Q3 2024 Atlassian Corp PLC Earnings Call

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Martin Lam: Good afternoon, and thank you for joining Atlassian's earnings conference call for the third quarter of fiscal year 2024. As a reminder, this conference call is being recorded and will be available for replay on the Investor Relations section of Atlassian's website following this call. I will now hand the call over to Martin Lam, Atlassian's Head of Investor Relations.

Speaker Change: Good afternoon, and thank you for joining at last year's earnings Conference call for the third quarter of fiscal year 2024.

As a reminder, this conference call is being recorded and will be available for replay on the Investor Relations section of Los Angeles site. Following this call.

I will now hand, the call over to Martin Lam Atlassian as head of Investor Relations.

Martin Lam: Welcome to Atlassian's third quarter of fiscal year 2024 earnings call. Thank you for joining us today.

Speaker Change: Welcome to a loss in the third quarter of fiscal year 2024 earnings call. Thank you for joining us today.

Martin Lam: Joining me on the call today are Atlassian's co-founders and co-CEOs, Scott Farquhar and Mike Cannon-Brooks, and Chief Financial Officer, Joe Binz. Earlier today, we published a shareholder letter and press release with our financial results and commentary for our third quarter of fiscal year 2024. The shareholder letter is available on Atlassian's work-life blog and the investor relations section of our website, where you will also find other earnings-related materials, including the earnings press release and supplemental investor data sheets.

Martin Lam: Joining me on the call today, we have about Washingtons co founders and co Ceos, Scott Farquhar, and Mike Cannon, Brookes, and Chief Financial Officer, Joe <unk>.

Martin Lam: Earlier today, we published a shareholder letter and press release with our financial results and commentary for our third quarter of fiscal year 2024.

Martin Lam: Their letter is available on that lock ins work life block and the Investor Relations section of our website, where you'll also find other earnings related materials, including the earnings press release and supplemental investor deck.

Martin Lam: As always, our shareholder letter contains management's insight and commentary for the quarter. So during the call today, we'll have brief opening remarks and then focus our time on Q&A. This call will include forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, and assumptions. If any such risks or uncertainties materialize, or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. You should not rely upon forward-looking statements as predictions of future events.

As always our shareholder letter contains management's insight and commentary for the quarter. So during the call today with brief opening remarks, and then focus our time on Q&A.

Martin Lam: This call will include forward looking statements forward looking statements involve known and unknown risks uncertainties and assumptions, if any such risks or uncertainties materialize or if any of the assumptions prove incorrect our results could differ materially from the results expressed or implied by the forward looking statements we make.

Martin Lam: You should not rely upon forward looking statements as predictions of future events forward looking statements represent our management's beliefs and assumptions only as of the date such statements are made and we undertake no obligations to update or revise such statements should they change or cease to be correct.

Martin Lam: Forward-looking statements represent our management's beliefs and assumptions only as of the date such statements are made, and we undertake no obligation to update or revive such statements should they change or cease to be current. Further information on these and other factors that could affect our business performance and 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 recently filed annual and quarterly reports.

Martin Lam: Further information on these and other factors that could affect our business performance and 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 recently filed annual and quarterly reports.

Martin Lam: During today's call, we will also discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and are not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures is available in our shareholder letter, earnings release, and investor data sheet on the investor relations section of our website.

Martin Lam: During today's call. We will also discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP.

Martin Lam: A reconciliation between GAAP and non-GAAP financial measures is available in our shareholder letter earnings release, and Investor data sheet on the Investor Relations section of our website.

Martin Lam: I'd like to allow as many of you to participate in the Q&A as possible, but out of respect for others on the call, we'll take one question at a time. With that, I'll turn the call over to Scott for opening remarks.

Martin Lam: I'd like to allow as many of you to participate in Q&A as possible out of respect for others on the call. We'll take one question at a time.

Martin Lam: With that I'll turn the call over to Scott for opening remarks.

Scott Farquhar: Thank you for joining us today. As you've already read in our shareholder letter, Q3 was truly a milestone quarter for us. Today, Alaskan is a crowd majority.

Scott: Thank you for joining us today.

Scott: You've already read in our shareholder letter Q3 was truly a milestone quarter for our last Q.

Scott Farquhar: Good day last thing is the cloud majority company.

Scott Farquhar: We have over 300,000 customers using our cloud products and have seen a three times increase in paid seats in the cloud since we announced the winding down of support for Server three and a half years ago. And while this is just one significant moment among many across our multi-year cloud journey, we are thrilled with what we've achieved to date. We migrated more paid seats to the cloud than we initially projected, and our churn has been consistently lower than expected from our server base.

Scott Farquhar: Have a 300000 customers using our cloud products and have seen a three times increase in ICT and the cloud since we announced the winding down of supports us over three and a half years ago.

Scott: And while this is just one significant alignment among many across a multi cloud journey, we are thrilled with what we've achieved to date.

Scott: We migrated more pipe takes to cloud than we had initially projected and our churn has been consistently lower than expected from outside of that.

Scott Farquhar: This big volume is about the mission critical role our products play, the value they deliver, and our customers' desire to realize the innovation in our cloud products. We now have an even larger opportunity in the cloud than originally believed.

Scott: This speaks volumes about the mission critical rollout products pipe.

Scott: <unk> and our customers desire to realize the innovation in our cloud products.

Scott: We now have an even larger opportunity in cloud than originally believed.

Scott Farquhar: You'll see us continue to execute it against our roadmap and do it with more innovation to pave the path so that we can start and finish up the system without having to clean it, driving durable future growth. We're also announcing that I'll be stepping down as co-CEO of Atlassian on the 31st of August this year. It's been a difficult decision, but after 23 years, it's time to pursue some other passions I have, particularly philanthropy, investing, and to help grow and build the global technology industry.

Scott: Youll see us continue to execute against that roadmap and deliver more innovation to pave the path hopefully start coming up soon.

Scott: Okay.

Scott: To drive durable future growth.

Speaker Change: We're also announcing but I'll be stepping down as co CEO of Atlassian on the 31st of August this year.

Speaker Change: It's been a difficult decision, but after 'twenty three time to pursue some other questions perhaps.

Speaker Change: Particularly philanthropy Index D.

Speaker Change: And to help grow and build the global technology industry.

Scott Farquhar: And while there is never a perfect time to step away, I'm supremely confident of where Atlassian is headed. We've got one of the best cloud platforms in the industry. Our Point A and U products are gaining real traction with customers and revenue. AI is providing new and exciting opportunities, and our customers are increasingly choosing to consolidate around Atlassian, and I'm proud to say we have the most experienced leadership team in our history.

Speaker Change: And while there is never a perfect time to step away.

Speaker Change: <unk> confident of what Atlassian is that.

Speaker Change: We've got one of the best cloud platforms in the industry.

Speaker Change: Our <unk> products are gaining real traction with customers and revenue.

Speaker Change: II is providing new and exciting opportunities and our customers are increasingly choosing to consolidate around it last year.

Speaker Change: And I'm proud to say, we have the most experienced leadership team in our history.

Scott Farquhar: I will remain an active board member and assume a special advisor role with Mike continuing on as CEO. I have complete trust in Mike leading the way to harness the incredible opportunities that we allow us to have. I'll turn it over to you, Mark.

Speaker Change: I will remain an active board member and as soon as special advisor role with market continuing on as CEO.

Speaker Change: I have complete trust in migrating away to harvest these type of opportunities that weight loss.

Speaker Change: I'll turn it over to you Mike.

Scott Farquhar: Yes, a milestone quarter for a number of reasons. Now there will be plenty of time for celebrations and farewells as this is not Scott's last earnings call, but I do want to touch on his news briefly. As you all know, Scott and I have known each other for nearly three decades and have experienced every major life milestone together. This company simply would not be Atlassian without Scott, and I'm truly thankful to have had him by my side every day for the last 23 years.

Scott Farquhar: Thanks Scott.

Scott Farquhar: Yes milestone quarter for a number of reasons.

Scott Farquhar: Now there'll be plenty of time for celebrations and farewell says this is not Scott last earnings call, but I do want to touch on his newest briefly.

Scott Farquhar: As you all know Scott and I have known each other for nearly three decades and have experienced every major life milestone together.

Scott Farquhar: This company simply would not be atlassian with that Scott and I am truly thankful to have had him by my side every day for the last 23 years.

Scott Farquhar: In this next chapter, I'm sure we will remain great mates and trusted partners, and I'm glad that I can support him through this both personally and professionally as I continue to lead Atlassian forward as CEO. Atlassian has always been my number one professional priority and focus. Scott and I have both worn every hat over the last two decades.

Scott Farquhar: And the next in this next chapter I'm sure, we will remain great mites, and trusted partners and I'm glad that I can support him through this both personally and professionally as I continue to lead Atlassian forward as CEO.

Speaker Change: Atlassian has always been my number one professional priority and focus Scott and I have both won every had over the last two decades, so I'm confident in taking over full responsibility of the company.

Scott Farquhar: So I'm confident in taking over full responsibility for the company. I'm incredibly excited about the massive opportunities that we have in front of us across our three markets in work management, software development, and service management. We also have huge opportunities ahead of us in both the enterprise transition and AI, where our unique team data and insights allow us to offer unique capabilities and unleash our customers' potential. As we continue to address our opportunities, I want to reiterate the commitments that we've made to continue to grow over the long term while returning to our historical margin levels.

Speaker Change: Yes.

Speaker Change: Incredibly excited about the massive opportunities that we have in front of us across all three markets and work management software development and service management.

Speaker Change: We also have huge opportunities ahead of us in both the enterprise transition and AI, where our unique team data and insights allow us to offer unique capabilities and unleash our customers potential.

Speaker Change: As we continue to attack our opportunities I want to reiterate the commitments that we've made to continue to grow over the long term.

Speaker Change: While returning to our historical margin levels.

Scott Farquhar: We have a thoughtful plan in place to continue to drive durable revenue growth. And we feel really good about our agile approach to prioritizing resources behind key strategic areas like enterprise and AI while driving leverage as we scale, and we couldn't be more excited about the future.

Speaker Change: We have a thoughtful plan in place to continue to drive durable revenue growth and.

Speaker Change: And we feel really good about our agile approach to prioritizing resources behind key strategic areas like enterprise NII, while driving leverage as we scale.

Speaker Change: And we couldnt be more excited about the future.

Operator: With that, I'll pass the call to the operator for Q&A. We will now begin the question and answer session. If you have a question, please press star followed by the 1 on your phone. If you'd like to withdraw from the queue, please press star followed by the 0 on your phone.

Speaker Change: With that I'll pass the call to the operator for Q&A.

Speaker Change: We will now begin the question and answer session. If you have a question. Please press star followed by the one on your side.

Speaker Change: If you'd like to withdraw from the queue. Please press star followed by the <unk>.

Operator: We will now begin the question and answer session. If you have a question, please press star followed by the 1 on your phone. If you'd like to withdraw from the queue, please press star followed by the 2. Your first question comes from Ryan MacWilliams from Barclays. Please go ahead.

Operator: Your first question comes from Ryan.

Ryan: Please go ahead.

Ryan: Hey, Thanks for taking the question just wanted to hear about the overall macro trends at this point tore developer hiring Mike.

Ryan: Any trends around the green shoots of growth for it budgets or hiring developers and then separately just one quick housekeeping item for Joe.

Joe Binz: Yeah, thanks, Ryan. I'll start. From a macro perspective, macro trends were very much in line with what we saw in Q2, and in line with our expectations. Enterprise was healthy across both cloud and data center, and that drove record billings, strong growth in annual multi-year agreements, strong migration, and good momentum in sales of premium and enterprise editions of our products that you see rolling through our revenue results. The macro impact on SMB, on the other hand, continued to be challenging, although also in line with expectations.

Ryan: What was the contribution to cloud revenue growth in the third quarter, and maybe how youre thinking about its contribution in the fourth quarter. Thank you.

Joe: Yeah. Thanks, Ryan I'll start from a macro perspective macro trends were very much in line with what we saw in Q2 and in line with our expectations enterprise was healthy across both cloud and data center and that drove the record billings strong growth in annual multiyear agreements strong migration and good momentum in sales of premium and enterprise editions of our products that you see.

Joe: Rolling through our revenue results.

Joe: The macro impact on SMB on the other hand continued to be challenging although also in line with expectations and that macro headwinds.

Joe Binz: And that macro headwind in SMB lands primarily in the cloud, given SMB makes up a significant part of that business. And within the cloud, it lands primarily in paid seed expansion. So stepping back more broadly within cloud, the trends in Q3 were very consistent with Q2, as well as our expectations coming into the quarter. And then paid seed expansion rates remained well below prior year levels, but the decelerating trend quarter to quarter did continue to moderate from Q2. So that's a positive sign.

Joe: Macro headwind in SMB lands, primarily in cloud given SMB makes up a significant part of that business and within cloud. It lands primarily in paid seat expansion. So stepping back more broadly within cloud the trends in Q3 were very consistent with Q2 as well as our expectations coming into the quarter and then paid seat expansion rates remained well below prior year levels.

Joe: The decelerating trend quarter to quarter did continue to moderate from Q2, So thats a positive sign all of the other growth drivers migrations cross sell upsell new customers.

Joe Binz: All of the other growth drivers, migrations, cross-sell, upsell, new customers, monthly active usage, churn, etc., were all in line with our expectations and stable overall. And then in terms of Loom, we, you know, basically from a quarter perspective, we're not going to provide specifics on Loom's revenue or growth rate. But we were pleased with the growth we're seeing and excited by the customer reaction to the recent AI innovations we've been introducing into Loom's product line.

Joe: Monthly active usage churn et cetera, those were all in line with our expectations and stable overall.

Joe: And then in terms of Bloom.

Ryan: Basically from a quarter perspective, we're not going to provide specifics on rooms revenue our growth rate. We were pleased with the growth, we're seeing and excited by the customer reaction to the recent AI innovations we've been introducing <unk> product line in terms of performance in the quarter room revenue in Q3 was squarely in line with our expectations and in terms of our fiscal year guidance in terms of our overall revenue in <unk>.

Joe Binz: In terms of performance in the quarter, Loom revenue in Q3 was squarely in line with our expectations. And in terms of our fiscal year guidance, in terms of our overall revenue and operating margin guidance for the year, we continue to expect Loom to have about 1.5 points of impact on FY24 cloud revenue growth for the year, and for Loom to be slightly dilutive to FY24 and FY25 operating margins.

Ryan: Operating margin guidance for the year, we continue to expect them to have about one five points of impact on FY 'twenty for cloud revenue growth for the year and for them to be slightly dilutive to FY 'twenty, four and FY 'twenty five operating margins.

Operator: The next question comes from Fred Havemeyer from Macquarie. Please go ahead.

Ryan: The next question comes from Brent <unk> from Macquarie. Please go ahead.

Joe Binz: Okay, thank you very much. Scott, we know you're not leaving, and certainly will be missed on these calls. I wanted to ask with respect to those, the super migration at this point. It's very encouraging to hear that churn was looking much lower than expected and primarily the customers have transitioned on to data center. But are there any customers that are left over at this point in time that might make a future transition after limping along for some period of time here? Hey Fred, this is Joe. You know, it's do...

Brent: Okay. Thank you very much Scott.

Brent: Leaving immediately but certainly will be quite missed on these calls.

Brent: I wanted to ask with respect to those.

Brent: The Super migration at this point, it's very encouraging to hear that churn was looking much lower than expected and primarily the customers have transitioned on to data center, but.

Speaker Change: Are there any customers that are left over at this point in time that might make the future transition after bumping along for some period of time here.

Joe Binz: Hey, Fred, this is Joe. You know, it's difficult to know exactly how many server customers remain running unsupported at this point. We believe it's a small number, and certainly smaller than we thought it would be entering the quarter. We're not assuming any material contribution to either data center or cloud revenue growth from this cohort of customers moving forward. And operationally, our focus now is squarely on enabling our data center customers to move to the cloud.

Speaker Change: Yes.

Speaker Change: Hey, Brad this is Joe it's difficult to know exactly how many server customers remain running unsupported at this point, we believe it's a small number and certainly smaller than we thought it would be entering the quarter, we're not assuming any material contribution to either data center or cloud revenue growth from this cohort of customers moving forward in the guidance and operationally our focus now squarely on enabling our data center.

Speaker Change: <unk> to move to the cloud.

Speaker Change: Thank you.

Operator: The next question comes from Keith Weiss from Morgan Stanley. Please go ahead, Keith.

Joe Binz: The next question comes from Keith Weiss from Morgan Stanley. Please go ahead.

Scott Farquhar: Yeah, this is Sanjit Singh for Keith. Thank you for taking the questions. I actually wanted to ask a question about a customer call out that you had in the shareholder letter. You guys mentioned that FanDuel was able to cut tickets that require human intervention by 85%, which is a pretty fantastic result for FanDuel. In terms of that customer, are you pricing that FanDuel contract on a steep basis? And how would you think about when they achieve those types of efficiency gains? How do you think about the revenue opportunity with some of the efficiency gains they're seeing with the Atlassian product?

Keith Weiss: Yeah. This is patrik. Thanks for Keith Thank you for taking the questions actually wanted to.

Keith Weiss: Ask the question about customer.

Keith Weiss: Call out that you had in the shareholder letter you guys mentioned that San Diego.

Scott Farquhar: Was able to.

Keith Weiss: Got tickets.

Keith: That require human intervention by 85%, which is a pretty fantastic result for <unk> in terms of that customer pricing back down to a contract on a seat basis and how would you think about when they achieve those types of efficiency gains how do you think about the revenue opportunity.

Keith: With with with some of the efficiency gains youre seeing with Pete with the Atlassian products.

Scott Farquhar: Yeah, that's a great question, Sanjit, and I think one on people's minds is how AI increasingly helps produce these incredible ROI experiences that we're seeing across, you know, our customer base. And at the moment, you know, we have historically priced almost all of our products on some sort of seat basis with some usage basis that has happened in certain areas of the product, such as bitbucket pipelines, that we've charged for, you know, units of builds and stuff like that.

Speaker Change: Yes, that's a great question, Sanjay and I think one on People's minds is.

Keith: Hi.

Keith: Increasingly helps you produce these incredible.

Sanjay: Experiences that we're seeing across.

Keith: Customer base and at the moment.

Keith: We have historically priced hours.

Keith: Almost all of our products on some sort of state basis some usage.

Keith: License that has happened in certain areas of the products such as bid bucket pipelines that we charged four units that builds and stuff like that.

Scott Farquhar: We are experimenting going forward with more usage-based privacy. So, I don't want to get into one specific customer, but we think that there is a world in the future where we do have some sort of usage-based pricing around these interactions with, you know, and the ROI that we're getting from customers. And so we'll see more experimentation with that going forward, but that's something we're experimenting with at the moment.

Keith: We are experimenting going forward with more usage based product suite.

Scott Farquhar: It's going to get into one specific customer but.

Keith: We think that there is a world in the future where we do.

Keith: Have some sort of usage based pricing around these interactions.

Scott Farquhar: Roy that we're getting from customers.

Scott Farquhar: We'll see more experimentation with that going forward.

Speaker Change: That's something.

Speaker Change: All right.

Speaker Change: Sure.

Operator: I appreciate the thoughts. Thank you.

Speaker Change: I appreciate the thoughts thank you.

Operator: Your next question comes from Gregg Moskowitz from Missouha Securities. Please go ahead.

Speaker Change: Your next question comes from Gregg Moskowitz from Mizuho Securities. Please go ahead.

Operator: Thank you very much for taking the question. And Scott, all the best in your future endeavors, even though I know, as Mike said, they'll be with us for a little while longer, fortunately.

Gregg Steven Moskowitz: Okay. Thank you very much for taking the question and Scott all the best in your future endeavors.

Gregg Steven Moskowitz: I think it will be with us for is it a lot longer Fortunately.

Joe Binz: So my question is, obviously, this is a significant upside quarter. Having said that, I think the big question is one of sustainability. Cloud revenue in the quarter was only in line with guidance, with all of the upside coming from data center and marketplace, and the marketplace itself is tied to the data center as well. But we're never gonna have another quarter of server migrations. And clearly, there was also a decent amount of pull forward given the recent data center price increase. And so as we look ahead into next year and beyond, the question is, can Atlassian, in fact, continue to show good growth? Thank you.

Gregg Steven Moskowitz: So my question is obviously this is a significant upside quarter, having said that I think the big question is one of sustainability.

Speaker Change: Revenue in the quarter was they will be in line with guidance with all of the upside coming from data center marketplace and marketplace. It sells is tied to the data center as well.

Joe Binz: But we're never going to have another quarter of separate migrations and clearly there was also a decent amount of pull forward given the recent datacenter price increase and so as we look ahead into next year and beyond.

Speaker Change: As Ken Atlassian in fact continue to show good growth.

Speaker Change: <unk>.

Joe Binz: Yeah, a great question, Gregg. Thanks for asking.

Speaker Change: Yeah, Great question, Greg Thanks for asking.

Joe Binz: Let me try and share a little bit of that without giving specific numbers for FY25. At the highest level, the long-term revenue growth of the company is really driven by the opportunities we have in our three large high-growth markets that Mike touched on at the top of the call, and secular trends around things like digital transformation and software are a critical factor to the success of every company. From there, there are several growth drivers across cloud and data center.

Speaker Change: Let me try and share a little bit of perspective on that without giving specific numbers for FY 'twenty five at the highest level.

Joe Binz: Long term revenue growth of the company is really driven by the opportunities we have in our three large high growth markets that Mike touched on at the top of the call and secular trends around things like digital transformation and software is a critical factor to the success of every company from there. There are several there are several growth.

Speaker Change: Drivers across cloud and data center in terms of cloud, but given the size of the datacenter installed base. We do continue to expect migrations to be a key driver of cloud revenue growth over several years, although we do expect that impact to Wayne gradually over time now to drive migrations, we're delivering a cloud platform that provides the best customer experience and value with analytics and automation.

Joe Binz: In terms of cloud, given the size of the data center installed base, we do continue to expect migrations to be a key driver of cloud revenue growth over several years, although we do expect that impact to wane gradually over time. Now, to drive migrations, we're delivering a cloud platform that provides the best customer experience and value with analytics, automation, and AI, as well as a better TCO for the customer, and those factors will only improve and grow stronger over time.

Speaker Change: NII as well as better Tcl for the customer and those factors will only improve and grow stronger over time as part of that we are investing in new and highly valuable product innovation as well and much of that is only currently available in premium enterprise editions of our products, our cloud products and we are working to unblock and help customers migrate into play on our cloud and making good progress on scalability.

Joe Binz: As part of that, we are investing in new and highly valuable product innovation as well, and much of that is only currently available in premium enterprise editions of our products, our cloud products. And we are working to unblock and help customers migrate and deploy to our cloud and making good progress on scalability, certifications, app integration, and extensibility, all of which are very relevant to our largest customers in data centers.

Speaker Change: And certifications and App integration extensibility, all of which are very relevant to our largest customers in data centers. So we have a lot of confidence in the migration space from there as you know there are multiple growth drivers in the cloud we've discussed in the past things like paid seat expansion within our existing customer base, our opportunity to cross sell additional products to <unk>.

Joe Binz: So we have a lot of confidence in the migration space. From there, as you know, there are multiple growth drivers in the cloud we've discussed in the past, things like paid seed expansion within our existing customer base, our opportunity to cross-sell additional products to our over 300,000 customers, upselling to premium and enterprise editions of our products, and then with a smaller impact today, but growing over time, are other drivers like new customer ads and new high-growth products like Compass, JIRA, Product Discovery, and Loom.

Speaker Change: Over 300000 customers.

Speaker Change: Upselling to premium and enterprise editions of our products and then with a smaller impact today, but growing over time are other drivers like new customer adds in new high growth products like compass gyro product discovery in them.

Joe Binz: And, of course, pricing is the final lever in the cloud model. In terms of data centers, we expect organic expansion and pricing to be durable long-term drivers given the high renewal rates on data center agreements and the enterprise nature of that customer base. And with AI, we are well positioned with unique data graphs around high-value workloads, and there's a lot of opportunity in that space as well. And we're off to a solid start with Atlassian Intelligence, with more AI innovation on the way.

Speaker Change: And of course pricing is the final lever in the cloud model in terms of data center, we expect organic expansion of pricing to be durable long term drivers given the high renewal rates on datacenter agreements and the enterprise nature of that customer base and with AI, we are well positioned with a unique data graphs around high value workloads and theres a lot of opportunity in that space as well.

Speaker Change: We're off to a solid start with Atlassian intelligence with more AI innovation on the way and then finally add on significant opportunity. We have for further penetration enterprise, where we've had great signal one momentum over the last year and overall all up we feel confident in our ability to invest behind and deliver healthy revenue growth over a multiyear period as a result of that.

Joe Binz: And then finally, add on the significant opportunity we have for further penetration into enterprise, where we've had great signals and momentum over the last year. And overall, all up, we feel confident in our ability to invest in and deliver healthy revenue growth over a multi-year period as a result of that.

Scott Farquhar: Yeah, Gregg, I just wanted to chime in at a higher level. I think Troy's given a very fantastic and comprehensive answer there.

Speaker Change: Yes, Greg I, just wanted to chime in at a higher level I think just given a very fantastic comprehensive answer there I think.

Scott Farquhar: I think we should remember that any upside in data centers is long-term upside for the cloud in terms of the destination for those customers over the long arc of time. I think our end-of-server journey, as you mentioned, from a migration point of view, has been a huge success, right? Over the last four years, you know, we've beat our original expectations for the number of paid seats that we've migrated to the cloud. We ended up with less churn overall than we thought we would have over that three- or four-year period.

Speaker Change: We should remember that any upside in data center is a long term upside for the cloud.

Speaker Change: In terms of the destination for those customers over the long arc of time.

Speaker Change: I think our.

Speaker Change: And a server journey as you mentioned from a migration point of view overall has been a huge success Bryan over the last four years, we beat our original expectations for the number of paid seats and we would migrate to cloud.

Speaker Change: Ended with less churn overall than we thought we would have over that three or four year period. We've.

Scott Farquhar: We've tripled the number of paid seats in the cloud during that period, in fact, since we announced the end-of-service for three and a bit years ago. I think the way I would zoom out and see that is, that is an example of Atlassian executing against a long-term goal as a team and as a company, and we can do hard things. We say this all the time internally.

Speaker Change: We've tripled the number of paid tickets and cloud during that during that period. Since we in fact, since we announced end of service for three and a bit years ago.

Speaker Change: I think the way I would assume that and see that as that is an example of it last year in executing against our long term goal.

Speaker Change: A team and as a company and we can do hard things, we say this all the time internally.

Scott Farquhar: Data center customers moving to hybrid deployments, which is generally the way they go through in the middle, and then to cloud, it's a different journey, right? These are our largest and most complex customers. They have different requirements, different things, but we will get them there. We will execute against that mission over the next few years in the same way that we executed against the last one. I have confidence in the Atlassian team to do that.

Speaker Change: Data center customers moving to hybrid deployments, which is generally the way they go through.

Scott Farquhar: Middle and then to cloud it's a different journey right. These are our largest and most complex customers they have different requirements different things.

Speaker Change: But we will get them there we will execute against that mission over the next.

Speaker Change: A few years in the same way that we executed against <unk> mission I have confidence in atlassian to do that.

Scott Farquhar: And if you want a singular statistic of how that's going, again, the data center to cloud migrations... Over the first three quarters of this year, we're up 90%, 9-0, on the first three quarters of last year, on a year-on-year basis. So we are already migrating data center customers to the cloud, so that overperformance is a long-term good sign.

Speaker Change: And if you want a singular statistic of how thats going again, the data center to cloud migrations.

Speaker Change: The first three quarters of this year were up 90% nine zero on the first three quarters of last year on a year on year basis. So we are already.

Speaker Change: Migrating data center customers to the cloud.

Scott Farquhar: The performance is as a longtime good Suntrust.

Operator: That's extremely helpful. Thank you both.

Speaker Change: That's extremely helpful. Thank you both.

Operator: Your next question comes from Michael Turrin from Wells Fargo Securities. Please go ahead.

Operator: The next question comes from Michael <unk> from Wells Fargo Securities. Please go ahead.

Operator: Hey, great. Thanks. I appreciate you taking the question. The results were quite strong in a still tough environment.

Michael James Turrin: Hey, great. Thanks, I. Appreciate you taking the question the results were quite strong in a still tough environment think the stock is initially reacting more to surprise news from Scott. So maybe you can both Scott and Mike give us a peek behind the scenes around how you have historically divided the CEO role and Mike would be helpful to hear more around it.

Scott Farquhar: I think the stock is initially reacting more to the surprise news from Scott. So maybe you can both, Scott and Mike, give us a peek behind the scenes around how you have historically divided the CEO role. And Mike, it would be helpful to hear more about whether becoming sole CEO at all changes the role or key points of focus on your end from a product or strategic perspective. I think just any detail there is useful. Thanks very much.

Scott Farquhar: Becoming <unk>.

Scott Farquhar: CEO at all changes the role or key points of focus on your end from a product or strategic perspective, I think just any detail. There is useful thanks very much.

Scott Farquhar: Thanks, Scott here. I'll take the first thing at that.

Speaker Change: Thanks, Scott here I'll take both.

Speaker Change: Thank you.

Scott Farquhar: Mike and I have worked together for 23 years. We used to take turns taking the bins out in our first office. So we've kind of done every job equally over that period of time. Mike's run go to market for well over half that time. I've run it for a little bit less than that. I run engineering, Mike's run engineering, products.

Scott Farquhar: Mike and I have worked together for 23 years, we used to take.

Scott Farquhar: I think the things out.

Scott Farquhar: First off though so we've kind of gone every job equally over that period of time Micron go to markets.

Scott Farquhar: Well over half that time I'll run that through that's not Brian engineering milestone engineering products.

Scott Farquhar: So we've kind of done everything together over that period of time, and I think that's relatively unique, actually. I mean, us are pretty unique. But to actually kind of share and give you those responsibilities and change them over time, I think it is also extremely unique there. And so I don't think there's anything that Mike hasn't done before that he'll be picking up. And even for lots of things around how we run finances and how we think about the growth of business and investments, like, you know, we've spent a lot of time together over the years doing, and though, you know, Joe and finance have reported into me for, you know, for the last half dozen years or so, you know So Mike, do you want to add anything?

Scott Farquhar: You've kind of done everything together over that period of time and I think that's relatively new.

Scott Farquhar: Ashley.

Mike: So unique.

Scott Farquhar: Actually.

Mike: Kind of share in Davita, those responsibilities and change them over time I think there's also.

Scott Farquhar: Extremely unique there.

Mike: I don't think there's anything that might have been done before that he will be it will be picking up and.

Scott Farquhar: Even philosophies around how we run finances and Howie.

Scott Farquhar: Thinking about the grocery business and the investments.

Mike: I've spent a lot of time together over the years Julien.

Mike: Joe and finance reporting into me for.

Scott Farquhar: For the last half dozen Yusill sorrow.

Scott Farquhar: <unk> spent a lot of time together looking at where we want to grow the business and what our investment profile is used cellular marketing anything.

Scott Farquhar: Yeah, thanks Scott. Thanks Michael.

Speaker Change: Yes, Thanks, Scott Thanks, Thanks, Michael.

Scott Farquhar: Look, other than Scott being clearly far better than I was at taking the Binz out, we'll work on that going forward. But, from a long-term point of view, I would echo Scott's last point, right? Our philosophies as a company, our values, our mission to unleash the potential of every team and the culture. This has been a constant in the company for the last 23 years, and it's going to continue to be a constant going forward.

Mike: Look other than Scott being clearly far better than I was taking the pins out.

Speaker Change: We'll work on that going forward, but.

Speaker Change: I want to say from a from a long term point of view I'd Echo Scott's last point Brian.

Speaker Change: Our philosophies as a company our values.

Speaker Change: Our mission to unleash the potential of every team and our culture. This has been a constant of the company for the last 23 years and it's going to continue to be a constant going forward.

Scott Farquhar: We hope for a very long time. We are a very long-term thinking company. We have certain ways of being that we don't expect to change, nor do I think Scott would want them to change, nor do I think they should change.

Speaker Change: Hope for a very long time.

Scott Farquhar: We had a very long term thinking company, we have certain ways of being that we don't expect should change.

Scott Farquhar: Nor do I think Scott would want them to change or how do I think this should change.

Scott Farquhar: Now, we live in a highly changing environment, so we can't say nothing's going to change. What we can say is in the short to medium term, sort of the closer focus, we're very clear on our strategies and our execution. As Scott mentioned, we have the most experienced executive team we've ever had. I'm super lucky to get to work alongside them all every single day, even executing this mini project, if you like.

Scott Farquhar: Now we live in a highly changing environment. So we can say nothing's going to change.

Scott Farquhar: What we can say is in the short to medium term sort of the closer focus.

Speaker Change: <unk>.

Speaker Change: Clear on our strategy and our execution as Scott mentioned, we have the most experienced executive team we've ever had I am Super Lucky to get to work alongside them. All every single day, even executing through this this many project if you like.

Scott Farquhar: From a strategy point of view, look, we're very clear with our investors, our shareholders, our customers, what our focuses are, in terms of the opportunities we have in the enterprise and with migrations, in terms of the ITSM and ESM market, and continue to invest strongly there and see strong results. And then, in the AI era, we have some fantastic opportunities. So those are the current priorities, as we said, that don't change from yesterday to today, and we'll keep you updated as we move forward.

Speaker Change: From a strategy point of view look were very clear I have been clear with our investors our shareholders our customers what our focus is our in terms of the opportunities we have in enterprise and with migrations in terms of the TSM and ESN market and continue to invest strongly there and seeing strong results and then in the AI era.

Scott Farquhar: We have some fantastic opportunities. So those are the current parties as we said that hasnt changed from yesterday to today.

Speaker Change: And we will keep you updated as we move forward.

Operator: Maybe Scott can take the Binz out one last time. Thanks, guys.

Speaker Change: Maybe Scott can take the pins out one last time, thanks guys.

Operator: Okay.

Operator: Your next question comes from Aleksandr Zukin from Wolf Research. Please go ahead.

Speaker Change: Your next question comes from Alex <unk> from <unk>. Please go ahead.

Operator: Hey guys, thanks for taking the question. Maybe mine is tied to the data center to cloud journey that you've seen, both in the context of some customers kind of signing more longer-term deals, and in the construct of kind of this notion that the end of server life unblocks the company's ability to focus on a lot more things. What does that mean for data center to cloud migration trends, in terms of both from a financial perspective, maybe next quarter and next year, those 10 points compared to what you maybe previously thought, and then just beyond, if you look at the activity of where those customers are migrating in terms of tier basis, and what that's doing to ARR or ACB growth?

Alex: Hey, guys. Thanks for taking the question maybe mine is.

Operator: Ride to the data center to cloud journey that <unk> seen both over the first three quarters of this year in the context of some customers kind of signing more longer term deals and in the construct of kind of this notion that the end of server life unlocks the company's ability to focus on a lot more things what does that mean.

Operator: <unk> four data center to cloud migration trends in.

Operator: In terms of both from a financial perspective, maybe next quarter and next year that 10 points.

Operator: Compared to what you may be previously thought and then just beyond if you look at the activity of where those customers are migrating in terms of the tier basis, and what thats doing to.

Operator: <unk>.

Joe Binz: Yeah, thanks, Alex. There are a lot of questions there, so if I don't hit them all, bring me back.

Operator: ACD growth.

Speaker Change: Yes, thanks, Alex a lot of questions. There. So if I don't hit them all bring me back so I'll start with migrations. We do continue to expect migrations to be a key driver of cloud revenue growth in Q4, and FY 'twenty five.

Joe Binz: So I'll start with migrations. We do continue to expect migrations to be a key driver of cloud revenue growth in Q4 and FY25. Despite few, if any, server migrations post-end of support, this is due to the significant size of the data center install base and the opportunity we have to enable those customers, some of our very largest customers, to move to the cloud. And that opportunity today is even bigger than we expected it to be three months ago, given the strong customer retention and migrations from server to data center this quarter.

Speaker Change: Despite few of any server migrations post end of support this is due to the significant size of the datacenter installed base and the opportunity we have to enable those customers. Some of our very largest customers to move to the cloud and that opportunity today is even bigger than we expected it to be three months ago, given the strong customer retention and migrations from server to data centers.

Joe Binz: Having said that, we also expect the migration benefit to cloud revenue growth to gradually decline over time from the approximately 10-point benefit in FY24, given the lack of server migration. Now, to drive these migrations, I talked earlier about the things we're doing, so we have a lot of confidence in our ability to execute on that and to drive it. So that's how I would think about the growth impact on the cloud from migrations going forward.

Joe Binz: This quarter having.

Joe Binz: Having said that we also expect the migration benefit to cloud revenue growth to gradually decline over time from the approximately 10 point benefit in FY 'twenty for given the lack of server migrations.

Joe Binz: Now to drive these migrations I talked earlier about the things we're doing so we have a lot of confidence in our ability to execute on that and to drive it.

Joe Binz: That's how I would think about the growth impact to cloud from migrations going forward in terms of the deal structure. As you know if you look at our overall deal volume this quarter, even though we had a large number of absolute deals the mix between annual and multiyear we're very consistent and similar to past quarter. So think of the overall volume growing.

Joe Binz: In terms of deal structures, you know, if you look at our overall deal volume this quarter, even though we had a large number of absolute deals, the mix between annual and multi-year was very consistent and similar to past quarters. So think of the overall volume growing and within that volume, the mix between multi-year and annual being the same. It's just that a few.

Joe Binz: And within that volume and mix between multi year and annual being the same.

Speaker Change: I just had a few small points to that Alex.

Scott Farquhar: Just add a few small points to that, Aleks. Firstly, in terms of deals, you're seeing a lot more hybrid deals, obviously, from the data center type customer. One of the points that we like to make clear is that for larger and more complex customers, moving to the cloud is not a sort of a one-day single button click event like changing an app on your phone, right? They have complex deployments with lots of integrations, and they're enmeshed into deep customer workflows.

Scott Farquhar: Firstly in terms of deals like Youre seeing a lot more hybrid deals obviously from the data center type customer.

Scott Farquhar: One of the points that we like to make clear is that.

Scott Farquhar: The larger and more complex customers moving to the cloud is not a sort of a.

Scott Farquhar: One day single button click event like changing an app on your fund they have complex deployments with lots of integrations and their unmatched into deep customer workflows. This is fantastic for Atlassian. This shows how much value we have in our products.

Scott Farquhar: This is fantastic for Atlassian. It shows how much value we have in our products. It means their migration journey is more of a gradual process over time. It's a series of events, and that shows up in their hybrid both in terms of their deployment environment topology and their deal construct.

Joe Binz: My question Jenny as more of a gradual over time.

Scott Farquhar: A series of events and.

Scott Farquhar: That shows up in their hybrid both in terms of their deployment environment topology and there.

Scott Farquhar: Deal construct.

Speaker Change: I will say.

Scott Farquhar: You know, we continue to be agile with our resources at Atlassian. We pride ourselves on our ability to move R&D around to where we need it to be. Obviously, with the end of servers, we can move slightly more R&D towards the cloud, but we maintain a strong commitment to the data center business and continue to move that forward. And there's still lots of work to do, right? We're incredibly proud of the work we've done on performance and scale in governance and data residency.

Scott Farquhar: We continue to be agile with our resources that atlassian, we pride ourselves in our ability to move R&D around to where we needed to be obviously at the end of server, we can move slightly more R&D towards the cloud, but we maintained a.

Scott Farquhar: Our strong commitment to the data center business and continuing to move that forward.

Scott Farquhar: And there is there's still lots of work to do right. We are incredibly proud of the work, we've done and performance and scale.

Scott Farquhar: In governance and data residency, we rolled out seven new regions this quarter and.

Scott Farquhar: We rolled out seven new regions this quarter and an extensibility and all the things that our largest customers need, and you'll see us continuing to invest in those over the coming years as part of the journey.

Scott Farquhar: And and extensibility and all the things that our largest customers need.

Scott Farquhar: And you'll see us continuing to invest in those over the coming years as part of that journey.

Operator: The next question comes from Kate Bachman from Bayamayo Capital Markets.

Keith Frances Bachman: Perfect. Thank you guys.

Keith Frances Bachman: Thanks, Alex.

Operator: The next question comes from Keith Bachman from BMO capital markets. Please go ahead.

Operator: Yes, many thanks for taking the call. Joe, I think this is for you as well.

Keith Frances Bachman: Yes, many thanks for taking the call Joe I think this is for you as well, but I wanted to talk about data center growth. So the guidance that you've given for.

Joe Binz: But I wanted to talk about data center growth. So the guidance that you've given for Q4 of calling it 40 to 42 with 15 points of help, even that amount of help, would have been significantly stronger than I would have anticipated. And so if we look out over the horizon, are there any puts and takes that you can give us on how to construct or think about data center growth, specifically, and just to even take a step back?

Joe Binz: For Q4 of call it 40% to 42 with.

Joe Binz: <unk> 15 points of help even net of health.

Joe Binz: Kenley stronger than I would've anticipated and so if we look out over the horizon is there any puts and takes that you can give us on how to construct or think about data center growth.

Joe Binz: Typically.

Joe Binz: And just to even take a step back.

Joe Binz: As we look at Analyst Day next week, or the analyst event, I should say, at your event, which I'm very much looking forward to, will management provide some longer-term model frameworks, either the top line or margin construct? Thanks very much.

Joe Binz: As we look at analyst day next week or the analyst event I should say at your event, which very much looking forward to Wil will management provide some longer term model frameworks, either the top line or margin construct thanks very much.

Joe Binz: Yeah, great questions, Keith, thanks. Let me start with the data center question and frame it in terms of long-term growth drivers for that model. We expect data center growth rates will decelerate through FY25, just given the migration dynamics into and out of data centers and the challenging comparables we're gonna have to FY24. To the question earlier, we're not gonna have another server end of support moment in FY25. Having said that, in FY24, data center revenue growth benefited from migration flows from server, net to headwind from data center migrations to cloud.

Speaker Change: Yeah, great questions. Keith Thanks, Let me start with the data center question and frame. It in terms of long term growth drivers on that model. We expect data center growth rates will decelerate through FY 'twenty five just given the migration dynamics into and out of data center and the challenging comparables are going to have the FY 'twenty floor to the question earlier, we're not going to have another server and to support.

Joe Binz: Moments in FY 'twenty five.

Joe Binz: Having said that in FY 'twenty four data center revenue growth benefited from migration flows from server net the headwind from data center migrations to cloud and with server end of support we do expect that benefit to wane over the course of the next year to 18 months given limited if any new migrations from unsupported server customers and accelerating data center migrations from cloud.

Joe Binz: And with server end of support, we do expect that benefit to wane over the course of the next year to 18 months, given limited, if any, new migrations from unsupported server customers and accelerating data center migrations from the cloud. We should see a much more pronounced decrease in that benefit in H2-FY25 and into FY26 as we lap the strong migrations from servers in this quarter, at which point we'll likely have a net headwind to data center revenue growth driven by migration to the cloud. So that's sort of the migration stories.

Joe Binz: We should see a much more pronounced decrease in that benefit in <unk> FY 'twenty five and into FY 'twenty six as we lap the strong migrations from server and this quarter at which point, we'll likely have a net headwind the datacenter revenue growth driven by regulation for cloud. So that's sort of the migration stories I think it's also important to keep in mind as you think about long term data center growth rates, our customer base here is predominantly.

Joe Binz: I think it's also important to keep in mind as you think about long-term data center growth rates. Our customer base here is predominantly enterprise, with very high renewal rates, and price increases and expansion are the other key drivers beyond those migration dynamics. And we do expect those three main healthy contributors to growth going forward. In terms of Analyst Day, you know, I appreciate the interest in that. I'm really looking forward to seeing you and many of your colleagues next week.

Joe Binz: Enterprise with very high renewal rates and price increases and expansion are the other key drivers beyond those.

Joe Binz: But the dynamics and we do expect those to remain healthy contributors to growth going forward.

Speaker Change: In terms of analyst day I appreciate the interest and that really looking forward to seeing you and many of your colleagues next week I'm not going to share a whole lot today other than to say, we plan to share our optimism around the long term opportunities. We have how we think about the drivers of durable growth and the key areas of investment, we'll be making that will enable us to deliver on that and I'll share. The rest next week when we can.

Joe Binz: I'm not going to share a whole lot today other than to say we plan to share our optimism around the long-term opportunities we have, how we think about the drivers of durable growth, and the key areas of investment we'll be making that will enable us to deliver on that. And I'll share the rest next week when we get together.

Joe Binz: Together.

Operator: All right. Many thanks. I look forward to it.

Speaker Change: Alright, Thanks, I look forward to it.

Operator: The next question comes from Brent Thill, Jeffries.

Operator: The next question comes from Brent Thill Jefferies. Please go ahead Brent.

Joe Binz: Thanks, Joe. I think many in the buy side are still hung up on why cloud isn't growing faster right now, and I know you're expecting it to accelerate going forward. But what do I mean? When you think about the differential of kind of the expectation versus what you're seeing, what has been holding cloud back as much? Is it just DC was easier to make the migration? Is there something else that's going on?

Speaker Change: Thanks, Joe I think many of the buy side are still hung up on why cloud is growing faster right now and I know youre expecting it to accelerate.

Joe Binz: Going forward that.

Joe Binz: What does.

Joe Binz: I mean, when you think about the differential of kind of the expectation versus what youre seeing what has been holding cloud back as much as it just DC was easier to make the migration is there something else thats going on because I think most felt like this would would actually move a little faster than we know it's going to accelerate going forward for your guide.

Joe Binz: Because I think most felt like this would actually move a little faster, and we know it's going to accelerate going forward, per your guide. But just curious to get your thoughts and what you think is maybe restraining some of the growth or maybe our expectations are just too big.

Joe Binz: Just curious to get your thoughts.

Joe Binz: What you think is maybe can restrain some of the growth or maybe our expectations are just too big.

Joe Binz: Yeah, with respect to the server end-of-support, Brent, you'll recall that we did talk about the fact that, you know, of the server customers that were there at end-of-support, we expected the vast majority, if not all of those customers, to migrate to data centers, right? Because those are large customers with very complex environments, and it's a much easier migration path to data center than cloud, and most of those customers need a little more time.

Joe Binz: With respect to the server and to support branch, you'll recall that we did talk about the fact that of the.

Joe Binz: The server customers that were there at end of support we expected.

Joe Binz: The vast majority if not all of those customers to migrate to data center right. Because those are large customers with very complex environments, and it's a much easier migration path to data centers and cloud and most of those customers need a little more time, so I would say migrations as part of the model has performed in line or better than what we expected all year and it's held up really well stepping back.

Joe Binz: So, I would say migrations, as part of the model, have performed in line or better than what we expected all year, and it's held up really well. Stepping back at the overall cloud business, I think the main pain point has been around paid seat expansion weakness. Everything else in the model has performed in line with what we expected entering the year and continues to hold up really well in what has been a really mixed, if not difficult, macroeconomic environment.

Joe Binz: At the overall cloud business I think the main pain point has been around paid seat expansion weakness everything else in the model has performed in line with what we expected entering the year and continues to hold up really well.

Joe Binz: There's been a really mixed if not difficult macroeconomic environment.

Joe Binz: In terms of paid seat expansion our rate of paid seat expansion in the quarter overall remained below prior year levels as I mentioned earlier, but I talked about the fact that trend quarter to quarter is is improving.

Joe Binz: Beginning to moderate some from prior quarters.

Joe Binz: In terms of paid seed expansion, our rate of paid seed expansion in the quarter overall remained below prior year levels, as I mentioned earlier, but I talked about the fact that the trend from quarter to quarter is improving and beginning to moderate from prior quarters. Within that trend, seed expansion rates in SMB continue to be particularly challenged, and so that's been, if you want to center the pain point there and the expectation delta, that could be an aspect of it.

Joe Binz: Within that trend seat expansion rates in SMB continued to be particularly challenged and so that's been if you wanted to center the pinpoint there and the expectation delta that could be an aspect of it our enterprise rates remained very stable and so we continue to believe a big driver of this trend is macro.

Joe Binz: As customers tightly managed head count growth in costs, and where we see SMB more impacted broadly speaking that enterprise. So.

Joe Binz: Our enterprise rates remain very stable, and so we continue to believe a big driver of this trend is macro, as customers tightly manage headcount, growth, and costs, and where we see SMBs more impacted, broadly speaking, than enterprises. So, from our perspective, that's been the primary pain point and the headwind on the business from a cloud perspective. The remaining drivers, whether it's migration or cross-sell or upsell to premium additions, even new customers are coming back in line. All of those aspects continue to perform well and in line with our expectations. So, from our perspective, that's been the biggest expectation delta.

Joe Binz: From our perspective, that's been the primary pain point and the headwind on the business from a cloud perspective, the remaining drivers whether its migration or cross sell or up sell to premium editions, even new customers are coming back in line all of those aspects continue to perform well and in line with our expectations. So.

Joe Binz: That's from our perspective, that's been the biggest expectation delta.

Speaker Change: Great. Thank you.

Joe Binz: The next.

Joe Binz: Our next question comes from Nick <unk> from Scotia Bank. Please go ahead.

Speaker Change: Awesome. Thanks, guys.

Speaker Change: Wanted to build on the last question a little bit but just in your prepared remarks, you guys talked about how the opportunity around cloud today is much larger versus your initial expectations and I was just wondering if you guys could unpack that a bit.

Operator: Your next question comes from Nick Altman from Scotiabank. Please go ahead.

Joe Binz: You guys talked about <unk>.

Nicholas William Altmann: <unk> counts on cloud are higher.

Operator: Awesome. Thanks, guys.

Nicholas William Altmann: Churn sort of was above expectations, but maybe just talk about why you see the opportunity more significant today than you did several years ago, what's sort of driving that heightened optimism and just any other color you can provide around what you guys are seeing with your current cloud customers, that's driving the upside versus sort of your initial expectations.

Scott Farquhar: I wanted to build on the last question a little bit. But just in your prepared remarks, you guys talked about how the opportunity around the cloud today is much larger versus your initial expectations. And I was just wondering if you guys could impact that a bit. I mean, you guys talked about, you know, seat counts on cloud are higher, and churn sort of was above expectations. But maybe just talk about, you know, why you see the opportunity more significantly today than you did several years ago. What's sort of driving that heightened optimism, and just any other color you can provide around what you guys are seeing with your current cloud customers that's driving the upside versus sort of your initial expectations. Thanks.

Scott Farquhar: Thanks.

Scott Farquhar: Thanks, Nick its Scott here.

Scott Farquhar: A couple of reasons, one is which.

Scott Farquhar: Titan migration ethics, first which is that migration models everything has performed as expected in terms of how many people we expected to migrate from server to cloud.

Scott Farquhar: Yes.

Scott Farquhar: Thanks, Nick. It's Scott here. We have a couple of reasons. One is, let's just take the migration aspect first, which is that in our migration models, everything was performed as expected, in terms of how many people we expected to migrate from server to cloud. What we've come to is that fewer people turned out.

Scott Farquhar: I think as pointed to the stickiness of our overall offering to our customers. These are the times when you would expect competitors or alternatives to be research out there in the market and we haven't seen that we've seen people really sticky and double down on investments in our <unk> products and so.

Scott Farquhar: And I think it points to the stickiness of our overall offering to our customers. You know, these are the times when you would expect competitors or alternatives to be researched out there in the market. And we haven't seen that.

Scott Farquhar: Demand out of made the first step to cloud.

Scott Farquhar: Data center, but.

Scott Farquhar: But I can tell you with every one of those customers I speak too large or small cloud use in the future.

Scott Farquhar: It's really even ex feature from us or they want a particular data residency or a particular compliance that we're already working on all of that just got a project and finally, because theyre trying to schedule when they want to get the migration done so.

Scott Farquhar: We've seen people really stick with and double down on investments in Atlassian's products. Or they've just got a project internally that they're trying to schedule when they want to get the migration done. And so I have a huge kind of excitement around what the health of migration is purely on migration. If we take then just the market size and opportunity, we can share some next week around that, but I'm super excited by what that shows, bottoms up, about just the opportunity inside our customer base.

Scott Farquhar: I have a huge.

Scott Farquhar: Uh huh.

Scott Farquhar: Kind of excitement around what that what that ultra is joanne migrations.

Scott Farquhar: We take then the just the market size and opportunity.

Scott Farquhar: Awesome.

Scott Farquhar: Yes.

Scott Farquhar: Next week around around that thoughts on I'm Super excited by what that Shadow is bottoms up.

Scott Farquhar: The opportunity inside our customer base.

Scott Farquhar: And that is getting larger for a couple of reasons. One is that we've got new products in the commodity market. Our point A products are gaining real customer usage and are early in their revenue usage, but they're growing pretty fast. And we know that those new products can then be sold across our entire customer base. Two is the consolidation motion we are seeing across the industry. In times like this, our customers are looking to deal with fewer vendors, and they are looking for a single system of work across their entire organization to make sure that work can move across, you know, every department.

Scott Farquhar: And that is getting larger for a couple of reasons wanted to use that we've got new products that are coming to market I'll point out products that are gaining real customer usage.

Scott Farquhar: Revenue you see that growing pretty fast and we noted that those new products command you saw it across our entire customer base.

Scott Farquhar: Is the consolidation motion.

Scott Farquhar: We would see across the industry in times like this our customers are working to deal with less vendors and they are looking for a single system of work across their entire organization to make sure the work and moved across.

Scott Farquhar: Every department and so we are seeing competitive switch outs.

Scott Farquhar: And so we are seeing competitive switch-outs of, you know, the products to consolidate on Atlassian, and so that is really exciting. And lastly, with AI and what we can do there, it does a couple of things. One is I firmly believe that more software is going to get built on the far side of this, and so the market for people who want to use our tools and products and so forth to broadly help build software is going to increase.

Scott Farquhar: <unk>.

Scott Farquhar: To consolidate on last year.

Scott Farquhar: That is really exciting.

Scott Farquhar: Lastly, with II and what we can do there. It does a couple of things one is I firmly believe that most software is going to get built on the fast side of eastern side of the market that people want to use our tools and products and so forth to broadly bill.

Scott Farquhar: Built software is going to increase.

Scott Farquhar: And the ROI or the dollars you can charge for our customers over time is changing, whether that's usage-based or some other business model, but we're now providing so much more value for our customers than we were before the AI revolution came in the last year and a half, that our opportunities there are a lot. So I can go on and on. I don't know if Michael or Joe want to add anything to that answer. Yeah, the only thing I would add is

Scott Farquhar: And the Royal.

Michael: You can charge.

Michael: For our customers over time due to changing whether that's usage based or some other business model, but we are now providing solid much more value for our customers.

Michael: For the II.

Michael: Revolution kind of over the last year and a half.

Michael: That's our opportunity there are a lot.

Speaker Change: I could go on and on.

Speaker Change: Michael or Joe want to add and it seems about right.

Scott Farquhar: Yeah, the only thing I would add, Scott covered all the basics, and obviously, we're incredibly bullish about AI. We've got some exciting stuff coming up next week, and we hope to see you all there at Team24. The Atlassian platform is probably one of the areas that I always think is underestimated in terms of durable growth and in terms of long-term advantage.

Michael: Yes, the only thing I would add.

Scott Farquhar: Scott could cover all the basics. So obviously, we're incredibly bullish about AI got some exciting stuff coming up next week, we'll have to see where they're at 10 24.

Scott Farquhar: The Atlassian platform, it's probably one of the areas that I always think is underestimated and in terms of durable growth and in terms of long term advantage.

Scott Farquhar: Again, Atlassian is a company that thinks very long term and very strategically and thoughtfully, you know, as we go through equinox and solstice and equinox and solstice and equinox and solstice. The world goes around and around, and we try to think about that across more than just a singular quarter. In terms of engineering, you see, we have significant R&D investments, right? That is a part of how we think about the world.

Scott Farquhar: Brian again, Atlassian is a company that thinks very long term and very strategically and thoughtfully.

Scott Farquhar: As we go through equinox, and solstice, and equinox, and solstice and equinox and solstice the world goes around and around and we try to think about that across more than just a singular quarter.

Scott Farquhar: In terms of engineering <unk> say.

Scott Farquhar: We have significant R&D investments right that is a part of how we think about the world and in the cloud a large amount of that goes into the Atlassian platform.

Scott Farquhar: And in the cloud, a large amount of that goes into the Atlassian platform. Building out the platform to scale across our products is a unique competitive advantage. It is increasingly resonant with customers as a differentiator and as a moat that allows them to choose multiple products, allows them to adopt our products more seamlessly, more quickly, get automation across those products, get analytics across those products, and build out the teamwork graph that underpins a lot of our Atlassian intelligence and other future capabilities.

Scott Farquhar: Building out the platform to scale across our products is a unique competitive advantage. It is increasingly resonate with customers as a differentiator and is a moat that allows them to choose multiple products allows them to adopt our products more seamlessly more quickly to get automation across those products.

Scott Farquhar: Get analytics across those products and build out build out the team work graph that underpins a lot of our Alaska intelligence.

Scott Farquhar: And other.

Scott Farquhar: That is a super unique advantage that comes only from our large R&D investments and our long-term thinking and our ability to, in a capital-efficient way, fund that build-out over a many, many-year period, and it will continue to be so over the future. Awesome. Thanks, guys.

Scott Farquhar: Future capabilities that is a super unique advantage that comes only from a large R&D investments and our long term thinking and our ability to.

Scott Farquhar: On a capital efficient way fund that buildout over over a many many year period and it will continue to be so over over the future periods.

Speaker Change: Awesome. Thanks, guys.

Operator: Your next question comes from Kasthuri Rangan from Goldman Sachs. Please go ahead.

Scott Farquhar: Your next question comes from Kash Rangan from Goldman Sachs. Please go ahead.

Operator: Sure.

Operator: Apologies. Yes, I was toggling between one call and the other. Thank you so much for your time here. My question is, it looks like, given the continued strength of the data center product, this is going to be here to stay for quite a while. So I'm curious, when you look at the product roadmap ahead, how much of an emphasis is being placed on the development side of the cloud, particularly with respect to functionality.

Kasthuri Gopalan Rangan: Absolutely yes.

Kasthuri Gopalan Rangan: Yes, toggling from one car to the other thank you so much for the time here.

Operator: My question is it looks like given the continued strength in the datacenter product. This is going to be here to stay for quite a while so I'm curious when you look at the product roadmap roadmap ahead, how much of an emphasis is being placed on the development side on the cloud, but particularly with respect to the.

Operator: And when are we going to start to see a divergence by design, by intention, between the cloud and the surviving entity? And what new incentives are we going to see in the fiscal years ahead? And also, migrations; are we going to make those migrations easier going forward? Thank you so much. I appreciate it.

Operator: And when are we going to start to see a divergence by design by intention.

Operator: We in the cloud and the surviving entity.

Operator: What.

Operator: New incentives or are we going to see in the fiscal years ahead and also migrations how are we going to make those migrations easier going forward. Thank you. So much appreciate it.

Scott Farquhar: Sure, Cash. Look, I would say from our customer's point of view, it's well understood that the cloud is our future, and our customers know that. As Scott mentioned earlier, you know, five years ago, you had a lot of customers that said, I'm not going to the cloud. Now, it is a when, not an if, right?

Speaker Change: Sure Kash I can I can take that look.

Scott Farquhar: I would say from a customer's point of view.

Scott Farquhar: It's well understood that the cloud is our future and our customers know that.

Scott Farquhar: As Scott mentioned earlier five years ago, you had a lot of customers that said I'm not going to the cloud.

Scott Farquhar: Now it is a when not an if but I do not run into customers, who say they will not go to the cloud I run into customers, who say we can't go now because of this reason or that reason either internal reasons or a lesson related reasons.

Scott Farquhar: I do not run into customers who say they will not go to the cloud. I run into customers who say they can't go now because of this reason or that reason, either internal reasons or Atlassian-related reasons. The divergence of features, to some extent, has already happened because of the nature of the cloud, so you need to look no further than Atlassian Intelligence.

Scott Farquhar: The divergence of features to some extent has already happened.

Scott Farquhar: Because of the nature of the cloud so you need to look no further than Atlassian intelligence.

Scott Farquhar: Right, AI and LLM driven features with large-scale foundational models, requiring the teamwork graph and the Atlassian cloud platform, is not something that we can bring to a data center customer, and they understand that it's a completely logical reason and hence an extra reason or incentive for them to migrate. Now we are continually building hybrid supporting features in things like our migration tooling and in other areas as those customers move parts of their workload to the cloud, if you think about it that way.

Scott Farquhar: Right.

Scott Farquhar: LLM driven features with large scale financial models.

Scott Farquhar: Requiring kmart graph and the Atlassian cloud platform is not something that we can bring to a data center customer and they understand that if it completely logical reason and hence.

Scott Farquhar: An extra reason or incentive for them to migrate.

Scott Farquhar: Now we are building continually.

Scott Farquhar: Hybrid supporting features and things like our migration tooling and in other areas as those customers move parts of their workload to the cloud if you think about it that way.

Scott Farquhar: And that is helpful to those customers over time. Beyond that, we do continue to invest in the capabilities of data centers for those customers, right, in terms of security, in terms of their scale and compliance, and in terms of features where we can take certain features, which makes sense to build in data centers and in the cloud simultaneously. So I think the customers understand that. In terms of additional incentives for DC customers to move from a financial and other point of view, we continue to work with our customers and our partners as to the best way to do that. Often, it's not financially driven, right? It can be as much about compliance and data residency and FedRAMP and enterprise scale and all the things that we are continuing to work on with those customers.

Scott Farquhar: That is helpful to those customers over time.

Scott Farquhar: Beyond that we do continue to invest in that.

Scott Farquhar: The capabilities of data centers for those customers, Brian in terms of security in terms of their scale and compliance and in terms of features where we can take.

Scott Farquhar: Take certain features which makes sense to build it and data center and in the cloud simultaneously.

Scott Farquhar: So I think the customers understand that in terms of additional incentives for DC customers to move from a financial and other point of view, we continue to work with our customers and our partners as to the best way to do that often it's not financially driven it can be as much about compliance and data residency.

Scott Farquhar: And fed ramp at enterprise scale and all the things that we are continuing to work on with those customers.

Scott Farquhar: Your next question comes from Fatima Boolani from Citi. Please go ahead. Good afternoon. Thank you for taking my questions. And Scott, congratulations to you for an absolutely legendary run.

Scott Farquhar: Okay.

Fatima Aslam Boolani: Your next question comes from <unk> <unk> from Citi.

Fatima Aslam Boolani: Go ahead.

Fatima Aslam Boolani: Good afternoon. Thank you for taking my questions and Scott Congratulations Keith perhaps legendary Ron.

Operator: Just on the point of carrots or incentives for your existing data center customers to move to the cloud, I wanted to ask you the question in a different way. You all have made substantial progress in solving for data residency demands and other compliance and security blockers for some of your most regulated and complex customers. So I'm curious, what is left to address or alleviate from a quote unquote, cloud blockers standpoint?

Fatima Aslam Boolani: Just wanted to point that.

Fatima Aslam Boolani: In the current soybean from Dan score.

Operator: Thank you and our customers can move to the cloud I wanted to ask you the question differently.

Operator: No.

Operator: Tangible progress in solving important data resident demand.

Operator: Security blockers firsthand with your administering generated.

Operator: So I'm curious what is the watch to address or alleviate from the quote unquote founded blockers standpoint.

Operator: And what type of investment should we expect that will entail in the medium term? And the reason I ask this is because the expectation is that your data center migrations to the cloud are going to accelerate, presumably most of those blockers have been removed. I would just love a little bit more color on that front. Thank you.

Operator: What type of investments should we expect that will entail.

Operator: Medium term and the reason I ask this is because the expectation that you were at data center migration to the cloud organ accelerating presumably most of those blockers.

Operator: With just a little bit more color on that thank you.

Scott Farquhar: Sure, Fatima, I can take some part of that. Look, I think... At the highest level, it's a pretty big testament to our enterprise maturity that three-quarters of our enterprise customers in regulated industries have a cloud footprint today. So, you talked about our achievements, and thank you for noticing that, by the way, that's... That's very gratifying. We have been working incredibly hard on those areas, and it is responding with customers, and that's an important place to start.

Scott Farquhar: Sure Timna I can take some part of that look I think.

Scott Farquhar: At the highest level, it's a pretty big Testament to our enterprise maturity that three quarters of our enterprise customers in regulated industries have a cloud footprint today.

Scott Farquhar: So you talked about our achievements and thank you for noticing that by the way that's.

Scott Farquhar: That's very gratifying, we have been working incredibly hard on those areas and it is resonating with customers and that's an important place to two.

Scott Farquhar: Second, I would say these customers, you know, we call them our largest, most complex, most enmeshed customers. That is one of the things that just takes time for them to move. Like, for a lot of these customers, it is a three, five-year roadmap they're running in these large, complex IT organizations. That's not about, I think you refer to them as cloud blockers.

Scott Farquhar: To start.

Scott Farquhar: Second I would say these customers we call them, our largest most complex most enmeshed customers.

Scott Farquhar: That is one of the things that just takes time for them to move for a lot of these customers. It is a three five year roadmap theyre running in these large complex organizations. That's not about I think you refer to them as cloud blockers that is just about that company, saying, yes, I get it I have these projects going on it's going to take me a year two years three years I'm going to move this piece.

Scott Farquhar: That is just about that company saying, "Yep, I get it. I have these projects going on. It's going to take me a year, two years, three years. I'm going to move this piece first, then this piece second."

Scott Farquhar: First in SP.

Scott Farquhar: Some of that's a natural progression pace of those customers. There are certainly things we can do, improving migration tooling and lots of other things that we are working on, but some part of the pace is in terms of the customers. There's no doubt we will continue to work on governance. As we mentioned, we're in the process with FedRAMP Moderate, and we continue to work on things like that for governmental customers. We have more data residency regions we'd love to roll out to, for sure. There is always more performance and scale that we can eke out for our largest customers. There are a lot of things that we have to continue to work on.

Scott Farquhar: Some of that is a natural progression pace of those customers. There are certainly things, we can do improving migration tooling and lots of other things that we're working on but some part of the paces were in terms of the customers.

Scott Farquhar: And there is no doubt we will continue to work on.

Scott Farquhar: Governance as we mentioned we're in process with fed ramp moderate and we continue to work on things like that for governmental customers.

Scott Farquhar: More data residency regions, we would love to roll two for sure.

Scott Farquhar: There is always more performance and scale that we can account for our largest customers.

Scott Farquhar: So there are a lot of.

Scott Farquhar: Things that we have to continue to work on.

Scott Farquhar: In the app and extensibility area, we continue to ship improvements every single quarter. The other thing is building customer trust. We see our relationship with customers, especially in subscription environments like data center and cloud, as about demonstrating continued trust over time. They are subscribing to get our future offerings. We can see that in the last two quarters, we've hit 100% of our cloud roadmap in terms of delivery.

Scott Farquhar: In the App and extensibility area, we continue to ship improvements every single quarter.

Scott Farquhar: Now the other thing is building customer trust.

Scott Farquhar: We see our.

Scott Farquhar: Our relationship with our customers, especially in the subscription environments like data center and cloud as about demonstrating continued trust over time, they are subscribing to get our future offerings.

Scott Farquhar: We can see that in the last two quarters, we've had 100% of our cloud roadmap in R&D in terms of delivery. So when these customers are making a multiyear or even decade long commitment to atlassian as a partner they want to say that we're going to deliver on the things that we tell them, we're going to deliver on which is certainly what we've done over the last period of time.

Scott Farquhar: So when these customers are making a multi-year or even decade-long commitment to Atlassian as a partner, they want to see that we're going to deliver on the things that we tell them we're going to deliver on, which is certainly what we've done over the last period of time. That said, in having customer conversations, they acknowledge, they are clear, and they see that we are continuing to remove the, as you call them, cloud blockers over time. So that trust is going to go up when you talk to customers. They are seeing our progress just as you are.

Scott Farquhar: That said.

Scott Farquhar: Having customer conversations they acknowledge they are clear and they see that we are continuing to remove the as you call them cloud blockers overtime. So that trust is going up when you talk to customers. They are seeing our progress just as you are so.

Operator: Gary, thank you so much. Your next question comes from Arjun Bhatia from William Blair. Please go ahead.

Speaker Change: I hope that's helpful.

Arjun Rohit Bhatia: Gary Thank you very much.

Operator: Your next question comes from Arjun Bhatia from William Blair. Please go ahead.

Operator: Perfect. Thank you.

Operator: Yes.

Arjun Rohit Bhatia: Perfect. Thank you maybe one for.

Scott Farquhar: Maybe one for Mike or Scott, I just wanted to touch on the AI landscape, but maybe more from the sense of what it means for the role of the developer, right? We're hearing a lot more about text-to-code capabilities and how that's automating a lot of the workflow. For the developer role, and you have companies popping up that are addressing this, and startups that are doing this more and more. But from your perspective, how do you see the role of the developer changing? And maybe, from an Atlassian perspective? What does it mean about how JIRA might need to change or evolve to manage the agile process overall?

Scott Farquhar: Mike or Scott.

Scott Farquhar: I just wanted to touch on the AI landscape, but maybe more from the Samsung.

Scott Farquhar: What it means for the role of the developer right. We're hearing a lot more about <unk> capabilities and how that's automating a lot of the workflow.

Scott Farquhar: For the developer role and you have companies popping up that are addressing this startups that are gaining more and more.

Scott Farquhar: From your perspective, how do you see the role of the developer changing and maybe what does it mean for from an Atlassian perspective, what does it mean about how <unk> might need to change or evolve to manage the the agile process overall.

Scott Farquhar: Yeah, thanks, Matt. I can certainly take that one.

Speaker Change: Yes, Thanks, Matt I can I can certainly take that one.

Scott Farquhar: Lots of thoughts here. Firstly, AI is awesome for software development in the broadest sense. Right, large language models, their ability to generate code, and their ability to understand code, which is arguably more important, is phenomenal for the world. We take the position that the world has a supply constraint in the number of engineers, not a demand constraint in the amount of ideas we have for software that we would like to be built. What AI does is loosens that supply constraint so we're not going to hit the demand ceiling.

Speaker Change: Lots of thoughts here firstly.

Scott Farquhar: AI is awesome for software development in the broadest sense Brian.

Scott Farquhar: Brian lost language models, our ability to generate code their ability to understand code, which is arguably more important.

Scott Farquhar: Is phenomenal for the world.

Scott Farquhar: It.

Scott Farquhar: We take the position that the world has a supply constraint in the number of engine is not a demand constraint and the amount of ideas. We have for software that we would like it to be built with.

Scott Farquhar: What AI does is loosens that supply constraint, we're not going to hit demand ceiling.

Scott Farquhar: So people will be able to do more with the number of engineers that they have. That is good for us for a number of reasons. Firstly, most developer time is not spent on coding. It's spent on coordination activities, it's spent on how developers work with product managers and marketing teams and service teams, how they support and operate the software and services that they've built, rather than just the sort of classical view of coding a piece of software and then delivering it. That is a collaboration activity; that is a difficult, hard problem that we have spent 20 plus years working on and I suspect will spend most of the next 20 years continuing to work on.

Scott Farquhar: So.

Scott Farquhar: People will be able to do more with the number of engineers that they have.

Scott Farquhar: That is good for us for a number of reasons. Firstly most developer time is not spent on coding. It spent on coordination activities. It's spent on how developers work with product managers and marketing teams and service teams have a support and operate the software and services that they built rather than just the sort of classical view of coding a piece.

Scott Farquhar: The software and then delivering it.

Scott Farquhar: That is a collaboration activity that is a difficult hard problem that we spent 20 plus he is working on and I suspect to spend most of the next 20 years continuing to work on.

Scott Farquhar: Secondly, AI, we believe, will generate far more software. Far more services, apps, and tools, and that is a great thing for us, especially for things like Compass, which are about managing developer experience, managing your software sprawl, again, responding extremely well with customers only a few months into GA, but already taking off on a pretty strong growth path and well ahead of our expectations. Compass and AI is a great thing to have more software.

Scott Farquhar: Secondly, AI, we believe will generate far more software.

Scott Farquhar: Far more services and apps and tools and that is a great thing for us, especially for things like compass, which are about managing developer experience managing your software sprawl.

Scott Farquhar: Again, resonating extremely well with customers only a few months into Gi, but obviously, but already taking off on.

Scott Farquhar: Pretty strong growth path and well ahead of our expectations. So.

Scott Farquhar: Compass NII is a great thing that have more software and.

Scott Farquhar: And thirdly and lastly, the ability of AI to allow non-developers to quote unquote, write code in some sort of a form, to be able to do more programmatic capabilities is quite fantastic. You can see this in Atlassian Analytics, where the ability to use natural language to turn it into SQL and then charts and dashboards. It's kind of a developer-like activity, but it allows a democratization of the ability to get to that analytics to get to your data to understand it.

Scott Farquhar: And thirdly and lastly.

Scott Farquhar: The ability of AI to allow non developers to quote unquote write code in some sort of a form.

Scott Farquhar: To be able to do more programmatic capabilities.

Scott Farquhar: Is quite fantastic you can see this in Atlassian analytics, where the ability to use natural language to tenant a sequel, and then Charleston, Dashboards is kind of a developer launch activity, but allows the democratization of the ability to get to that analytics to get to your data to understand it I think there'll be many many more things like that that allow.

Scott Farquhar: I think there'll be many, many more things like that that allow these AI capabilities to democratize what we used to think of as software development. Maybe that's a way to say it. Scott, I don't know if you have any follow-ons, but

Scott Farquhar: AI capabilities to democratize, what we used to think of our software development, maybe thats the way to say it so.

Scott Farquhar: Scott I don't know if you have any follow ons, but.

Scott Farquhar: I'm just going to bring in the first point of night, which is just that, like, I think for people that don't write software, I think it may not be well known how little time people actually spend on the keyboard writing code. A lot of software is working out the requirements and what success looks like and how do we want to build things and where is the data going to come from. And so you can make huge differences in how much time a developer spends on the keyboard, but percentage-wise, it actually doesn't change their week that much because they spend a lot of their time in JIRA, in confluence, talking to customers, gathering requirements, and when you look at where our products touch our customers, that's a way larger percentage of a customer's week than a software developer's week than writing in an

Scott Farquhar: I just to just to brands.

Scott Farquhar: Knight, which is just that.

Scott Farquhar: I think it is.

Scott Farquhar: <unk> software I think it may be not will not and how little time people actually spend handgun cable Rajiv colored.

Scott Farquhar: I want a software is looking at the requirements and what is success in quark and how do we want to build the data going to come from and.

Scott Farquhar: So you can make huge differences in how much time that develop extensive hands on cable on the percentage wise it actually doesn't change that much because I spend a lot of that volume.

Scott Farquhar: <unk>.

Scott Farquhar: Talking to customers gathering requirements and you look at where our products touch our customers that the white larger percentage of our customers what are you spending.

Scott Farquhar: And so the opportunity for us to save time for these hands-on keyboard software developers. At the end of the day, if you've not spent time coding, why give it a bit of time there? It's a huge difference, and so I just want to echo that because it's not particularly well known if you're not a software developer.

Scott Farquhar: Also for the Gulf with what you're saying.

Scott Farquhar: Rod and unit <unk> sorry the.

Scott Farquhar: For us two cytokine.

Scott Farquhar: All these <unk>.

Scott Farquhar: <unk> cable.

Scott Farquhar: We're developers is a man.

Scott Farquhar: Because like.

Scott Farquhar: So if you kind of.

Scott Farquhar: Yes.

Scott Farquhar: Kind of a guy spent gardening market by the time they are huge.

Operator: Perfect. I appreciate the call. Thank you.

Scott Farquhar: Huge difference you saw them.

Speaker Change: I just wanted to say that because it's not we are not particularly well known.

Scott Farquhar: Thank you, and that concludes our question and answer session. I will now turn the call over to Mike for his closing remarks.

Operator: Awesome.

Mike: Alright, perfect I appreciate the color. Thank you.

Scott Farquhar: Thank you and that concludes our question and answer session I will now turn the call over to Mike for closing remarks.

Scott Farquhar: Thank you everyone for joining our call today. As always, we appreciate your thoughtful questions and continued support. We're incredibly excited for Team 24, our flagship customer conference next week in Las Vegas. We've got some incredible speakers. Fantastic customers and some hopefully mind-blowing announcements that we can't wait to share with you. We'll also be hosting Invest Today at Team24, so we really hope to see you there. And with that, I hope you have a fantastic weekend.

Scott Farquhar: <unk>.

Scott Farquhar: Thank you everyone for joining our call today as always we appreciate your thoughtful questions and continued support.

Scott Farquhar: We're incredibly excited for <unk> 24, a flagship customer conference next week in Las Vegas.

Scott Farquhar: We've got some incredible speakers.

Scott Farquhar: Fantastic customers and some hopefully mindblowing announcements that we can't wait to share with you.

Scott Farquhar: We will also be hosting our investor day at $10 24, So we really hope to see you there.

Scott Farquhar: And with that have.

Scott Farquhar: Fantastic weekend.

Scott Farquhar: Yeah.

Scott Farquhar: Okay.

Scott Farquhar: Yes.

Scott Farquhar: Yeah.