Q4 2022 Atlassian Corporation PLC Earnings Call
As interim CFO .
This will be my first and last earnings call as interim CFO as we welcome Joe beans, as our incoming CFO .
We are so excited to bring Joe on and introduce him to you in the next point next call next quarter.
With that I'll pass the call to the operator for questions and answers.
We will now begin the question and answer questions.
He has a question placed flurry of press star followed by the one on ESI.
If you'd like to withdraw from the queue. Please press star followed by the <unk>.
First question comes from Fatima <unk> from Citi. Please go ahead.
Hey, everyone. Thanks for taking my question just.
One around the.
Cloud growth expectations for fiscal 'twenty, three that you've reiterated which is very encouraging as well as the reiteration of the magnitude of <unk>.
Gration impact to that cloud growth what I'm curious about is when you think about the fiscal 'twenty four dynamic which is similar to fiscal 'twenty three how much of the migratory impact from the prior year I E fiscal 'twenty three.
What type of purchasing or expansion behavior from those migrated customers are you expecting in the base in fiscal 'twenty four.
Alright, Ross here answering your question.
We mentioned previously.
Good day.
A few months ago and reiterating now on these earnings call, we expect cloud growth to be approximately 50% year on year for FY 'twenty three.
<unk> 24, and so that remains the same we've also said that the high single digits.
That growth comes from migrations in any given year and so we expect again that to continue.
Haven't we.
In terms of the FY 'twenty for dynamic of how that goes.
So we do see though you've got migrating customers.
To expand at a similar rate to the customers we have in our existing.
And we've also stated that previously we have a net expansion rate of 130%.
Good and 140% for our larger customers in cloud and so that's all I can give you on that at this time.
Sure.
I appreciate it Mark just to clarify just to clarify.
Second 10 points of growth above the 50%.
Gross.
And cloud for the next two years.
Understood. Thank you I'll jump back in queue.
Your next question comes from Michael Cherny from Wells Fargo. Please go ahead Michael.
Hey, great. Thanks, and congrats on a strong end of the fiscal year, Scott I know you won't see it often but nice suit photo very CFO within the materials as well.
There is a great stat you emphasize just in the letter on 90% of fiscal year revenue coming from.
We know you've generally always run a consistent long term playbook. So just wondering is that number fairly consistent with prior periods and then on the other side of that if we do see some moderation of the newer cohorts are you confident that there is a catch up with the newer cohorts you're landing consumer really contribute to the model as you worked through with just given the experience.
<unk> and expertise it gathered there.
Yes.
Yeah. Thank you for the compliments on how good I will conclude I appreciate that.
And you're right we went quickly to.
Too often in the future.
He said historically, yet that 90% of our revenue in any given year comes from our existing customers.
And we were chatting just before on this call that.
But if you think about the results we're getting this year theyre safely plan two years ago, and the FIFA client being this year come to balloon.
Is important.
This is not a business, where we are trying to have a very extensive enterprise sales force.
<unk> number in a particular period, we think very carefully about the long term return characteristics of all the investments that we make at any point in time, and so that 90% number where we continue to see that like that's not what the declines in any particular time, but we really think about the long term the investments that were not.
<unk> now on paying off over a two to three year period.
Thank you.
Your next question comes from Arjun Bhatia from William Blair Go ahead, Jim.
Alright. Thank you guys, taking the question and congrats on a great quarter.
I know you guys addressed.
Macro a little bit.
In the shareholder letter, but I'm curious as it relates to migration, specifically would you expect with shape.
Migration to change at all just.
Given given the macro situation of the customers pause a little bit that they reconsider or did I say hey, the total cost of ownership is there and I'm going to go full steam ahead, what are you seeing and hearing from our partners and customers on that front.
This is Cameron and I will take that one so as you know this migration journey.
That's been going on for a couple of years now we announced the server end of life over 18 months ago and gave customers more than three years heads up it's gone.
To make a decision on migrating to the cloud. So none of this is a surprise many are in a different stages of their planning whether that's from a technical perspective are budgetary perspective, and we are increasingly getting good at those conversations about honestly the larger rois savings that customers get when they move to the cloud, whether that's reducing administrative costs their own <unk>.
<unk> costs and of course, unlocking a ton of new innovation in our cloud in addition to that we've.
We have a Forrester total economic impact report, where we've actually done deep research into the overall cost savings that customers get when they actually moved to the cloud. So the short answer is no.
<unk> plans continue as planned.
And we are very very happy with the results to date and you saw a lot of that in our recent Q4 results.
Your next question comes from James Fish from Piper Sandler.
State your question.
Yeah, Hey, guys. This is quentin on for Jim. Thanks for taking my question sticking to the demand side for just a second is there anything you can call out from a geographic perspective in terms of weakness or relative strength.
At the numbers here it looks like really strong growth across all geos, but wondering if there is one specific place that youre, maybe keeping your eye on more than others. Thank you.
Thank you Glenn Cameron here again.
I would say we are being exceedingly vigilant cross watching all stages of our funnel, whether its migration funnel the additions upgrades retention rates and of course, our new customers coming in and.
And it's really set up with the Russia, Ukraine War back starting in February we have been keeping a very specialized in the EMEA region.
Good news as of to date as we have yet to see any specific trends geographically oriented and industry segments or customer size that gives us pause or worry to date. So something we continue to watch it like a hawk, but there is no new news to share today.
Your next question comes from Gregg Moskowitz from Mizuho. Please go ahead.
Okay. Thank you very much and congrats on a very good quarter as well.
There been any change to the mix of products sold over the last few months anything different with regard to customer prioritization and then just a quick clarification just to help everybody with their their models. If I may I believe consensus was projecting datacenter revenue growth somewhere in the low to mid twenties for fiscal 'twenty, three and and given the comment in the shareholder letter about.
Moderating growth after Q1 being somewhat vague I was just wondering if youre able to tell us if you're comfortable at this time with where those consensus numbers Dan. Thank you.
This is Cameron I will speak to the mix.
Our new interim CFO handle the second part of that question as far as the overall mix no. We have not seen any significant shift in customer demand across our product lines I do have to continue to call out.
Strong demand, we continue to see with GRS service management.
One of our strongest cross sell motions, surpassing 40000 Euro service management customers to date, and we just seem to have struck a vein there in the market with a very compelling offering that's very feature complete very easy to use as well as a highly competitive from a pricing perspective.
But I don't want to take away from our other products <unk> software confluence <unk> you name. It continued to see strong demand across the board.
We continue to see people.
Embracing digital transformation and needing to Lasalle Brian .
These large technical projects that they're running and our tools help manage those projects throughout as well as the cultural transformation. We continue to see US all of US are figuring out this new way of working whether its remote back in the office or hybrid we continue to see demand for collaboration products continue to be strong.
And the second half to Scott there.
Yes, just to add to your question around.
The shape of revenue again, just remind if those people you're asking story.
And of lockout server offering and.
I have to make a choice whether they move to a cloud directly or a bear.
The prices for a long time, Brian .
Got a tender as a stepping stone and committing to cloud.
And so we've been really happy again.
And.
Actually happy about a third of that migration would come with that.
At our Investor day about a third of our migrations come from about Athena documents already and so we really all direction.
Towards cloud now specifically in our shareholder letter.
Highlighted in terms of the data center revenue maintaining high growth through.
Q1 before moderating over the remaining three quarters and we can't give any more details than that but really that's just to give you a into the seasonality that we might be the next step.
Four corners in terms of how we think those migrations might not end up happening.
Okay. Thank you both.
Your next question comes from Brent Thill from Jefferies Go ahead.
Please state your question.
Thank you this is loves quota on for Brent Thill.
I wanted to ask a real quick question on <unk>.
Margins this quarter.
It looks like there was.
An increase in investment in R&D and it sounds like Youre planning to continue that into the next year.
Could you maybe give us some color into where these investments are being directed to.
Thank you.
Yes, thank you for those questions.
If we.
So starting out with the Guy we have.
<unk> had a discussion with you our shareholders about the incredible opportunity we are seeing across our business and those opportunities are kind of in every every corner of the business.
Management team, we think long term when we think about how do we invest behind these opportunities.
Myriad Orlando couple we've highlighted in the past or are customers migrating to the cloud.
With the incredible demand for that migration and Guy if we can improve the throughput of those migrate to the crowd that's great for them and it's great for us.
We are also seeing incredible demand for our IPO.
Products in that market and again, because we can add there and getting our customers on boarded with our product and Greg Roth and today I mean I could go on but as a result of all these opportunities we made a decision to invest heavier behind these opportunities we had before and as we said in Investor day.
We expect margins for FY 'twenty three to be in the mid teens and so those areas of investments already mentioned largely in R&D.
So we're really seeing.
Huge investment there because of the features and getting out crowd to.
To the stage, where it can come in at 100% of our customers requires more features you will also see.
Interesting kind of in other areas of the P&L because for example that are hand, holding to get accustomed to the cros.
That doesn't show up in R&D, as well and that shows up in other areas in the P&L.
Largely R&D, but you might see some other areas of the P&L impact just given the way that we're helping our customers migrate.
Perfect. Thank you.
The next question comes from Alex Zukin from Wolfe Research.
Please state your question.
Perfect. Thanks, so much.
And congrats on a.
On a great quarter, I guess, maybe just two from our side.
When you think about the.
The macro impact that you are seeing in the business I think you called out a slightly slower conversion of free customers to pay customers I guess.
When you when you dissect what's happening in the pipeline why do you think thats, the only macro impact youre seeing versus migration delays or versus longer sales cycles, and the larger customers or we're not seeing kind of some of the other impact that other companies are seeing is it is it like what are you what are you <unk>.
Turning in real time as you analyze the data and the demand environment and then I've got a quick quick follow up.
Yes, I can cover that first base. This is Cameron again, so as you mentioned and you see this in our Q4 results.
The many funnels, we operate whether that's our migrations are additions upgrades are cross sell of products our overall retention.
To be exceedingly strong.
And that's been great to see and Thats been supporting our net expansion rate. We've already discussed on this call here and largely what you see it as existing customers continue to have demand for what our products do to help their teams work more productively.
Future as far as that slightly double you mentioned the shareholder letter just so you all realize that we land all of our net new customers in free plants and this is a relatively are about two years into this experience, but we continue to have many many many thousands of customers signing up in free plans and they either need to add in the 11th.
User, which and they had to peg it they love the user or simply they want more premium capabilities in our in our standard and premium additions those are the reasons people enter their credit card and the one thing that's worth calling out that we've seen literally just in the last month is that the cohort of customers that came in in the April may and June timeframe are converting to those paid plans.
At a slightly slower rate than what we've seen in previous quarters now I'd love to say that specific to a product or a geography or an industry. There is no specific customer segment. There. It just seems that in general those cohort of customers that are signing up in the last quarter are using the products. They are activating theyre getting value, but they simply just have put those credit cards and hit those paid walls yet.
That's one of those areas that we continue to be vigilant, we have multiple analytics teams multiple growth teams as well as our onboarding and R&D teams that are focused on ensuring that those customers remain active and it gives us more chances to convert them to pay plans in the future.
That does not take away from the continued growth we see in our existing customer base that also drives more than 90% of our revenue in the existing year.
Perfect.
I guess, maybe just.
Going back to the data center part of your business the extraordinary growth that youre seeing I think accelerating growth in the quarter.
How much of that growth is from data center customers expanding versus.
Understanding what the existing customers are growing like within data center to get a sense of the growth that youre seeing in data center coming from server migration to data Center. In addition, and I apologize for the Multipart question just the range of.
Gration activity.
From data center to cloud versus server to cloud.
That 10 points of migration as a <unk>.
Driver for the 50% cloud growth.
Got you I think I can address that so overall data center demand I'll hit that first and then we can talk about the server to cloud or data center to cloud journey. So.
As we've already mentioned this server end of life message, we gave customers more than three years heads up and what you see customers doing every quarter is an increasingly optioning out of going to cloud, which obviously, that's where we lead with Thats why we have been putting all of our incentives to get customers to go to the cloud. So they get US most of the innovation is possible or they can choose data center and many choose.
Many are seeing either way, it's an increased investment and commitment to atlassian long term and we see that.
Those are two good decisions for customers. However, when those customers jumped the data center and we see this again and again they are seeing and that is just a stepping stone to that cloud journey, but it gives them more optionality down the time and of course data center is a fantastic product.
So we've historically said, it's a roughly 30% of our cloud migrations come from data center customers, which prove that stepping stone statement and I don't specifically.
Exactly how much that drives them to the overall, 10% growth that we show on that drives our overall comp growth, but you can see roughly a third of our customers are coming from data center.
That's all I have sure Scott did you have any doubt on that.
Okay.
Your next question comes from and then Kindle from Raymond James.
Please state your question.
Okay. Thank you very much I just wanted to touch on the investment period and operating margin trends you talked about mid teens in fiscal 'twenty three playing offense and I think you said lower in the second half of the year I was wondering if that's indicative of a multi year period of investment here you certainly earn the right to invest based on what we've seen so far I just wanted to level set.
Investor expectations since I think the street is modeling improvement in fiscal 'twenty four I am not sure if that's consistent with how youre thinking about things. Thank you.
Thank you Adam.
Okay.
So our market everyone, what we said backyard investor Guy.
So last thing out of an incredible business model and if you look historically.
The arc of time before as being a public company and during the seven years, we've been a public company. This business model that will generate a large amount of free cash flow and.
Margin return.
That's the fundamental that we have.
And we look at the long term opportunities.
More abundant than we've ever seen before and that's the reason to invest.
Specific investing period, what we've said is that FY 'twenty three is going to your investment year, and we guided to the mid teens margins for FY 'twenty three we haven't given any guidance for FY 'twenty, four and we'll be doing not quite.
23.
Yes.
Your next question comes from Peter Lee from Bernstein. Please go ahead.
Thank you.
So <unk> taken a look at kind of your overall migration plan I think you had originally anticipated.
Maintenance shrinking down a little bit more than maybe <unk> seen.
<unk> now and you're talking about a year from now getting to $75 million, which I think was maybe a little bit of a slower ramp than at least I had been anticipating.
How are you seeing that roll off of your existing customer base.
Been stickier and is it something where you're having to spend more time and effort.
Encouraging customers to migrate and how do you see that affecting periodically.
Cloud migration itself.
Yes.
As Cameron again, as we've mentioned migration demand remains very strong.
And that server customer base, they effectively have till February of 2024 to make a decision on where they want option out whether that's going to data center or whether thats going to cloud. Obviously, we continue to remove any blockers or any reasons why customers would not adopt our cloud when we give people plenty of incentives along the way to move to our cloud offerings. The good.
News across the board as we continue to see retention rates maintain high for the existing the entire server customer base throughout this so as we continue to see server renewals happen, we see people opt out the datacenter and cloud. The good part there is we continue to see these customers continue remaining they're loyal to atlassian and largely they're figuring out what the best technical and business decision long term is for their companies.
We have been focusing on cloud and as we've already mentioned we are largely in line with our migration plans to date. So we will continue to be vigilant there over the next year as we continue to incentivize our customers to choose glass.
And I think you've been investing in some cloud migration personnel do you see that being kind of like fully built out or are you seeing that youre going to have to continue to expand that personnel too.
See the success through.
Hi, This is Cameron again, yes, so we have a dedicated cloud migration management and migration support engineers as long as as well as a dedicated migration tooling in a variety of people that can come and help these customers through the more technical migrations, we did make significant investment in the previous fiscal year across those teams and we believe they are fairly stable to date and can hand.
Will that volume that's coming in over the next coming quarters.
Thank you.
Your next question comes from David Steven Koenig from SMB and Nikkei Steven. Please go ahead.
Great Hey, Thanks, a lot for taking my question.
So, let's say I'm wondering.
Regarding your hiring and your investment that you've been talking about.
Your year.
Comments on your plans to hire are certainly borne out by year as we look at your job postings, there remaining pretty solid, whereas a lot of other vendors are cutting their hiring plans.
I'm wondering how has your hiring progressing relative to plan in terms of your.
Your progress in finding the talent that you want and then if I can just add a quick agenda.
Any any tactical pricing adjustments of note since your February 15th price increase on server and data center and that's all for me, thanks, very much and congrats on a great quarter.
Hey, David it's.
It's Mike here I can take that as that seem to be getting a lot of product questions on today's call. So let me jump in and take one of the <unk>.
Look we've been we've been pretty clear that.
We're playing offense, we continue to tell that quarter in quarter out.
We're using this period of time too.
Deepen our strategic position and increase the the advantages we have over the competition, Brian there's less they say that there <unk> a cash funding competition.
So we think we have a really good opportunity going forward.
We also have spent a lot of time.
Retooling, our hiring pipeline over the last two years and I'm really really excited with where we stand at the moment. So we've had I believe our two biggest quarters of hiring in the last two quarters.
We continue to do that do so obviously, we don't just look at the volume of hires although that's sort of an absolute number marker we continue to push quality.
<unk> off the talent available and we think that that will get easier in difficult circumstances.
And also obviously, making sure that the cultural fit.
Other things that Atlassian, which is incredibly important and incredibly difficult and a huge challenge for us to do as we as we continue to scale.
There is no doubt as Scott mentioned, the majority of that hiring is going to R&D to try to again.
Deep in those strategic positions that we.
That what you already have.
The last thing I would say, it's just a reminder that we.
We made the same or similar sort of play in the 2008 2009 period.
We paused for a little while then and then we realized that we were in a very strong position as a company relative to the other companies out there.
And so we.
Hired well through that period, and we saw the benefits of that for the three four and five years afterwards, as we got a real up dropped with the products coming out and the results of those products. So we believe we have massive opportunities in front of us in all three of our markets and as such were hired behind them.
Okay.
That's great can you guys comment on any pricing actions.
Okay and the last.
Thanks, Mark February price increase.
Yes. So this is Cameron as you already mentioned, we did have price increases on our server and data center products in February all of our pricing changes are made public and we across the board and they are all available on our websites for all of our customers as well as we give our customers.
A relatively decent heads up on these price changes so they can plan their budgets accordingly, no other price changes.
As mentioned in our pricing strategy remains consistent.
Great great well, thanks, very much for the color.
Your next question comes from Keith Weiss from Morgan Stanley . Please go ahead Keith.
Thank you for taking my question. This is our tangible thing or for Keith.
Some of them the way we add another question on sort of the case for investment I was just sort of look at where the business stands today you have.
No.
$3 billion business, you have a quarter of a 1 million customers I think 10, plus monthly active users. If you look at sort of where youre trying to take the business day to 1 million customers, a 100 million monthly active users expanding from developers in it too.
Two lines.
<unk> wealth management.
As you expand into these.
Newer markets and the longer tail of customers are these.
Unit economics.
Here are going to be as attractive.
Versus what the business is built today to get to this 3 billion in quarter million customers. I was wondering if you can just sort of frame out how you think.
Pending entities.
And to the into the longer tail of users and customers and product market, what does that do to that sort of unit economics of the business.
Yeah.
Sure Mike I can I can take that again.
Look I think obviously we feel.
Bullish about our unit economics at the moment and I don't see why that would change going forward and we've always been very true.
Stewards of capital in the business and continue to invest in very high ROI opportunities as we as we look forward.
You mentioned something about numbers, there, obviously, there are millions and millions and millions of businesses in the world.
Round or approximately 1 billion knowledge workers. So we have a huge amount of expansion possibility, even just inside our existing customers as Cameron mentioned earlier.
We remain north of 130% in our <unk> numbers in north of 140% in the large customer segment.
And we saw that again this quarter and so from the point of view of expansion in those large customers. We have many many millions of employees that we do not touch is existing customers and you see that in specifically in our wealth management segment, where <unk> confluence and Atlas are continuing to get further and further into an organization.
And look more to the wall to wall.
Access to both or all employees within those companies.
I think the other thing I would say is that we.
We continue to.
As Kevin mentioned earlier be incredibly focused on not just the unit economics of our funnel the product led growth funnel in terms of free and our valuations in trials and we're obviously incredibly well instrument to there and we really understand.
The value of spending a dollar on marketing or sales and the conversion rate of expansion through our customer base. We've got 20 years of experience doing this.
I believe we're absolutely best in class and continue to improve and evolve every single year. We also.
I really really good at the.
Enterprise and premium expansion activities when it comes to bringing in more human power and more activity to expand customers across the product sets and again, we've got a whole lot of new products coming out but.
But also the.
Same focus on.
Being.
Very very capital efficient when it comes to those sales motions, we don't just take it in the automated product led growth funnel, we take it at the same time in all of our sales activities were very proud of how do we do that and we have to keep raising the bar on that every year I don't think long term it should change the unit economics.
Really appreciate the thoughts I think that's the great data center and cloud subscription results. This quarter. Thank you.
Okay.
Your next question comes from Ari Johnny <unk> from Cleveland Research. Please go ahead.
Hi team. Thanks for taking the question and congrats on the great results.
Just wanted to double click on the Deutsche Bank cloud.
Cloud deal that was called out in the press release or the shareholder letter I was just.
If you could provide some more detail on that opportunity as that migration complete.
Or is it just the signing and what do you think caused them to pull the trigger because I know regulated industries banking, Germany Europe .
Areas that.
Historically more hesitant to move to cloud so.
I was just wondering if you could please provide some more color on that deal and.
Do you think it could be a beachhead and cause others in these geos and verticals to start moving thank you.
Great.
Cameron again, yes, I was deeply involved.
With Deutsche Bank for quite some time back they've been a customer for many years. They had datacenter customer for many years and we've been speaking about the cloud opportunity and journey with them for for quite some time, but it shows that I think you nailed it right there.
German bank highly regulated massive scale like you name it from our requirements perspective, they had it for our cloud and it's a testament to the investments we've made over the last couple of years in performance and scale in regulated things like bandwidth specific financial services regulation requirements in Germany that allowed us to.
Open up that door and have that serious conversation about getting them to the cloud to answer. Your question. No. We have just started the cloud journey we've largely.
Checked all the boxes to get them to adopt our cloud and we have started our migration planning to begin moving their users and data and that will be a multi month or a multi quarter journey or the size of deployment and complexity that they have as well as how mission critical applications are for the bank I mean, they literally are running on US every single day. Many of our customers are saying that our applications are more import.
And then E mail for getting their work done inside the organization. So it's something that we have to plan out very diligently with them, but they have been incredible partners throughout.
This exploration of cloud and we are looking forward to having them on 100% on the cloud in the upcoming quarters.
Thank you.
As a reminder, if you have a question. Please press star followed by the liner.
Your next question comes from Craig Hallum.
Macquarie. Please go ahead.
Thank you.
I wanted to ask about your net retention rate because throughout this year, you've been posting or discussing strong 130% Robert north of 130% cloud net retention rates.
In the shareholder letter today that you noted that larger customers were topping 140% cloud networks are rather net expansion rates. So I wanted to ask.
Could you help to characterize what's driving that is that something that is a seat based expansion cross sell upsell reach into non technical department expansion with new Technical Department.
Can you just kind of characterize that can.
Can help us understand where this growth is coming from would be greatly appreciate it.
Alright, I appreciate you asking the question.
In the few quarters are correct and I think.
And you know from our Investor day last year and I'm reiterating shareholder.
Now if you think about Atlassian business model it is.
Historically and continues to be a land and expand motion, where we land in side.
Part of an organization, maybe a small team a couple of different teams or even multiple teams across the organization that maybe uneven coordinated with each other and from there I see.
The incredible value in our products and then expand on a number of vectors and those vectors are they spending.
The number of seats, maybe starting with one small team all the way up until large enterprise deployments such Deutsche Bank that we talked about with tens of thousands of seats inside of the let's say aspect, where you ended there.
See that customers expand on.
On a product basis, I thought with one product.
Included value that are going to come back to Washington discover what other products that we have and it can do solve their problems and how well do these products work together, particularly in cloud with a deeply integrated and so that is that's another one.
We have different edition now with premium and enterprise and so customers will have the functionality.
Additional functionality in the product and so they are willing to pay per hour premium.
Well.
We go on but one I want to touch on is offered at third party application marketplace.
We have one of the best market prices in enterprise software and customers can easily adopt.
Incremental functionality.
All new areas of our functionality in our marketplace. So we see expansion across all of those vectors in various ways and does not typically one specific path that we see our customers tight.
But we're very comfortable and feel very great about that going forward given how sticky our products are and how much additional functionality that can unlock across the organization once they started becoming a customer.
Okay.
Thank you if I can get another one in the room and take up more time I wanted to also ask about scaling because in the shareholder letter today I think you also noted that <unk>.
35000 user cloud instances are now available to your entire customer base and if I recall.
Getting to that scale has been a journey and looking across the market.
Some of the other project management tools that are out there have some difficulty scale really achieving scale for a larger concurrent users. So.
Wanted to ask what does that journey been like and generally what does it take to build such a.
Highly scalable collaborative project management tool and what do you view that as a competitive moat.
Sure I can take that question, it's Mike here look.
They've done that is a testament to R&D.
Teams and specifically the infrastructure engineering teams there in terms of scaling.
Our offerings in the cloud.
There's a few things I would point to the so a reminder for anyone listening.
<unk>.
A single instance of SAP.
Software in the case that you mentioned.
We started our cloud journey at about I think 1000 or 2000.
So Brian we expanded to five.
<unk> 10.
I think we've ended 25 and now its just <unk> 35, and I believe we have 50000 in early access programs. So it continuing to scale a single instance of Euro software at the same time we.
Scalable to other parts of our back end infrastructure to allow further increase beyond that amount in a single jurist off where instance.
So you see that in our enterprise edition, where you get unlimited instances. So you can have lots of 35000 user instances at the moment and obviously from an identity and scaling perspective, you can go beyond there.
I would say, it's really a testament to our continued investment in our customers and the continued.
The.
Leading amount of revenue that we spend on R&D because this stuff is hard it's just one of those problems. That's very very difficult you need a lot of hard work and discipline over a long period of time to continue to work out what parts of your infrastructure around scaling and continue to obviously.
The ambitious and pushed that ceiling upwards, we have many many customers.
On premise and data center, who were well beyond the 35000 limit. So you won't see a stop there we'll continue to push that limits, the higher and higher as we work with those larger customers.
Lastly, I would say, it's a testament to the platform that we built because most of that scaling doesn't actually happen and that you are a software world. It happens in the Atlassian cloud platform and our infrastructure lies below that everything from the networking layer all the way through to databases. Various shared services, we have et cetera, all have the scale to handle that whether it's.
Serving videos or whether it's.
<unk> mentioning users collaborative software is all about connecting with other people on your team. So if you mentioned the user and it takes an awful long time, it's a very poor customer experience you get low customer satisfaction. So it's not just about scaling the sheer numbers, it's making sure that all the user experiences happen at scale very very fast and there's huge amounts of smarts in AI and machine learning for example to make sure.
But when you mentioned the user.
We did get across your 35000 employees and find the exact question that you are trying to find with a couple of case strikes as possibly became so look we spend a lot of a lot of time and effort on that and we'll continue to do so.
Probably reflected in AR, and VR and great cloud numbers and more to come.
Your next question comes from Kash Rangan from Goldman Sachs. Please go ahead.
Hi, Thank you very much I wanted to say congratulations on that.
Only the quarter, but tightened jobin.
Terrific terrific executive.
On that thought.
How comfortable are you with the new CFO of Joe's caliber coming in.
You have reset the margin in that.
We can be very comfortable that you have factored in all possible investments that the company needs to make to achieve this cloud transition because I would imagine that our new CFO coming in.
Wants to.
To ensure that the street's level set with respect to margin guide advocates.
Microsoft mutual cloud transition.
I'm just wondering how did youll get comfortable with the level of investments that have already been spoken for and guided into the model. That's it for me. Thank you very much and congratulations.
Thank you Scott here.
I'll answer that.
Mark and I have been around for 20 years running at last year, you just celebrated its one year anniversary in the last few months.
For seven years.
While states individuals coming.
Coming into Alaska, and bring a whole bunch of their experience and their opinions around how would you work philosophy about how we run the business and how we set guidance and how we interact with you our shareholders in an open and transparent way that is really set for mines at the top and so we're really excited.
Joe to get you with his deep experience with Microsoft to.
Our own cloud transition, but I don't expect there to be any material changes to the way we guide to the way we invest in the way we interact with you as shareholders as a result of that and.
Super excited to have Joe on board he is going to be a great.
Addition to the team I'm Super excited about his ability to help us allocate capital across the amazing opportunities that we have in front of us and.
That's a really really exciting given.
That is extremely well at his previous positions.
Your next question comes from Michael <unk> from Keybanc capital market. Michael. Please go ahead.
Hi, This is Billy on for Michael Thanks for taking the question can you just give us an update on the regulatory work you've been doing around the public sector fed ramp and may be different industry verticals and how much opportunity. You think is out there with you unlock as evidenced.
Hi, This is Cameron I can speak briefly to that so as we mentioned before.
Over the last couple of years actually many years with the cloud platform. We continue to invest in not just scale as Mike just mentioned, but all of the regulatory data and compliance requirements that are very very diverse customer base has and that we've been able to knock off. These these cloud requirements and Youll see this every single quarter and every single quarter as we announce these new.
Capabilities, a new cohort of customers gets unlocked to start their cloud transition.
In addition to that we do publish all of our future looking roadmap in this expanding this area up on our public cloud roadmap Mac is just increasing confidence for our customers. So that they can plan ahead as well as engage with our teams on.
When they should actually start their migration journey and that's been a critical part of our overall conversation going forward.
So we've done in the last 12 months HIPAA band fee, we have all of our sock to compliance and we continue to have additional requirements across the board.
And we are continuing to work on fed ramp our federal customer base is significant and we do have customers across the federal customer base, all on server and data center today, great part there.
The overwhelming majority of those agencies actually have cloud first mandates like all of them are simply looking for the ability to go to cloud and we continue to invest in our cloud platform to hit up those specific requirements, but it doesn't stop with better and there is still many other specific industry related regulatory efforts that we will continue to invest in.
In addition to that I do want to call out our forge platform, which was our new capability to allow marketplace apps to be run within the Atlassian cloud infrastructure. This has opened up even more opportunity for our customers to build and deploy apps as well as our marketplace partners to build apps and have them basically secured within the <unk>.
Cloud platform, giving our customers even more confidence if they are in highly regulated industries.
Thank you and that concludes our question and answer session I will now turn the call over to Mike for closing remarks.
Thanks, everyone. Just thank you for joining the call to two small things with where we are.
So <unk> firstly, congratulations Scott on his interim CFO .
Foreign job today.
Super excited.
We have Joe <unk>.
I'm going to take the wheel.
Borrowing any emergencies, we look forward to him joining us on our October call.
Secondly, as you saw in our shareholder letter.
On the success of $10 22 earlier.
Last quarter, we will be holding a unique events now pilot to each of our markets. So we'll kick things off in September 29th September in San Francisco, and the Chase Center with a work management specific event that we're calling worldwide.
So please come check it out and see how teams can work differently together.
With that thank you everyone for joining our call today as always we really appreciate all of your continued support thoughtful questions.
And last but definitely not least thank you to all the atlassian on a fantastic.
And Thats again, we will touch on next quarter.
Okay.
[noise].
Yes.
[noise].