Atlassian’s quarterly earnings show the cost of keeping staff

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Tech company Atlassian reported its third quarter results overnight, and the market reacted positively.

Q3 revenue rose by 36% to $US159.9 million, and the company is projecting Q4 revenue to be in the range of $US170 million to $US172 million.

Despite significant growth in headline revenue, Atlassian reported a quarterly loss of $US17.46 million, resulting in negative earnings for the quarter of -$US0.08 per share.

Atlassian’s earnings per share figures are compliant with International Financial Reporting Standards (IFRS). The IFRS calculations included added expenses for share-based compensation of $US37.72 million.

Non-IFRS earnings per share, with share-based payments and some other expenses added back, were in positive territory at $US0.08.

Here’s the summary of Atlassian’s IFRS-compliant net earnings for Q3 2017:

Atlassian Shareholder Letter

This chart shows Atlassian’s consistent trend of revenue growth since December 2015:

Atlassian Shareholder Letter

The two biggest contributors to Q3 revenue were subscription fees and maintenance revenue. Subscription fees for access to Atlassian’s cloud computing services was $US63.4 million, up 63% over the year.

Maintenance revenue, which Atlassian describes as “fees earned from providing customers updates, upgrades and technical product support for our perpetual license products,” was US$67.1 million – a yearly increase of 19%.

In its shareholder letter, Atlassian projected full year revenue of $US445.6 million for the 12 months to June 2017, up from $US329.4 million in the prior year.

“Free cash flow for Q3’17 was $68.3 million, comprised of cash flow from operations of $72.9 million, less capital expenditures of $4.6 million. Free cash flow margin, defined as free cash flow as a percentage of revenue, was 42.7%,” Atlassian said.

The company finished Q3 with $US503.6 million in cash and cash equivalents. It spent $US362.8 million of cash in the quarter to purchase Trello, a web-based application that enables collaboration on projects.

“Excluding Trello, Atlassian ended the third quarter of fiscal 2017 with a total customer count of 72,242, a 26% year-over-year increase”, it said.

Atlassian’s shares rose almost 2% overnight following the release of the company’s earnings report. This chart from shows the rise.