given the volume of customers.
The change that you have this offer available to them.
So when you look at the price changes themselves that we announced a few weeks back.
They vary by product by user tier, which is very normal for us.
I would generally think of those as.
Consequently, mid teens type growth.
In price.
Cross server and data center.
And so I would expect that.
To begin flowing into our P&L in the fourth quarter.
A more meaningful way so.
That may well be.
Some.
Event, driven customer purchasing ahead of those price increases as we saw.
In Q3 of last fiscal year.
But again at the end of the day, the customer already to sites and so this is why we've been talking.
For some time now about a certain amount of variability in our financial model.
As our customers go on this journey from service cloud.
Thank you. The next question comes from the line of <unk> <unk> with Citi. Your line is open.
Thank you good afternoon, and thank you for taking my question and get to Telefonica.
And James a question for you.
With respect to <unk>.
Turning to acceleration.
And in the cloud and data center business I was hoping you could put into context how.
Both those businesses. Thank you enjoy this degree of concurrent acceleration, especially considering.
You had mentioned that about a third.
The cloud performance being attributable to data center migration. So I'm just curious as to you.
If you can walk through some of the dynamic.
And if you can also give us a frame of reference for you.
How much of that cloud performance and require quarters.
Much of that.
What's driven by migrations from data center, just wanted to signal context. Thank you.
Sure.
Say that one.
Let's start with migrations.
I mentioned, a little earlier that what we would expect an effect what we saw in Q2.
Was about mid to high single digit impact on our subscription revenue growth.
From migrations.
Now.
Important though.
Too to note that when we think about cloud migrations.
Then about a third of that activity is coming from data center.
So again.
But in context.
You think about the growth rate of the <unk>.
Businesses that we're recording both cloud and data center migration through important but relatively small positive at the overall picture.
So, let's take a step back and really think about what are the key drivers for the cloud.
And I'd really point to a handful of items.
<unk> migrations.
First of all I think most importantly, we continued to do an excellent job of expanding our user accounts.
Current cloud customers.
You saw it also in the data.
We brought 10000, new customers to the company.
Theyre, all effectively going to clouds.
We talked about the percentage.
And once the cloud we're doing a very nice job of expanding use account.
The second thing I really also highlight.
The growing impact.
That we're making.
Customers on premium and enterprise editions.
Really goes to our overall additions strategy that starts with free standard than premium than enterprise and we've really got those four additions now pretty much right across our portfolio a broad portfolio of products and I think that's a tremendously important driver we're seeing customers.
Really get incremental value as they step up that ladder, if you will.
Yes.
Yes.
And.
Then we've spoken now for several quarters about how pleased we being at the relatively low churn levels and how we really put effort into minimizing that type of.
Activity, so thats rollout.
Mid single digit pricing increase.
A few months ago, now and so that relatively quickly layers into the P&L. When you think that the majority of our customers are on a monthly subscription.
Those are really the important drivers to the driving the cloud business, Yes migrations are a part of the story.
Certainly.
Wanted to put that in context.
Thank you. The next question comes from the line of James Fish with Piper Sandler Sir Your line is open.
Hey, guys. This is quentin on for Jim Thanks for taking my questions.
Customer initiatives. This quarter were really strong again is this kind of 10000 net add the right level moving forward or do we move back to more fiscal 'twenty fiscal 'twenty one levels and then just as a quick follow up what inning would you say that the educational channel partners is at with selling the cloud products are we.
At the bottom of the ninth inning with one or two legacy partners to go or is there significant education left within the channel. Thank you.
Okay.
Cameron do you want to start off with that one.
Yes as far as.
I can speak to about the new customer numbers as long as the earnings of the channel partners.
As far as the new customers like to call out just how incredible this machine that we built in go to market that we can routinely get 10000, plus net new customers in the business, while maintaining our efficient go to market spend.
In addition to that we've got to call. It two years ago, we made that change to the free model. So in addition to 10000 paying customers coming in with more than two users. We also have thousands of more teams and companies choosing us and using us and market for free.
And that just shows how much demand there is and why people are choosing us.
As far as the number itself like it fluctuates quarter to quarter for a variety of reasons changes in the final seasonality you name. It. So let's just focus on the individual quarter numbers and look at the longer term trend.
Had it over 51000 customers over the last 12 months, which was when I started with this company. Many years ago. It was a fraction of that of our overall customer base. So we've just been able to continue to evolve and make that efficient go to market model work.
As far as innings theme, an Australian company most of our Aussie friends don't understand with any of the means.
I'd hate to say, what you mean, there and the reality is we continue to train and certify partner with.
And engage our partners in these migrations.
Multiyear journey some of the partners are well ahead.
And leaving a lot of integrations many of the other partners are going through this training and bringing people in so plenty more to do there, but I will tell you that they are critical to our migration story and on execution there Jamie.
James.
No I think you covered it.
Thank you. The next question comes from the line of Arjun Bhatia with motor lateral hiring.
Okay.
I think you stated that building more products in the R&D or will be.
Alrighty.
Scale and we saw your developer talent I'm curious if you can share any particular areas.
Okay.
Okay.
That you have out in the market from a product perspective.
As mark addressed by the broader product portfolio today.
Archetype.
Yes.
Okay.
It is.
Mark and Matt on onshore.
No.
Underpinning our ability to.
Go off lease market is the Atlassian platform. The way you spent over a decade to building out and so when I look at the investments, we're making like you'd have to say they are in the areas of the three different markets we talked about.
To help our customers micro is my question.
It's across the cloud and continued investment in the platform that we're that we've built out.
But there are also benefits our ability.
Okay that we can bring in Washington.
Product side to the market pretty quickly and so I wouldn't say there's been huge.
Changes.
Continues to mature we'll be able to.
Hey, Kevin.
The ability.
But even for us to because I've mentioned earlier, our ability to cross.
Yeah.
To work across Devin I'll tell you is I guess it would be like.
Chips and guacamole right that go hand in hand.
And so.
So that's like a unique ability that what goes to waste management for all built on a great platform for work really unifies work across the entire organization again that.
We're uniquely positioned today sorry.
Mark can you add anything yes, I just wanted to the question.
I think Scott pointed out the platform.
It is really key.
Our platform. We believe is one of our strengths and executing against the large opportunities that we believe we have in all of our markets and around the business.
Loan types.
World Class.
Cost engineering team in the World.
Kyle so you'll see us.
Continued improvements in.
Things like came anywhere in our culture and pushing our long term thinking as a business.
And also executing.
Against those opportunities rather than being clear that we are going to invest in we believe in those opportunities at the core of that platform is a truly world class Engineering organization. So it's about where are we hiring.
We have a deep long term belief that building a world class technology company without engineering and R&D of the call is to skills.
Well Scott's analogies are alike, making guacamole without putting avocados ethical.
<unk> doesn't work and Youll see that from some other companies, but we have a deep belief in engineering and R&D at the core of executing against that.
Right.
Hello, John tie those two together in question.
Your next question comes from the line of Thai kitchen with Oppenheimer.
Numbers I have a.
Couple of questions. One on work management, you haven't talked as much about that.
Maybe you can give us a little bit more color on the progress there.
Maybe number of customers you mentioned, our work management and.
And then just second question more of a general one regarding the customers that have transitioned to the cloud.
Can you talk about the.
How do your expansion activity of customers that migrate to the cloud is different.
Then.
Look I can take both of those firstly on.
From wealth management role.
First thing I would say is the fact that we can get this deep into the call and we've talked about a huge opportunities and I'd say, we haven't mentioned.
The set of opportunities we have.
It's been an hour plus with you in any event.
I would say we continue to be incredibly bullish on the blood management space.
We're doing an incredibly good job of cello and continuing to make that part about.
Platform part of our set of offerings, whilst having a standalone flavor to it.
To your wealth management continues to power along it's very near out about a program innovation, but.
A different flavor on project management.
And.
We're incredibly bullish on things like pain central and other things coming at us.
I as well at the same time so.
I feel very comfortable with where we stand we believe there'll be lots of different ways of attacking the broad book management problem.
And that's all before when you had mentioned something like confluence.
No.
Really excited about how that how that happens and how that continues to evolve.
We talk a lot about digital transformation changing software teams and I'd say teens.
Part of that is also a cultural transformation and how the software and hi Tech teams work with the rest of the business.
Yes, we have three different markets, we believe in all of them very deeply.
Tied together at the core of how every company is changing.
As a as a software and technology base, but also changing culturally to be more dynamic and more agile and thats why were necessary market.
In terms of cloud expansion, it's a pretty simple story actually.
The ease of adopting a second product in the cloud.
Our ability to understand what customers using and hence recommend other alternatives for them either you should get more people on your team on board or you should try. This other product is we can just put a lot faster in Asia, but it's a single click into cloud nothing to install nothing to try.
With free you can quickly get can you just started so our ability to help cut greater and quicker expansion numbers of customers.
But our ability to help customers and guide them less friction in the cloud.
Okay.
Our next question comes from the line of.
Rob Oliver with Baird. Please ask your question.
Great. Thank you good evening guys. Thanks for taking my question James.
James you alerted to alluded to this earlier in your remarks, and Scott and Mike Good luck.
To hear your view, but you guys continue to knock down a lot of the global compliance standards that are out there.
Really I assume.
Visitors to many large enterprises and governments really going up going wholesale onto the cloud So would love to hear a little bit about some of what you're seeing in terms of as you would knock those down.
Is it about you guys hinted in the letters.
There's more to come immediately.
I appreciate it thank you very much.
Yeah.
Yes, Hi, Rob.
Look for sure it's part of our continued momentum one of the.
We've all seen over time Atlassian is just continued momentum in improvement incremental improvement in every single quarter. It's something we've done for just shy of 20 years now and we will continue to do.
The area, you've you've asked about in terms of cloud standards and compliance.
Governance, and the whole sort of equity suite that comes with that and every different geography in the world, which I believe is that that will continue to be a challenge for everyone.
SaaS company going forward is there are more companies more geographies more.
Legal conditions and so we have to build a world class Engineering organization.
Platform underneath our cloud products that allows us to quickly.
Adapt to that market as it changes that are areas of changes and also continue to add the standard that our customers need and asked us to support.
We've done that by the time, we continue to see us improving that every single quarter, whether it's data residency in Australia for financial companies or whether it's Boston in Germany.
We've continued to do that and we'll continue to do that.
We've seen a lot of.
Examples of every time, we add.
Support for a different geography or standard.
We unlock a portion of our customer base to move to the cloud it's not a singular unlock it's a whole series of ingredients, but it just increases the overall momentum of customers to the cloud.
But for sure we continue to work on performance and Scott will go over the logic customers in the cloud we continue to work on compliance and regulations and standards.
We also continue to work on extensibility, which is equally important.
The reason I mentioned that last one is <unk>.
Sort of.
Future Extensibility standard and technical framework.
Build things like these compliance and regulatory standards in the call, which is incredibly difficult to do but.
But what we believe and extensibility for our customers going forward. It has long been a hallmark of Atlassian and I think.
Hi, compliance environment, that's going to be incredibly important to us going forward in the cloud and we're seeing that in the adoption of Ford Bye Bye.
By those enterprise customers in the cloud where it handles the regulatory standards for them.
Thank you. The next question comes from the line of D. J Hynes with Canaccord. Please ask your question.
Hey, guys. Congrats on the continued success here.
I have a product question for micro Scott I presume. So there are a handful of visual collaboration tools in the market that are seeing really strong growth.
I know you guys recently invested in Europe .
What is it about visual collaboration that makes it hard for you to replicate like what why invest or partner in that space versus doing it on your own.
Yes, Hi, Matt I think I can take that.
Look we.
We have long belief in having a broad spectrum of opportunities and debts.
We with Atlassian benches, we're trying to make sure that we are investing and partnering and high quality enterprise SaaS companies that are.
Partners over the last one you've.
You've seen us do that in the past with zoom and slack and others.
And more recently with narrow and sneak in across our markets as well as a whole host of smaller up and coming <unk>.
Visual collaboration in General look it's a very.
The category I would say because it's such a broad.
Option, we used to be called Whiteboards, but it's not really a lot, but it's a whole series of different things that you can do there it's a bit like saying is one way to do project management.
Europe 5000 marketing team you do project management I think that there are a lot of fantastic products in there.
Obviously, we believe in the ones that we use and the ones that we've invested in.
But in general our.
Hudson customer philosophy has been.
Partnered integrated with all of the best of breed SaaS products that are out there.
And allowing our customers to make those choices and just making sure that all the data they have in any atlassian product is easily connected and integrated with all the data they have in any other.
Product.
Thanks <unk>.
<unk>.
Pretty clear over $50 million.
On the platform yet I think monetization is still low can you can you walk through.
How you expect to potentially change that over the next year or maybe not and in for James Americas.
Americas at least in our model look like the best quarter in 13 quarters, I know that the comp is a little easier but.
And then stand out there in the Americas that perhaps you haven't seen in past quarters. Thanks.
Brian I can take the first part on trailer monetization.
I'm afraid I don't have much new news for you, but I can repay that stands here I mean.
Charlie we focus first on continuing to grow the months. It is the size of the trailer going after the fortune 500000, we think about very very large scale in the 1 billion knowledge workers out there trying to.
Product with <unk>.
<unk>.
Smartcards to integrate third party data or is it just talked about and a whole series of continued product improvements.
That said, we've gotten better at monetizing trailer almost every year that we've had it on the platform, but I will say that we put.
Mr. Joel you said it getting closer to the Atlassian platform in various different ways in terms of the last one account and identity and both sorts of different things. So.
We are very patient.
Doing those things correctly and continuing to make <unk>, a huge product thats the loved by its users and when we put that put that first but it's.
Pretty nice business for us and will continue to investment.
It sounds only be the second.
Just a follow up.
On that.
One of the things we've done around Charlotte.
Again this is an example.
We talked about price increases at different points.
Based on this call. So is a good example of where there are many indication where we actually lower.
Jane to stimulate the sort of demand, but Mike is referring to that in.
In terms of the Americas result, yes, it was a strong year over year growth rate for the Americas.
Just point back to.
So one of my earlier comments about obviously data center had very strong growth.
In the quarter and we do have that.
A portion of the customer commitment that has taken up front.
In terms of Rev Rec in the quarter in which the customer signs with us and of course.
The U S. The Americas, particularly in the U S is home to a good number of our largest customers. So there's a certain amount of time.
<unk> affect that.
Made for a very strong Americas year over year growth rate.
Thank you and the next question comes from the line of Gregg Moskowitz of Mizuho. Your line is open.
Okay. Thank you I remember when you launched atlassian marketplace that was less than a decade ago and here. We are 2 billion lifetime sales. This incredible my question here is with cloud now comprising nearly half of the asset in the marketplace and with take rates.
Founded as an additional incentive.
Are we sort of at a tipping point in other words are we at a stage, where youre seeing app development and App usage really accelerate.
Yes, Scott here.
Okay.
I'm proud of the marketplace a number.
<unk>, Mike Ross the original code that went into the marketplace.
Got it got us off the ground than troughs, they get from there to $2 billion of what Tom sales is amazing and more importantly.
One 5 billion.
Of money Thats gone back into the ecosystem right and we've got such a strong and powerful ecosystem around atlassian.
We want one.
So I would predict that had goals around the ecosystem outside of Atlassian to the way larger than Alaska itself. Both in terms of.
The number of people working on it in the revenue there and so we're really really proud about kind of the jobs and everything would be credit around atlassian on how.
Now we benefit all of us benefit from that.
In terms of like cloud and tipping point.
Forge RF development platform in cloud and takes careful waters things that developers use to have to do it until such as writing their own servers and.
Now.
We take care of that for you. So that has lowered the barrier to entry for new people to build functionality inside of applications and now as we've seen kind of server based applications all of the early adopters of these.
Technology that people using.
And internally inside their own companies to integrate with different processes to automate things themselves to.
Bill.
Functionality that is unique to that particular company.
Oftentimes leads to people starting in our business.
You can do things that make me more generic or are things flowed through our existing marketplace partners, who are building out on the porch capabilities. So.
I think like longer term.
You're seeing pressure on marketplace take rates across kind of particularly the consumer side of things has been downward pressure on that and we get to play that out over the long term I would say is that.
The take rate will be more pressure on the take rates and they have been historically, but that's also going to lead to a much much much larger ecosystem.
Around Atlassian, and we're experimenting and saying beyond our traditional partners. How we can partner with people that we've made investments into Austin ventures.
And overall like the number we focus on is not really all I'll take rate like that's not the.
Remember, we focus on internally use alternative J&J or effectively how much money is running through the marketplace to outside parties and that's another way of commodity for internally.
Thank you and our last question comes from.
It's from the line of Steve Keaney, with Smbs and Nicole Your line is open.
And I appreciate it.
Most of my questions have been asked but and actually let me also congratulate you on the quarter also on the very low employee turnover metrics that we're seeing from Linkedin.
The price increase that's happening on February 15th you've talked a little bit about.
Okay.
Quarter.
What kind of customer behavior.
Maybe have renewed early.
To take advantage of locking in the price and then.
I would be looking to convert to cloud within the next four quarters or do we think about that.
The larger question here really is as we kind of puzzle over.
Your trajectory is here.
Sure.
Talked a bit about data center and the drivers there and we've talked qualitatively about the drivers.
That even if it's qualitative itself.
That's all and thanks again and congratulations.
Yes.
So thanks for the question this is Cameron here.
So two pieces on this every time, we do some price changes obviously customers have the ability to make a choice and I was actually just on a call with executives very large pharmaceutical company.
This is as we continue to plan for cloud.
Now a few small cloud projects.
Maybe for some teams or we can do.
Go all in on cloud in and get it all done with it all comes down to what's your prioritization of M&A, what your company's readiness.
A 30 minute conversation EBIT give me al.
On cloud option like this that's fine we have a cloud mandate, we need to prioritize the work, let's just get it done now three.
The reality is that's how we built we prefer that optionality for our customers.
Down any path, that's whats going to work for them and they have to renew today, we have plenty of programs and practices in place that two months from now or four months from now or six months from now if they want to move to cloud rollout.
Absolutely make them right from a licensing perspective, so by no means do we hold them to it.
So timing of budgets prioritization and it projects.
Thank you and our next question comes from the line of Pat <unk> with JMP Securities. Your line is open.
And so market scaling ranks mccomsey Pat I appreciate the question.
Please give us some more color on the <unk> acquisition, and then sort of how you're thinking about M&A going forward and then separately.
What are you looking for in your neck.
Thank you so much.
Okay, great questions at the end there.
Look let me take that.
First.
Fantastic team focused on.
And smarts in.
Specifically.
Service management and customer service.
Manner again, AI and smarts is relatively benign specific to make a huge impact at the moment and so I.
I would say this is a part.
Part of our continual improvements in the <unk> space, both organic and inorganic.
To make sure that we have.
<unk>.
Set of Ics and tools around.
And also an investment in machine learning and smart as we keep putting at the core of our platform iOS side Thats customers Shouldnt need to know that we care about AI and machine learning, it's not what we'd like a takeaway into the platform and this is about.
Continuing to improve that in the area of service management for IC teams at any any service stream.
Driven enterprise out there.
I can pass to Scott on.