Business Wire | Jan 28, 2021 04:06PM EST

Atlassian Announces Second Quarter Fiscal Year 2021 Results

Jan. 28, 2021

SAN FRANCISCO--(BUSINESS WIRE)--Jan. 28, 2021--Atlassian Corporation Plc (NASDAQ: TEAM), a leading provider of team collaboration and productivity software, today announced financial results for its second quarter of fiscal year 2021 ended December 31, 2020 and released a shareholder letter available on Atlassian's Work Life blog at http://atlassian.com/blog/announcements/shareholder-letter-q2fy21. The shareholder letter will also be posted to the Investor Relations section of Atlassian's website at https://investors.atlassian.com.

"Our Q2 results reflect steady progress towards our long-term goals as we crossed $500 million in quarterly revenue for the first time, up 23% year-over-year, and drove subscription revenue growth of 36% year-over-year," said Scott Farquhar, Atlassian's co-founder and co-CEO. "Total customers rose to 194,000, an increase of over 11,600 during the quarter. This increase is a new record illustrating our progress and commitment to continuous customer innovation in the cloud."

"Through the strength of our cloud platform, we're delivering customers powerful new products like Jira Service Management, which unleashes the potential of technical teams in the ITSM market," said Mike Cannon-Brookes, Atlassian's co-founder and co-CEO. "This is one example of the value we deliver to organizations large and small across the Fortune 500,000 to power their most mission-critical workflows. We're excited to continue that momentum in the second half of fiscal year 2021."

Second Quarter Fiscal Year 2021 Financial Highlights:

On an IFRS basis, Atlassian reported:

* Revenue: Total revenue was $501.4 million for the second quarter of fiscal year 2021, up 23% from $408.7 million for the second quarter of fiscal year 2020. * Operating Income and Operating Margin: Operating income was $27.7 million for the second quarter of fiscal year 2021, compared with operating income of $41.8 million for the second quarter of fiscal year 2020. Operating margin was 6% for the second quarter of fiscal year 2021, compared with 10% for the second quarter of fiscal year 2020. * Net Income (Loss) and Net Income (Loss) Per Diluted Share: Net loss was $621.5 million for the second quarter of fiscal year 2021, compared with net income of $124.1 million for the second quarter of fiscal year 2020. Net loss per diluted share was $2.49 for the second quarter of fiscal year 2021, compared with net income per diluted share of $0.49 for the second quarter of fiscal year 2020. Net loss for the second quarter of fiscal year 2021 included a charge of $539.1 million recorded in "other non-operating income (expense), net," compared with a gain of $106.4 million in the second quarter of fiscal year 2020 relating to Atlassian's exchangeable senior notes and related capped calls. Of this amount, a loss of $440.4 million is related to marking to fair value the exchange feature of these notes and related capped calls, that remain outstanding as of quarter end, and in addition, a net loss of $98.7 million is related to the net impact of repurchasing a portion of the notes and unwinding of the related capped calls during this quarter. Further, Atlassian took an $87.3 million charge related to accelerated amortization of the unamortized notes discount and issuance costs.

* Balance Sheet: Cash and cash equivalents, and short-term investments at the end of the second quarter of fiscal year 2021 totaled $1.8 billion. During the second quarter of fiscal year 2021, the company used $671.5 million in cash to repurchase a portion of its outstanding notes in privately negotiated transactions and received $72.8 million in cash from the unwinding of the related capped calls. The net impact resulted in cash outflows of $598.7 million, which is reflected in cash used in financing activities on our statement of cash flows.

On a non-IFRS basis, Atlassian reported:

* Operating Income and Operating Margin: Operating income was $143.2 million for the second quarter of fiscal year 2021, compared with operating income of $125.4 million for the second quarter of fiscal year 2020. Operating margin was 29% for the second quarter of fiscal year 2021, compared with 31% for the second quarter of fiscal year 2020. * Net Income and Net Income Per Diluted Share: Net income was $95.3 million for the second quarter of fiscal year 2021, compared with net income of $93.9 million for the second quarter of fiscal year 2020. Net income per diluted share was $0.37 for the second quarter for both fiscal year 2021 and 2020. * Free Cash Flow: Cash flow from operations was $200.5 million and free cash flow was $179.8 million for the second quarter of fiscal year 2021. Free cash flow margin for the second quarter of fiscal year 2021 was 36%.

A reconciliation of IFRS to non-IFRS financial measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below, under the heading "About Non-IFRS Financial Measures."

Recent Business Highlights:

* Jira Service Management Launch: In November 2020, Atlassian introduced Jira Service Management, its cloud-based end-to-end IT service management (ITSM) solution. The line between IT and software development is blurring, and Jira is the only solution that brings software and IT operations teams together on a unified platform. Jira Service Management integrates several capabilities into one holistic solution including: service desk; workflow management; incident management; real-time-communications; and asset and configuration management. By serving IT teams, Atlassian more than doubles its addressable opportunity with technical teams from 45 million software team members to 100 million technical workers. * Cloud Customer Migration Announcement: In October 2020, Atlassian took the next step in its multi-year cloud journey by announcing changes to its on-premises offerings. Atlassian announced the end of new server license sales beginning February 2, 2021, and the end of support for all server products as of February 2, 2024. In conjunction with this announcement, Atlassian introduced a robust migration program, including tools, incentives, and customer support. For data center customers, Atlassian announced new capabilities and integrations that make it easier for cloud and data center products to work together. * Sustainability Annual Report and Net-Zero Commitment: In December 2020, Atlassian released its second annual sustainability report, announcing the achievement of operating on 100% renewable energy. Atlassian also made the commitment to achieve net-zero emissions by 2050 in line with the Paris Agreement and the company's commitment to the Business Ambition for 1.5C campaign. These goals have been approved by the Science Based Targets Initiative Steering Committee. * Customer Growth: Atlassian ended its second quarter of fiscal year 2021 with a total customer count, on an active subscription or maintenance agreement basis, of 194,334. Atlassian added a record 11,617 net new customers during the quarter. * Atlassian Team 2021: Atlassian will hold its premier customer event on April 28th and 29th as a virtual conference. Team 2021 is the ultimate digital experience for developers, creators, and innovators of every industry. General information on Team 2021 can be found at https://www.atlassian.com/company/events/team.

Financial Targets:

Atlassian is providing its financial targets for the third quarter of fiscal year 2021. The company's financial targets are as follows:

Third Quarter Fiscal Year 2021:

* Total revenue is expected to be in the range of $475 million to $490 million. * Gross margin is expected to be approximately 82% on an IFRS basis and approximately 84% on a non-IFRS basis. * Operating margin is expected to be approximately (7%) on an IFRS basis and approximately 16% on a non-IFRS basis. * Net loss per diluted share is expected to be in the range of ($0.15) to ($0.14) on an IFRS basis, and net income per diluted share is expected to be in the range of $0.20 to $0.21 on a non-IFRS basis. * Weighted average share count is expected to be in the range of 250 million to 252 million shares when calculating diluted IFRS net loss per share and in the range of 255 million to 257 million shares when calculating diluted non-IFRS net income per share.

For additional commentary regarding financial targets, please see Atlassian's second quarter fiscal year 2021 shareholder letter dated January 28, 2021.

With respect to Atlassian's expectations under "Financial Targets" above, a reconciliation of IFRS to non-IFRS gross margin, operating margin, and net income (loss) per diluted share, has been provided in the financial statement tables included in this press release.

Shareholder Letter and Webcast Details:

A detailed shareholder letter is available on Atlassian's Work Life blog at http://atlassian.com/blog/announcements/shareholder-letter-q2fy21, and the Investor Relations section of Atlassian's website at: https://investors.atlassian.com. Atlassian will host a webcast to answer questions today:

* When: Thursday, January 28, 2021 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). * Webcast: A live webcast of the call can be accessed from the Investor Relations section of Atlassian's website at: https://investors.atlassian.com. Following the call, a replay will be available on the same website. * Audio replay: An audio replay of the call will be available via telephone for seven days, beginning two hours after the call. To listen to the replay in North America, please dial 1-800-585-8367 (access code 6576384). International callers, please dial 1-416-621-4642 (access code 6576384).

Atlassian has used, and will continue to use, its Investor Relations website at https://investors.atlassian.com as a means of making material information public and for complying with its disclosure obligations.

About Atlassian

Atlassian unleashes the potential of every team. Our team collaboration and productivity software helps teams organize, discuss, and complete shared work. Teams at more than 194,000 customers, across large and small organizations - including Bank of America, Redfin, NASA, Verizon, and Dropbox - use Atlassian's project tracking, content creation and sharing, and service management products to work better together and deliver quality results on time. Learn more about our products, including Jira Software, Confluence, Jira Service Management, Trello, Bitbucket, and Jira Align at https://atlassian.com/.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. All statements other than statements of historical fact could be deemed forward looking, including risks and uncertainties related to statements about our products, customers, anticipated growth, go-to-market model, environmental goals, outlook, technology and other key strategic areas, and our financial targets such as revenue, share count, and IFRS and non-IFRS financial measures including gross margin, operating margin, and net income (loss) per diluted share.

We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.

The achievement or success of the matters covered by such forward-looking statements involves 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. Forward-looking statements represent our management's beliefs and assumptions only as of the date such statements are made.

Further information on these and other factors that could affect our financial results is included in filings we make with the Securities and Exchange Commission from time to time, including the section titled "Risk Factors" in our most recent Forms 20-F and 6-K (reporting our quarterly results). These documents are available on the SEC Filings section of the Investor Relations section of our website at: https://investors.atlassian.com/.

About Non-IFRS Financial Measures

Our reported results and financial targets include certain non-IFRS financial measures, including non-IFRS gross profit, non-IFRS operating income, non-IFRS net income, non-IFRS net income per diluted share, and free cash flow. Management believes that the use of these non-IFRS financial measures provides consistency and comparability with our past financial performance, facilitates period-to-period comparisons of our results of operations, and also facilitates comparisons with peer companies, many of which use similar non-IFRS or non-GAAP financial measures to supplement their IFRS or GAAP results. Non-IFRS results are presented for supplemental informational purposes only to aid in understanding our results of operations. The non-IFRS results should not be considered a substitute for financial information presented in accordance with IFRS, and may be different from non-IFRS or non-GAAP measures used by other companies.

Our non-IFRS financial measures include:

* Non-IFRS gross profit. Excludes expenses related to share-based compensation and amortization of acquired intangible assets. * Non-IFRS operating income. Excludes expenses related to share-based compensation and amortization of acquired intangible assets. * Non-IFRS net income and non-IFRS net income per diluted share. Excludes expenses related to share- based compensation, amortization of acquired intangible assets, non-coupon impact related to exchangeable senior notes and capped calls, the related income tax effects on these items, and discrete tax impact resulting from a non-recurring transaction. * Free cash flow. Free cash flow is defined as net cash provided by operating activities less capital expenditures, which consists of purchases of property and equipment, and payments of lease obligations.

Our non-IFRS financial measures reflect adjustments based on the items below:

* Share-based compensation. * Amortization of acquired intangible assets. * Non-coupon impact related to exchangeable senior notes and capped calls: Amortization of notes discount and issuance costs. Mark to fair value of the exchangeable senior notes exchange feature. Mark to fair value of the related capped call transactions. Net loss on settlements of exchangeable senior notes and capped call transactions. * The related income tax effects on these items, and discrete tax impact resulting from a non-recurring transaction. * Purchases of property and equipment and payments of lease obligations.

We exclude expenses related to share-based compensation, amortization of acquired intangible assets, non-coupon impact related to exchangeable senior notes and capped calls, the related income tax effects on these items, and discrete tax impact resulting from a non-recurring transaction from certain of our non-IFRS financial measures as we believe this helps investors understand our operational performance. In addition, share-based compensation expense can be difficult to predict and varies from period to period and company to company due to differing valuation methodologies, subjective assumptions, and the variety of equity instruments, as well as changes in stock price. Management believes that providing non-IFRS financial measures that exclude share-based compensation expense, amortization of acquired intangible assets, non-coupon impact related to exchangeable senior notes and capped calls, the related income tax effects on these items, and discrete tax impact resulting from a non-recurring transaction allow for more meaningful comparisons between our results of operations from period to period.

Management considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening our statement of financial position.

Management uses non-IFRS gross profit, non-IFRS operating income, non-IFRS net income, non-IFRS net income per diluted share, and free cash flow:

* As measures of operating performance, because these financial measures do not include the impact of items not directly resulting from our core operations. * For planning purposes, including the preparation of our annual operating budget. * To allocate resources to enhance the financial performance of our business. * To evaluate the effectiveness of our business strategies. * In communications with our Board of Directors and investors concerning our financial performance.

The tables in this press release titled "Reconciliation of IFRS to Non-IFRS Results" and "Reconciliation of IFRS to Non-IFRS Financial Targets" provide reconciliations of non-IFRS financial measures to the most recent directly comparable financial measures calculated and presented in accordance with IFRS.

We understand that although non-IFRS gross profit, non-IFRS operating income, non-IFRS net income, non-IFRS net income per diluted share, and free cash flow are frequently used by investors and securities analysts in their evaluation of companies, these measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results of operations as reported under IFRS.

Atlassian Corporation Plc

Consolidated Statements of Operations

(U.S. $ and shares in thousands, except per share data)

(unaudited)

Three Months Ended Six Months Ended December December 31, 31,

2020 2019 2020 2019

Revenues:

Subscription $ 310,675 $ 228,684 $ 588,639 $ 429,779

Maintenance 131,276 116,877 258,970 226,948

Perpetual license 22,124 29,051 44,261 53,795

Other 37,284 34,113 68,995 61,593

Total revenues 501,359 408,725 960,865 772,115

Cost of revenues (1) 79,482 65,761 153,166 128,040 (2)

Gross profit 421,877 342,964 807,699 644,075

Operating expenses:

Research and 241,064 172,420 473,299 348,302 development (1) (2)

Marketing and sales (1) 77,151 69,263 147,437 137,306 (2)

General and 75,949 59,440 147,318 121,181 administrative (1)

Total operating 394,164 301,123 768,054 606,789 expenses

Operating income 27,713 41,841 39,645 37,286

Other non-operating (545,749 ) 104,214 (572,020 ) 186,449 income (expense), net

Finance income 2,112 8,100 4,702 17,212

Finance costs (91,448 ) (12,364 ) (104,023 ) (24,691 )

Income (loss) before (607,372 ) 141,791 (631,696 ) 216,256 income tax expense

Income tax expense (14,156 ) (17,717 ) (11,386 ) (22,862 )

Net income (loss) $ (621,528 ) $ 124,074 $ (643,082 ) $ 193,394

Net income (loss) pershare attributable to ordinary shareholders:

Basic $ (2.49 ) $ 0.51 $ (2.59 ) $ 0.79

Diluted $ (2.49 ) $ 0.49 $ (2.59 ) $ 0.77

Weighted-average sharesoutstanding used tocompute net income (loss) per shareattributable toordinary shareholders:

Basic 249,188 244,203 248,601 243,497

Diluted 249,188 250,960 248,601 250,950

(1) Amounts includeshare-based paymentexpense, as follows:

Three Months Ended Six Months Ended December December 31, 31,

2020 2019 2020 2019

Cost of revenues $ 6,801 $ 4,407 $ 12,057 $ 9,119

Research and 73,085 45,978 134,536 94,917 development

Marketing and sales 11,666 10,874 18,450 21,505

General and 16,140 9,179 28,380 22,193 administrative

(2) Amounts includeamortization ofacquired intangibleassets, as follows:

Three Months Ended Six Months Ended December December 31, 31,

2020 2019 2020 2019

Cost of revenues $ 5,413 $ 9,173 $ 10,832 $ 17,661

Research and 42 42 83 83 development

Marketing and sales 2,317 3,925 4,616 7,611

Atlassian Corporation Plc

Consolidated Statements of Financial Position

(U.S. $ in thousands)

December 31, 2020 June 30, 2020

(unaudited)

Assets

Current assets:

Cash and cash equivalents $ 1,251,715 $ 1,479,969

Short-term investments 534,498 676,072

Trade receivables 157,543 112,019

Tax receivables 2,582 1,509

Derivative assets 263,622 327,487

Prepaid expenses and other current assets 54,653 46,730

Total current assets 2,264,613 2,643,786

Non-current assets:

Property and equipment, net 103,861 97,648

Deferred tax assets 50,024 35,351

Goodwill 686,858 645,140

Intangible assets, net 123,759 129,690

Right-of-use assets, net 204,004 217,683

Other non-current assets 128,071 124,774

Total non-current assets 1,296,577 1,250,286

Total assets $ 3,561,190 $ 3,894,072

Liabilities

Current liabilities:

Trade and other payables $ 189,345 $ 202,570

Tax liabilities 27,727 19,583

Provisions 22,986 14,291

Deferred revenue 652,330 573,813

Lease obligations 39,297 34,743

Derivative liabilities 1,418,559 1,284,596

Exchangeable senior notes, net 735,660 889,183

Total current liabilities 3,085,904 3,018,779

Non-current liabilities:

Deferred tax liabilities 43,652 31,304

Provisions 10,631 9,493

Deferred revenue 33,951 27,192

Lease obligations 215,566 229,825

Other non-current liabilities 2,346 2,173

Total non-current liabilities 306,146 299,987

Total liabilities 3,392,050 3,318,766

Equity

Share capital 24,963 24,744

Share premium 461,002 459,892

Other capital reserves 1,324,489 1,130,918

Other components of equity 118,160 76,144

Accumulated deficit (1,759,474 ) (1,116,392 )

Total equity 169,140 575,306

Total liabilities and equity $ 3,561,190 $ 3,894,072

Atlassian Corporation Plc

Consolidated Statements of Cash Flows

(U.S. $ in thousands)

(unaudited)

Three Months Ended December 31,

Six Months Ended December 31,

2020

2019

2020

2019

Operating activities

Income (loss) before income tax expense

$

(607,372

)

$

141,791

$

(631,696

)

$

216,256

Adjustments to reconcile income (loss) before income tax expense to net cash provided by operating activities:

Depreciation and amortization

13,807

17,753

27,218

34,410

Depreciation of right-of-use assets

9,378

8,869

18,592

17,227

Loss (gain) on sale of investments, disposal of assets and other

51

(217

)

299

(264

)

Net unrealized loss on investments

750

-

750

-

Interest expense

3,594

3,516

6,996

7,099

Net unrealized foreign currency loss

4,874

3,183

10,441

946

Share-based payment expense

107,692

70,438

193,423

147,734

Net loss (gain) on exchange derivative and capped call transactions

539,102

(106,423

)

566,598

(188,526

)

Amortization of debt discount and issuance cost

87,854

8,848

97,027

17,590

Interest income

(2,112

)

(8,099

)

(4,702

)

(17,211

)

Changes in assets and liabilities:

Trade receivables

(37,145

)

(24,276

)

(45,523

)

(41,113

)

Prepaid expenses and other assets

4,057

2,227

(7,361

)

(6,370

)

Trade and other payables, provisions and other non-current liabilities

32,823

26,320

(14,561

)

(5,509

)

Deferred revenue

61,297

77,223

83,933

108,779

Interest received

3,298

7,591

7,454

16,270

Income tax paid, net

(21,486

)

(10,379

)

(28,961

)

(12,762

)

Net cash provided by operating activities

200,462

218,365

279,927

294,556

Investing activities

Business combinations, net of cash acquired

(9,700

)

(37,168

)

(42,164

)

(37,983

)

Purchases of property and equipment

(9,548

)

(7,010

)

(17,365

)

(13,123

)

Purchases of investments

(36,013

)

(263,122

)

(69,265

)

(586,878

)

Proceeds from maturities of investments

120,627

70,569

195,304

193,018

Proceeds from sales of investments

40,607

82,942

47,694

141,961

Increase in restricted cash

(2,162

)

-

(2,162

)

-

Payment of deferred consideration

-

-

(185

)

-

Net cash provided by (used in) investing activities

103,811

(153,789

)

111,857

(303,005

)

Financing activities

Proceeds from exercise of share options

225

331

1,147

986

Payments of lease obligations

(11,139

)

(9,357

)

(22,235

)

(17,027

)

Payment of issuance costs for credit facility

(4,445

)

-

(4,445

)

-

Interest paid

(3,294

)

(3,125

)

(3,294

)

(3,125

)

Repayment of exchangeable senior notes

(671,489

)

-

(671,497

)

-

Proceeds from settlement of capped call transactions

72,776

-

72,776

-

Net cash used in financing activities

(617,366

)

(12,151

)

(627,548

)

(19,166

)

Effect of exchange rate changes on cash and cash equivalents

4,546

109

7,510

(1,101

)

Net increase (decrease) in cash and cash equivalents

(308,547

)

52,534

(228,254

)

(28,716

)

Cash and cash equivalents at beginning of period

1,560,262

1,187,191

1,479,969

1,268,441

Cash and cash equivalents at end of period

$

1,251,715

$

1,239,725

$

1,251,715

$

1,239,725

Atlassian Corporation Plc

Consolidated Statements of Cash Flows

(U.S. $ in thousands)

(unaudited)

Three Months Ended December Six Months Ended December 31, 31,

2020 2019 2020 2019

Operating activities

Income (loss)before income tax $ (607,372 ) $ 141,791 $ (631,696 ) $ 216,256 expense

Adjustments toreconcile income(loss) beforeincome tax expense to netcash provided byoperatingactivities:

Depreciation and 13,807 17,753 27,218 34,410 amortization

Depreciation ofright-of-use 9,378 8,869 18,592 17,227 assets

Loss (gain) onsale ofinvestments, 51 (217 ) 299 (264 )disposal ofassets and other

Net unrealizedloss on 750 - 750 - investments

Interest expense 3,594 3,516 6,996 7,099

Net unrealizedforeign currency 4,874 3,183 10,441 946 loss

Share-based 107,692 70,438 193,423 147,734 payment expense

Net loss (gain)on exchangederivative and 539,102 (106,423 ) 566,598 (188,526 )capped calltransactions

Amortization ofdebt discount and 87,854 8,848 97,027 17,590 issuance cost

Interest income (2,112 ) (8,099 ) (4,702 ) (17,211 )

Changes in assets and liabilities:

Trade receivables (37,145 ) (24,276 ) (45,523 ) (41,113 )

Prepaid expenses 4,057 2,227 (7,361 ) (6,370 )and other assets

Trade and otherpayables,provisions and 32,823 26,320 (14,561 ) (5,509 )other non-currentliabilities

Deferred revenue 61,297 77,223 83,933 108,779

Interest received 3,298 7,591 7,454 16,270

Income tax paid, (21,486 ) (10,379 ) (28,961 ) (12,762 )net

Net cash providedby operating 200,462 218,365 279,927 294,556 activities

Investing activities

Businesscombinations, net (9,700 ) (37,168 ) (42,164 ) (37,983 )of cash acquired

Purchases ofproperty and (9,548 ) (7,010 ) (17,365 ) (13,123 )equipment

Purchases of (36,013 ) (263,122 ) (69,265 ) (586,878 )investments

Proceeds frommaturities of 120,627 70,569 195,304 193,018 investments

Proceeds fromsales of 40,607 82,942 47,694 141,961 investments

Increase in (2,162 ) - (2,162 ) - restricted cash

Payment ofdeferred - - (185 ) - consideration

Net cash providedby (used in) 103,811 (153,789 ) 111,857 (303,005 )investingactivities

Financing activities

Proceeds fromexercise of share 225 331 1,147 986 options

Payments of lease (11,139 ) (9,357 ) (22,235 ) (17,027 )obligations

Payment ofissuance costs (4,445 ) - (4,445 ) - for creditfacility

Interest paid (3,294 ) (3,125 ) (3,294 ) (3,125 )

Repayment ofexchangeable (671,489 ) - (671,497 ) - senior notes

Proceeds fromsettlement of 72,776 - 72,776 - capped calltransactions

Net cash used infinancing (617,366 ) (12,151 ) (627,548 ) (19,166 )activities

Effect ofexchange ratechanges on cash 4,546 109 7,510 (1,101 )and cashequivalents

Net increase(decrease) in (308,547 ) 52,534 (228,254 ) (28,716 )cash and cashequivalents

Cash and cashequivalents at 1,560,262 1,187,191 1,479,969 1,268,441 beginning ofperiod

Cash and cashequivalents at $ 1,251,715 $ 1,239,725 $ 1,251,715 $ 1,239,725 end of period

Atlassian Corporation Plc

Reconciliation of IFRS to Non-IFRS Results

(U.S. $ and shares in thousands, except per share data)

(unaudited)

Three Months Ended Six Months Ended December December 31, 31,

2020 2019 2020 2019

Gross profit

IFRS gross profit $ 421,877 $ 342,964 $ 807,699 $ 644,075

Plus: Share-based 6,801 4,407 12,057 9,119 payment expense

Plus: Amortization ofacquired intangible 5,413 9,173 10,832 17,661 assets

Non-IFRS gross profit $ 434,091 $ 356,544 $ 830,588 $ 670,855

Operating income

IFRS operating income $ 27,713 $ 41,841 $ 39,645 $ 37,286

Plus: Share-based 107,692 70,438 193,423 147,734 payment expense

Plus: Amortization ofacquired intangible 7,772 13,140 15,531 25,355 assets

Non-IFRS operating $ 143,177 $ 125,419 $ 248,599 $ 210,375 income

Net income

IFRS net income (loss) $ (621,528 ) $ 124,074 $ (643,082 ) $ 193,394

Plus: Share-based 107,692 70,438 193,423 147,734 payment expense

Plus: Amortization ofacquired intangible 7,772 13,140 15,531 25,355 assets

Plus: Non-coupon impactrelated to exchangeable 626,956 (97,575 ) 663,625 (170,936 )senior notes and cappedcalls

Less: Income tax (25,581 ) (16,182 ) (57,415 ) (31,645 )effects and adjustments

Non-IFRS net income $ 95,311 $ 93,895 $ 172,082 $ 163,902

Net income per share

IFRS net income (loss) $ (2.49 ) $ 0.49 $ (2.59 ) $ 0.77 per share - diluted

Plus: Share-based 0.44 0.28 0.78 0.59 payment expense

Plus: Amortization ofacquired intangible 0.04 0.05 0.07 0.10 assets

Plus: Non-coupon impactrelated to exchangeable 2.48 (0.39 ) 2.63 (0.68 )senior notes and cappedcalls

Less: Income tax (0.10 ) (0.06 ) (0.21 ) (0.13 )effects and adjustments

Non-IFRS net income per $ 0.37 $ 0.37 $ 0.68 $ 0.65 share - diluted

Weighted-averagediluted shares outstanding

Weighted-average sharesused in computing 249,188 250,960 248,601 250,950 diluted IFRS net lossper share

Plus: Dilution fromshare options and RSUs 5,357 - 5,457 - (1)

Weighted-average sharesused in computing 254,545 250,960 254,058 250,950 diluted non-IFRS netincome per share

Free cash flow

IFRS net cash provided $ 200,462 $ 218,365 $ 279,927 $ 294,556 by operating activities

Less: Capital (9,548 ) (7,010 ) (17,365 ) (13,123 )expenditures

Less: Payments of lease (11,139 ) (9,357 ) (22,235 ) (17,027 )obligations

Free cash flow $ 179,775 $ 201,998 $ 240,327 $ 264,406

(1) The effects of these dilutive securities were not included in the IFRS calculation of diluted net loss per share for the three and six months ended December 31, 2020 because the effect would have been anti-dilutive.

Atlassian Corporation Plc

Reconciliation of IFRS to Non-IFRS Financial Targets

(U.S. $)

Three Months Ending March 31, 2021

Revenue $475 million to $490 million



IFRS gross margin 82%

Plus: Share-based payment expense 1

Plus: Amortization of acquired intangible assets 1

Non-IFRS gross margin 84%



IFRS operating margin (7%)

Plus: Share-based payment expense 21

Plus: Amortization of acquired intangible assets 2

Non-IFRS operating margin 16%



IFRS net loss per share - diluted ($0.15) to ($0.14)

Plus: Share-based payment expense 0.39

Plus: Amortization of acquired intangible assets 0.03

Plus: Non-coupon impact related to exchangeable senior 0.03notes and capped calls

Less: Income tax effects and adjustments (0.10)

Non-IFRS net income per share - diluted $0.20 to $0.21



Weighted-average shares used in computing diluted IFRS net 250 million to 252loss per share million

Dilution from share options and RSUs (1) 5 million

Weighted-average shares used in computing diluted non-IFRS 255 million to 257net income per share million

(1) The effects of these dilutive securities are not included in the IFRS calculation of diluted net loss per share for the three months ending March 31, 2021 because the effect would be anti-dilutive.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210128006034/en/

CONTACT: Investor Relations Contact Martin Lam & Matt Sonefeldt IR@atlassian.com

CONTACT: Media Contact Jake Standish press@atlassian.com