##### 03-Aug-2023
 (TEAM)
## Atlassian Corp.

##### Q4 2023 Earnings Call


##### Total Pages: 17


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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call

### CORPORATE PARTICIPANTS


Corrected Transcript

03-Aug-2023


Martin Lam
Head-Investor Relations, Atlassian Corp.

Michael Cannon-Brookes
Co-Founder, Co-Chief Executive Officer & Director, Atlassian Corp.

Joe Binz
Chief Financial Officer, Atlassian Corp.


Cameron Deatsch
Chief Revenue Officer, Atlassian Corp.

Scott Farquhar
Co-Founder, Co-Chief Executive Officer & Director, Atlassian Corp.


......................................................................................................................................................................................................................................................

### OTHER PARTICIPANTS


Michael Turrin
Analyst, Wells Fargo Securities LLC

Sanjit K. Singh
Analyst, Morgan Stanley & Co. LLC

Arjun Bhatia
Analyst, William Blair & Co. LLC

Ryan MacWilliams
Analyst, Barclays Capital, Inc.

Kash Rangan
Analyst, Goldman Sachs & Co. LLC

Gregg Moskowitz
Analyst, Mizuho Securities USA LLC

Brent Thill
Analyst, Jefferies LLC


Ari Terjanian
Analyst, Cleveland Research Co. LLC

Michael Turits
Analyst, KeyBanc Capital Markets, Inc.

Alex Zukin
Analyst, Wolfe Research LLC

Frederick Havemeyer
Analyst, Macquarie Capital (USA), Inc.

Peter Weed
Analyst, Sanford C. Bernstein & Co. LLC

Derrick Wood
Analyst, Cowen & Co. LLC

Austin Cole
Analyst, JMP Securities


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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call

### MANAGEMENT DISCUSSION SECTION


Corrected Transcript

03-Aug-2023


**Operator: Good afternoon and thank you for joining Atlassian's Earnings Conference Call for the Fourth Quarter**
of Fiscal Year 2023. As a reminder, this conference call is being recorded and will be available for replay from 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 Relation.
......................................................................................................................................................................................................................................................
##### Martin Lam
Head-Investor Relations, Atlassian Corp.

Welcome to Atlassian's fourth quarter of fiscal year 2023 earnings call. Thank you for joining us today. Joining me
on the call today, we have Atlassian's Co-Founders and Co-CEOs, Scott Farquhar and Mike Cannon-Brookes;
our Chief Revenue Officer, Cameron Deatsch; 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 2023. 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 datasheet.

As always, our shareholder letter contains management's insights 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.
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 revise such statements should they change or
cease to be current.

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 recently filed annual and quarterly reports.

During the call today, 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. The reconciliation between GAAP and non-GAAP financial measures is available in our
shareholder letter, earnings release and investor datasheet on the IR website.

Please keep in mind that we'd like to allow as many of you to participate in Q&A as possible. To facilitate that,
we'll take one question at a time. Please rejoin the queue if you have another question or a follow-up, and we'll do
our best to come back to you later in the session.

With that, I'll turn the call over to Mike for opening remarks.
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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call

##### Michael Cannon-Brookes
Co-Founder, Co-Chief Executive Officer & Director, Atlassian Corp.


Corrected Transcript

03-Aug-2023


Thank you all for joining us today. As you've already read in our shareholder letter, we delivered a strong quarter
financial results. We closed out FY 2023 with great momentum in cloud migrations, in enterprise and across all
our three markets. We generated over $3.5 billion in revenue this year and over 250,000 customers now power
their collaboration on our world-class cloud platform. Amidst a challenging year, we're extremely proud of all that
we've accomplished. We said we'd play offense in FY 2023, and that's exactly what we did. We migrated millions
of users to our world-class cloud platform. We built game-changing innovations such as Atlassian Intelligence,
launching new products like Jira Product Discovery, delivered increased scale on our cloud platform and unlocked
data residency in new locations like Germany and Singapore for our global customer base.

Working deeply with our customers, we're more and more excited about the value Atlassian Intelligence will
deliver by leveraging the latest advancements in large language models combined with each customer's unique
data and our world-class cloud platform with our two decades of data-driven insights into how teams work, we'll
be able to further unleash each of our customer's potential across all our three markets. Today we're seeing our
bets pay off and that's strengthening our conviction in our strategy. As we enter FY 2024, we're eager to get after
those large opportunities and believe we're well-positioned to come out of the year even stronger.

With that, I'll pass the call to the operator for Q&A.
......................................................................................................................................................................................................................................................
### QUESTION AND ANSWER SECTION

**Operator: We will now begin our question-and-answer session. [Operator Instructions] Your first question comes**
from Michael Turrin from Wells Fargo Securities. Please go ahead.
......................................................................................................................................................................................................................................................
Michael Turrin
Analyst, Wells Fargo Securities LLC
# Q

Hey. Great. Thanks. Appreciate you taking the question. Joe, given it's your first full year guide, maybe you can
start by walking us through the process there, the visibility into and confidence in framing those cloud targets for
fiscal 2024. And there's some commentary in the letter just around the proportions you're expecting between data
center and cloud and just some details in there I think it's useful to bring to the front of the call. So anything on just
the signals you're watching and how the end-of-life event is taken into account, all very useful. Thanks.
......................................................................................................................................................................................................................................................
Joe Binz
Chief Financial Officer, Atlassian Corp.
# A

Great. Thanks for the question. I think I'd just start with our cloud revenue guide of 25% to 30%. That assumes
the macro headwinds in FY 2023 persist into FY 2024 and that migrations from server and data center will
continue to be strong contributors to cloud growth, approximately 10 points. So we do expect the momentum that
we've seen in 2023 on that front to continue. The low end of our cloud guidance range assumes continued macro
weakness throughout FY 2024, as well as some macro impact areas that have held up really well in FY 2023, like
churn, upsell and migrations. Finally, we do expect cloud revenue growth rates to gradually improve throughout
the year, driven by the easier prior-year comparables that we have in the second half of the year.

Now, you mentioned data center. In terms of data center, we do expect decelerating revenue growth rates in FY
2024 driven by a few things. First and foremost, lower migration from server following the server end of support.


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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call


Corrected Transcript

03-Aug-2023


We do expect greater migrations from data center to cloud as we remove migration blockers and enhance our
cloud offering. And then of course, data center has difficult prior-year comparables in the second half of the year.

And then finally, we expect a steep decrease in our server revenue up to end of support in February 2024, at
which point we'll no longer recognize any further revenue. So that's a general outline of how we're thinking about
that for next year.
......................................................................................................................................................................................................................................................

**Operator: Your next question comes from Keith Weiss from Morgan Stanley. Please go ahead.**
......................................................................................................................................................................................................................................................
Sanjit K. Singh
Analyst, Morgan Stanley & Co. LLC
# Q

Thank you for taking the questions. This is Sanjit Singh for Keith. One of the challenges of the last couple
quarters is really the – this free-to-paid conversation, the letter suggests that was still sort of an impact again, this
quarter. As we go into next year, just wanted to get a sense of what it would take to sort of reignite growth in that
segment of the customer base. Is it simply just a better macro or there's things on the funnel side, the sales side
and the execution side that could help reinvigorate growth in that side of the business.
......................................................................................................................................................................................................................................................
Cameron Deatsch
Chief Revenue Officer, Atlassian Corp.
# A

Yes. This is Cameron. I'll speak to the new customer number. So in Q4, we definitely saw that continued
downward pressure on our free-to-paid conversion that we've been speaking about largely through the last four
quarters or so. Although we do continue to increase the total number of free customers out there in the pool and
serve those customers year-on-year, simply those customers are slower to take up the credit card and purchase
our software, which is fine. We can be patient and convert them over a longer period of time.

The bigger shift that we saw between Q3 and Q4 was actually due to something that we had full control of as we
look to our budgets, and we're very diligent with all of our budget this year, but we really went into our marketing
campaigns then and marketing campaign budgets and looked at ROI of those investments. Based off a deep dive
of that analysis we were actually able to redirect some of our top-of-funnel spend towards higher value, longerterm customers. The result here was that we got less customers overall in the funnel and converted to paid
customers in Q4. But the customers we did bring in will be by the higher, longer-term value, higher ROI customers
for that marketing spend.

Going forward, as Joe already mentioned, we do continue to believe that the macroeconomic pressure against
the free-to-paid will continue. But we will always be optimizing our marketing spend for the highest ROI possible.
And where we see good ROI, we will put more investment behind it.
......................................................................................................................................................................................................................................................

**Operator: Your next question comes from Arjun Bhatia from William Blair. Please go ahead.**
......................................................................................................................................................................................................................................................
Arjun Bhatia
Analyst, William Blair & Co. LLC
# Q

Hey. Thank you guys for taking the questions. Maybe one for Cameron or Joe. Just as you're thinking about how
fiscal 2024 plays out, how should we think about the cadence of the migrations that are left as we approach the
February end of life? And maybe this one's more for Cameron, but who are the customers that are still left on
server, do they tend to skew smaller or larger? Anything you can give us there would be super helpful. Thank you,
guys.
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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call

Joe Binz
Chief Financial Officer, Atlassian Corp.


Corrected Transcript

03-Aug-2023


Yes, Arjun, this is Joe. I'll take it first, and then Cam can chime in at the end. As you mentioned, we had support
for our server products in February 2024. Our focus there is obviously on migrating our remaining server
customers to either our cloud or data center offerings. We expect that there will be uncertainty in quarter-toquarter variability based on when and how our server customers ultimately choose to migrate. For now, we are
assuming the trends we saw in FY 2023 with respect to how many server seats migrate and where they migrate
to will continue in FY 2024 directionally through end of support. And that at end of support, we expect most of the
remaining server seats that migrate will migrate to data center and we've also built appropriately prudent
assumptions for customers who will choose not to migrate in FY 2024 into our guidance. And we'll be able to
share more on quarter-to-quarter assumptions related to that server end-of-support dynamics when we provide
our Q2 guidance next quarter. Cam?
......................................................................................................................................................................................................................................................
Cameron Deatsch
Chief Revenue Officer, Atlassian Corp.
# A

Yeah. Just adding to that, I just want to highlight that this entire transition since we announced the end of server
support almost three years ago has been a multi-year journey and a multi-year investment across all factions of
Atlassian, whether it's go to market or getting closer to our customers, whether it's R&D teams, eliminating cloud
blockers, delivering scale, certifications, you name it. And of course, the variety of programs we've rolled out from
price changes to loyalty discounts and of course this large compelling event with the end of service support
coming up in February.

So like I said, it's been a multi-year journey and as we've been saying, we're very consistent and very happy with
our performance along the way. We were able to retain a very large portion of our server customers while getting
our customers to choose cloud or data center appropriately.

That said, we have about six months more as we come up to February. We have a significant server customer
base still out there. They are of all shapes and sizes, I have to say. But they're the ones who waited the last – to
the latest to make this choice, which is perfectly fine. The good part there is we are in a better position than we've
ever been to help those customers make the right choice for their company and transition as quickly as possible.
Obviously, we'll incentivize our customers to choose cloud first and foremost in all those conversations, but data
center of course is there and honestly a great option for some customers out there who simply are still not ready
to move to cloud.

As far as who will choose what, as Joe said, we largely see that customer choice falling in line with what we've
kind of seen over the last year. And of course, the customers who wait for the last minute definitely will have data
center as a easy migration path for them if they want to stay on prem.
......................................................................................................................................................................................................................................................

**Operator: Your next question comes from Ryan MacWilliams from Barclays. Please go ahead.**
......................................................................................................................................................................................................................................................
Ryan MacWilliams
Analyst, Barclays Capital, Inc.
# Q

Thanks for taking the question; two part question here on 4Q cloud results. Could you maybe provide some
context around what the contribution was from migration to cloud growth in the quarter? And how should we also
think about the contribution from the expiration of the loyalty discount program to that fourth quarter cloud growth?
Thanks.
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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call

Joe Binz
Chief Financial Officer, Atlassian Corp.


Corrected Transcript

03-Aug-2023


Yeah. Thanks for the question. The first part of the question in terms of migrations, the migrations contribution to
growth in the quarter was very consistent with what it's been in the past. I think we've talked about it being
approximately 10 points in FY 2023. That was a similar outcome in Q4.

In terms of outperformance to the revenue guide, the outperformance was driven by stronger than expected
purchasing in June and primarily in enterprise ahead of the expiration of our loyalty discount program. And that
came in the form of both more deals and higher contract value per deal, and it drove strong results in migration,
seat expansion and upsell to premium and enterprise versions of our products across both our cloud and data
center businesses. And that drove the outperformance there.

The server outperformance in the quarter was driven strictly by stronger than expected renewals and larger deal
sizes. And then finally, marketplace outperformance was driven by our pull-through on the stronger cloud and
data center sales I noted earlier; hope that helps.
......................................................................................................................................................................................................................................................
Cameron Deatsch
Chief Revenue Officer, Atlassian Corp.
# A

Yeah. And this is Cameron. Just from a customer perspective, I just want to say that none of this was really a
surprise for the customers. We've been very open along the way for over the last few years about how the loyalty
discount program would be staging down over three years and going away entirely on July 1. And it's that
openness that these customers – largely we've been working with them for many months, sometimes with these
bigger customers for years knowing that this date was out there and giving a large, compelling event to make that
choice. Of course, as I already mentioned, we still have another big date out there with next February, and we'll
continue to work with our customers who still remain on server between now and then.
......................................................................................................................................................................................................................................................

**Operator: Your next question comes from Kash Rangan from Goldman Sachs. Just go ahead.**
......................................................................................................................................................................................................................................................
Kash Rangan
Analyst, Goldman Sachs & Co. LLC
# Q

Hi. Thank you very much. I was curious if you could just comment on the transition. We've had a transition of
sorts in the company and with the CRO transition, how are you approaching the next year's planning? Are you
looking for a new leader within the company, are you hiring somebody outside? What are the considerations on
that transition? Thank you so much.
......................................................................................................................................................................................................................................................
Scott Farquhar
Co-Founder, Co-Chief Executive Officer & Director, Atlassian Corp.
# A

It's Scott here. I just want to say a huge thank you to Cameron for his 11 years at Atlassian. And Cameron's done
every job at Atlassian. He's done marketing presales and now eventually, what he's at, running all of our sales
and marketing, and he's done an incredible job. And when we chatted about this, it's been the right time for
Cameron to step back because the cloud migrations and end of life of server are going so well. So it turns out
that's the right time for Cameron to spend a bit of time on skiing given he lives up in Tahoe at the moment.

In terms of what happens going forward, Cameron has some really strong leaders under him inside the business,
particularly on the sales side, he's got a leader that runs most of the sales organization at the moment and so we
expect there to be a strong continuity of that leadership.


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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call


Corrected Transcript

03-Aug-2023


At this stage, we're not saying exactly how that role will be replaced or refilled, but I don't expect there to be
significant changes from what we've done in the past.
......................................................................................................................................................................................................................................................

**Operator: Your next question comes from Gregg Moskowitz from Mizuho Securities. Please go ahead.**
......................................................................................................................................................................................................................................................
Gregg Moskowitz
Analyst, Mizuho Securities USA LLC
# Q

Okay. Thank you for taking the question and best wishes to Cameron. For Michael or Scott, you were very clear
at the Atlassian summit in April that Atlassian Intelligence would be embedded in all of your cloud additions and
be free of charge. But since that time, we've seen several software companies, GitLab, to name one of them,
announce specific pricing for their Gen AI tech. And so, I'm curious to hear your thoughts on the direct
monetization plans that are developing in the industry. Also, if Atlassian Intelligence delivers the value to
customers that you think it can, could all of this potentially make you rethink your approach at some point?
......................................................................................................................................................................................................................................................
Michael Cannon-Brookes
Co-Founder, Co-Chief Executive Officer & Director, Atlassian Corp.
# A

Yeah. Hi, Gregg, it's Mike here. Thanks for the question. Look, I would start with our philosophy here and longterm thinking as a company. We clearly believe that Atlassian Intelligence and AI and new models are a huge
opportunity for us. We think that software is supply-constrained, not demand-constrained, that will enable the
creation of far more software. We are a content, text-based business and anything that allows you to manipulate,
generate, parse, understand text is very good for us as a company that targets collaboration and knowledge
workers. We have a huge amount of data across our set of products and connections to third-party products and
the best-of-breed products in the world.

That is incredibly value for us.

So we are huge believers in AI and the potential of Atlassian Intelligence to drive significant value change for our
customers. Secondly, our philosophy is to lead with R&D, to build and then customer value before thinking about
monetization. I know there may be others in the industry who go the other way around it and announce a price,
then build something, then work out if customers care. We don't work that way. We go in the other direction.

So you've seen us execute that plan and that play many times over two decades, and that's exactly what we're
doing in terms of the Atlassian Intelligence. We are super excited and I believe you're at TEAM 2023, one of the
best feature set customer resonances we've had at the announcement and the launch of what we demonstrated
to customers, huge customer excitement. Our job now is to turn that into actual customer usage in a huge manner
first, and that is exactly what we're doing. Those features are now in the hands of the order of thousands of
customers, and we are working every single day to make sure that those features deliver customer value and are
actually used first.

We do believe they'll drive significant product competitiveness and unleash the potential of every team, which is
what we're here to do. There are a number of ways we believe, as we've said before, that we gain economically
from the Atlassian Intelligence feature set. Again, first and foremost, we do believe it will continue to drive
significant momentum in migrations of customers from server and data center products to the cloud. Atlassian
Intelligence features only exist in the cloud and can only exist in the cloud. So anything that is a carrot to further
improve that migration flow is a good thing for us economically as a business.


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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call


Corrected Transcript

03-Aug-2023


Secondly, we do believe it'll drive product competitiveness and improve our new to new customer conversion
rates and our win rates against competitors in all markets. Worth saying that we have built Atlassian intelligence
leveraging our cloud platform, which is both world-class and quite unique. It is a great example of why we spent 5
to 10 years building this cloud platform, because we can ship Atlassian intelligence features in every product, in
every category that we're in, every market, to improve our competitive standing across the board. And we think
that will come back in new customers and competitive wins over the medium to long term.

And thirdly, some Atlassian intelligence features enhance and leverage features that are packaged into premium
and enterprise editions. So we do believe that it will drive some additional movement as customers go from free to
standard and standard to premium and premium to enterprise. Some features do exist in enterprise levels. For
example, the Atlassian Analytics features that exist in the enterprise edition, very powerful set of features to be
able to use Atlassian Intelligence to generate queries for you is one of the resonant features, but that will
hopefully drive more enterprise edition upgrades.

So we do believe there is monetization opportunities for us in Atlassian Intelligence in summary, but
philosophically we're starting with R&D and building a deep set of core capabilities we believe we can scale for
the next 5 to 10 years as this wave takes over all software. And secondly, we are focusing on delivering customer
value first. We are doing it every single day and we remain incredibly bullish about this area of the company.
......................................................................................................................................................................................................................................................

**Operator: Your next question comes from Brent Thill from Jefferies. Please go ahead.**
......................................................................................................................................................................................................................................................
Brent Thill
Analyst, Jefferies LLC
# Q

Thanks. Joe, on the operating margin, you're guiding down 200 basis points year-over-year and I think in the
shareholder letter, you expect that trend to reverse. Can you just walk through that the next couple-year cadence
and how you're thinking about the investments you're going after and then maybe tie that into that expansion and
how you're thinking about how that plays out. Thanks.
......................................................................................................................................................................................................................................................
Scott Farquhar
Co-Founder, Co-Chief Executive Officer & Director, Atlassian Corp.
# A

It's Scott here, I'll take the first part about that and Joe can get in with the details. And just to remind those who
might be new to Atlassian's story, well, I think we've run a very successful and highly profitable business over a
really long period of time [indiscernible] (00:22:11) free cash flow, has great margins. And about 18 months ago,
we identified a set of opportunities where we wanted to invest heavy arm behind those opportunities than we had
historically. And the three opportunities we articulated to you, our investors – at our Investor Day, were investing
heavier in enterprise cloud, investing heavier in our cloud migrations and investing more in our ITSM set of
products.

And on all three, I mean super happy with the returns we've been getting, migrations were – continuing at the
pace that we thought. We were – ITSM, particularly in this time of consolidation and people looking to get off highpriced legacy vendors, we've seen a lot of competitive switch-outs, and in enterprise cloud, you're seeing now
some of the numbers now $0.5 million, $1 million deals in our shareholder letter like we're seeing a great uptick in
our enterprise segment as well. So all three of those are going really well.

Now, you, as investors have rightly asked, well, what does the shape of that investment look like? How many
years are we doing that for? And in our investor letter this year, just that we – just came out today, we shared that


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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call


Corrected Transcript

03-Aug-2023


we expect the FY 2024 margin profile to be the sort of lowest point in our margin and we expect them to climb
over the coming years back to towards our historical norms. Joe, do you want to add any more color to that?
......................................................................................................................................................................................................................................................
Joe Binz
Chief Financial Officer, Atlassian Corp.
# A

Yeah. Thanks, Scott. Brent, I'm just going to walk you through some of the mechanics. So in the FY 2024, we do
expect operating margins of approximately 18.5% as Scott mentioned. That's lower than this year and it's driven
by the strategic high-priority areas we're investing in that Scott and Mike have both highlighted, including the
areas of innovation like AI. Keep in mind, in FY 2024, we'll also be lapping the H2 benefit of restructuring savings
and lower bonus expense that we had in FY 2023.

In terms of FY 2025, what's happening there is we do expect continued healthy revenue growth in FY 2025
combined with our expectation of improving operating leverage as operating expense growth moderates, as Scott
mentioned, particularly in the big areas of investment like cloud migrations. And we will continue to drive general
efficiency improvements with scale. So that's some of the mechanics underneath the philosophy that Scott
articulated.
......................................................................................................................................................................................................................................................

**Operator: Your next question comes from Ari Terjanian from Cleveland Research. Please go ahead.**
......................................................................................................................................................................................................................................................
Ari Terjanian
Analyst, Cleveland Research Co. LLC
# Q

Thank you for the question and congrats on the results, Cameron. I know you're leaving at the end of the year, but
congrats on a great run. I guess, question for you, a lot of strength here in the quarter on enterprise size. If you
could double click, what do you think has changed from a go-to-market perspective, investments into enterprise
advocates and the partner side that helped drive some of these larger deals and do you feel like Atlassian's at a
steady state now in terms of the investments on a go-to-market side or is there more to come here as you think
about the future? Thank you.
......................................................................................................................................................................................................................................................
Cameron Deatsch
Chief Revenue Officer, Atlassian Corp.
# A

Thank you for the question. And yes, we're very happy with the results we had in Q4 and the strength we continue
to see in migrations and enterprise. But like I said, none of this happened overnight and none of this was
specifically just because the go-to-market tends to focus more on enterprise. This really has been a multi-year
investment from Atlassian, largely with the commitment to get closer to our largest customers and deliver –
honestly to become the strategic partners that they want us to be.

Now, this starts with R&D, and you see us deliver massive investments in scale. We have 50,000 users in our
cloud products today, certifications, extensibility, and largely just understanding our enterprise customers' unique
needs much more closely. And then of course, we match that investment and go to market by including our
enterprise advocates, our technical account managers, our customer success managers and so on. And as we
got closer, we've been able to get larger deals, longer term commitments, and become the strategic partner that
customers want.

However, we've been able to do this all through evolution, as we said, not revolution. And you see that today in
our sales and marketing spend. So we've been able to actually get closer to our largest customers to do these
larger enterprise transactions, all while maintaining largely-industry leading sales and marketing expense,
something that I'm exceedingly proud of and something that I'm very happy with my team will continue to do going

##### 10


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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call


Corrected Transcript

03-Aug-2023


forward is have that great balance of understanding our flywheel and product-led growth and all those great
principles that Mike largely laid out earlier of how we're even thinking about AI. But then, of course, when we're
ready, go to our largest customers and bring those solutions to them. And of course, get value in return for that.

So we will continue to get closer to our largest customers but we will absolutely continue to maintain our
incredible efficient go-to-market structure going forward.
......................................................................................................................................................................................................................................................

**Operator: Your next question comes from Michael Turits from KeyBanc Capital Markets. Please go ahead.**
......................................................................................................................................................................................................................................................
Michael Turits
Analyst, KeyBanc Capital Markets, Inc.
# Q

Thank you. Hey, guys. Good evening. So you said in a couple of places that migrations are strong, but you talked
about them both to data centers as well to cloud. I was wondering if you could drill down specifically on the
migrations to cloud. Scott mentioned things like data residency that were obstacles that were being removed. But
are we in a position where whether it's because macro feels better people are okay on TCO or some other reason
that the actual migrations from let's just call it on-prem whether it's from data center or server to cloud are
improving at this point, s that sustainable?
......................................................................................................................................................................................................................................................
Cameron Deatsch
Chief Revenue Officer, Atlassian Corp.
# A

This is Cameron here. So the migration plan like I said is a multiyear program we put in place and as the
customers choosing cloud choosing data center has been very much in line with what we've expected as we
eliminate cloud blockers, whether that's data residency, scale, extensibility and to be perfectly honest, we have a
public roadmap where we show all of our customers, here's all the things that we are shipping down the road so
they can make the appropriate choices going forward. It's a combination of all those things that have allowed us to
get these large customers choosing to move to cloud.

Of course, as we've said, there are still plenty of customers out there that aren't ready for cloud, would prefer to
stay on premises and are choosing data center. And we will continue to see, I think a large portion of customers
going over the next year choosing data center as that option. But that's not a dead end. We largely see that
investment in data center as a further commitment into Atlassian and we've proven again and again that we can
move data center customers to the cloud with half of our migrated seats coming from data center customers. So
once again, we provide the optionality for the customers throughout, if they choose data center, that's great. We'll
continue to work with them on moving them to cloud and getting the most value from Atlassian long-term. Mike,
you got anything to add?
......................................................................................................................................................................................................................................................
Michael Cannon-Brookes
Co-Founder, Co-Chief Executive Officer & Director, Atlassian Corp.
# A

Nothing Cameron. I think you nailed it. Just re-emphasizing that half our migrated seats coming from data center
is a really important milestone for us as we continue this long-term journey.
......................................................................................................................................................................................................................................................

**Operator: Your next question comes from Alex Zukin from Wolfe Research. Please go ahead.**
......................................................................................................................................................................................................................................................
Alex Zukin
Analyst, Wolfe Research LLC
# Q

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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call


Corrected Transcript

03-Aug-2023


Hey, guys. Thanks for taking the question. Maybe just first, if we look at the cloud revenue growth number and we
look at – we try to decompose net new ARR into net new versus migration versus expansion, you've talked a little
bit about the migration dynamic, but how much – like if we look at the – if we just ask you like a cloud NRR metric
and how much was coming from expansion, it'd be great to understand that particularly as we're getting into the
later innings of the migration. And then maybe just as a follow-up, you talked about healthy top line growth for
fiscal 2025, you gave the 25% to 30% growth range for 2024, which we really appreciate, by the way.

Is that a durable kind of growth rate? It's obviously a wider range, given the macro uncertainty, but is that growth
rate likely to stay durable, particularly as maybe the migration tailwinds start to add a little bit as we get past the
server end of life?
......................................................................................................................................................................................................................................................
Joe Binz
Chief Financial Officer, Atlassian Corp.
# A

Yeah. Thanks for the question, Alex. I'd say starting with your last question, in terms of FY 2025, we're obviously
not giving any guidance on that. To your broader question, I do believe it's durable. The value that we're adding to
the products that cloud brings, it's very specific, the value it delivers to customers, I think there's a lot of
opportunity for tailwind in that business. And so, directionally speaking, we should continue to see very healthy
growth as I mentioned for FY 2025 that will be driven primarily by cloud as the server revenue base goes away
and increasingly data center customers migrate to the cloud.

In terms of your first question on net retention rates, I would just say paid seat expansion and free-to-paid
conversions continue to be impacted by the economic headwinds that we've seen that would impact that area of
the business. In terms of a specific expansion rate, as you know, we don't share quarterly retention and
expansion rates. Having said that, we've talked about the macroeconomic pressures and the underlying
fundamentals in our business outside of that remain very strong, however, and we see no change to our structural
competitive position. So we do expect those retention rates to improve once the macro picture stabilizes and
begins to improve.

And then as you talked about earlier, I'd also highlight other key aspects of our business, like migrations and
cross-sell and upsell and monthly active usage. Those all remain very healthy and speak to the highly valuable
and mission-critical nature of our products. And those will also feed future expansion rate improvement. So our
outlook is very positive on that going forward.
......................................................................................................................................................................................................................................................

**Operator: Your next question comes from Fred Havemeyer from Macquarie. Please go ahead.**
......................................................................................................................................................................................................................................................
Frederick Havemeyer
Analyst, Macquarie Capital (USA), Inc.
# Q

Hi. Thank you very much for the question. Firstly, actually, another thank you for introducing a dark theme as well
to – for people like me is greatly appreciated, especially when I'm on with some of my colleagues in Australia late
at night. The question right now is really focusing on the migration tooling that you have as you're looking at and
kind of reviewing the learnings that you have and the investments you've made into your migration tooling, just
how confident are you that at this point you have the server to either data center or a cloud migration tooling on
ramp capabilities really solved versus are there any significant risks you still see for some of those larger
enterprise customers post server end of life to need to wait a little longer to have additional tools built out. Thank
you.
......................................................................................................................................................................................................................................................

##### 12


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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call

Michael Cannon-Brookes
Co-Founder, Co-Chief Executive Officer & Director, Atlassian Corp.


Corrected Transcript

03-Aug-2023


Hey, Fred, I can take that. It's Mike. And thanks for the kudos on dark theme in Jira. It's actually a good example
of the amazing R&D team we have. It's done properly with design tokens and all sorts of things across our cloud
platform using Atlaskit. So it will be coming to other products shortly. It's already in a handful of products but you'll
see it all across the area. We have a huge focus on accessibility, which has kept us into migrations. Dark theme is
quite challenging to do in an accessible way that works to meet all of the standards required for people who have
accessibility issues when it comes to software.

Gets to some of the migration tooling questions that you've asked. Our migration tooling continues to improve
quarter-on-quarter. We work really hard on the tools to make that as self-service as possible. And largely what we
are doing is continue to work on the scale and speed of the tools to move huge amounts of data faster and faster.
The repeatability of those tools, our customers don't do one-shot migrations, especially the larger ones. They will
migrate their data across, test it, migrate it again, and do that multiple times so the tooling becomes incredibly
important to be repeatable and reliable.

And lastly, we work with customers who have lots of edge cases. Some of them have 10 to 20 years of JIRA
family or Confluence data on prem. They may have edited their own database. They may have done a whole lot
of things that we have to take as edge cases to move them across. We continue to work on how to do that as we
get bigger and bigger customers and we encounter more and more edge cases, more of the tooling is self-service
and repeatable. And lastly, we are continuing to work with app vendors and our amazing marketplace community
to make sure that their app data and the apps themselves can be migrated as they move from our on-premise
extensibility and plugin systems to connect and forge in the cloud. That's quite a unique migration challenge.

I would say, every quarter we get better and better at doing this. We can use less human power to do migrations.
We can do bigger migrations. And really proud of how the team is going on managing all of that tooling. So
continuing to improve. I don't know, it's – your question was around, is it solved? It will get better every single
quarter as it has done for the last three years and we will continue to do that as we migrate more and more server
and data center customers over time.
......................................................................................................................................................................................................................................................

**Operator: Your next question comes from Peter Weed from AllianceBernstein. Please go ahead.**
......................................................................................................................................................................................................................................................
Peter Weed
Analyst, Sanford C. Bernstein & Co. LLC
# Q

Thank you and great to see IT service management growth called out in the note. It was top of mind for us too.
We see it as a really large opportunity for you going forward. Obviously it already is a large business. Really
impressive to see the 45,000 customers and 80% year-over-year growth. Kind of looking forward how should we
think about the total upside from here? Like, what are the profiles of the companies that are the largest
opportunity going forward that will drive more growth? And how much additional headroom do you see in this over
the coming kind of three-ish years?
......................................................................................................................................................................................................................................................
Scott Farquhar
Co-Founder, Co-Chief Executive Officer & Director, Atlassian Corp.
# A

Thanks, Peter. Scott here. Look, I think we have a huge opportunity for durable growth over such a long period of
time. We operate in three very large markets. And so, take them one by one. You talked about Jira Service
Management and ITSM, the opportunity there is we're the challenger in that particular market and, there's plenty

##### 13


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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call


Corrected Transcript

03-Aug-2023


of large incumbents there and plenty of unhappy customers in those large incumbents. And so there's just
massive opportunities for us to take market share in that particular space.

In our migrations – well, actually let me talk about work management's role, there's definitely huge opportunities
there, that's a very large market. And if you look at the stronghold we have around developers and around
development teams and when I talk to CEOs these days around the world, like the biggest asks – one of the
biggest issues is how do they make the development teams productive, how do they get more out of development
teams? And when we look at customers consolidating around what work management for all items, they throw out
other vendors, but they can't get rid of the tools that power their engineering teams. And so we have a huge
opportunity for consolidation in our work management for all market.

And then if I look at the innovations that we're bringing to our traditional Agile and DevOps market, we're a large
player there, but there's just so many different customer problems that we can be solving for them. And you saw
us launch Jira Product Discovery to target product managers. So if we start tackling more and more personas
across there, there's just so much customer value that we can produce. And so I'd say huge opportunities in every
market that we have at the moment. And so I don't really see any limit there. Migrations of our customers from
server to the cloud is just a stepping stone for us to be able to keep delivering huge value and increased cloud
revenue.
......................................................................................................................................................................................................................................................
Cameron Deatsch
Chief Revenue Officer, Atlassian Corp.
# A

Yeah. And Cameron here, I'll follow up just speaking with customers as well, the IT service business – as we
mentioned, 80% growth in our largest enterprise customers with Jira Service Management last year, which shows
that, hey, we've struck a vein here with the customers where you look at the trends in the market, customers are
trying to consolidate vendors and save money. Jira Service Management for existing Atlassian customers is a
great opportunity. Customers also want their development teams and IT teams to come closer together to work on
a common platform. Jira Service Management provides that absolute capability, and customers want more
flexibility, quicker time to value of their investments. They don't want to spend 6 to 12 months rolling out these
tools. They want to be able to purchase software, get it running and start delivering value to their end users, in
days, weeks at most and Jira Service Management once again delivers value here.

So, in the IT service management market broadly, I think we have a very unique offering with a very unique value
prop at a very unique price point. And all three of those reasons are the reasons why customers continue to look
to us and invest in Jira Service Management.
......................................................................................................................................................................................................................................................

**Operator: Your next question comes from Derrick Wood from TD Cowen. Please go ahead.**
......................................................................................................................................................................................................................................................
Derrick Wood
Analyst, Cowen & Co. LLC
# Q

Oh, great. Thanks. I guess, Joe, this is for you. I wanted to ask about some of the expansion headwinds being felt
upmarket. I think with your smaller customers, I know a lot are on monthly contracts. So, perhaps, net expansion
rates normalize quicker, but within your enterprise customers, you often have multiyear contracts. Customers
would historically buy seats for growth to take advantage of pricing. And we've heard from other seat-based
models that as growth in the tech world has slowed, expansions on renewals can be a lot more challenging. So
just curious, is that something you're seeing and do you think we still need some time quarters ahead to fully cycle
through this with kind of longer enterprise contracts?
......................................................................................................................................................................................................................................................

##### 14


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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call

Joe Binz
Chief Financial Officer, Atlassian Corp.


Corrected Transcript

03-Aug-2023


Yeah. Thanks for the question. Let me just talk a little bit about the differences between SMB and enterprise, and
I think it will get to your question. The SMB segment of our business is the most sensitive to macro, and it has
been the most impacted over the last year by the macroeconomic headwinds. We also do see the impact of
changes in SMB in our cloud revenue sooner than in enterprise, simply given the mix of monthly cloud billings that
we have in SMB. So I do expect SMB to be an area that will most benefit in our portfolio if macro improves and
we'll see that impact in a fairly timely way in our revenue and P&L when it occurs.

Now, as you point out, enterprise has slightly different dynamics. It's been less macro-sensitive over the last year,
still impacted by macro, but not to the same degree as SMB. And as you pointed out, enterprise also benefits
from the investments we've made to unblock cloud migrations and improve enterprise capabilities, including
premium enterprise SKU value. And they purchase that value through a higher percentage of annual and multiyear contract billings, and that reduces the quarter to quarter revenue variability to some degree. So you will see
that play out over time and it does take longer for us to see that goodness from enterprise fully reflected in the
P&L as a result of that.
......................................................................................................................................................................................................................................................

**Operator: Your next question comes from Austin Cole from Citizens JMP Securities. Please go ahead.**
......................................................................................................................................................................................................................................................
Austin Cole
Analyst, JMP Securities
# Q

Yeah. Thanks for taking my question. Congrats on the results. So just cash now exceeds $2 billion on the balance
sheet, kind of a milestone there. I was wondering if you guys could share anything on how you guys are thinking
about M&A strategy at this stage.
......................................................................................................................................................................................................................................................
Joe Binz
Chief Financial Officer, Atlassian Corp.
# A

Well, yes, thanks for the question. I'll talk a little bit just in general about our capital allocation philosophy, which
really hasn't changed. The first priority is investment to drive the long-term growth of our business, both from an
organic R&D and sales and marketing perspective, as well as, as you point out, mergers and acquisitions and
strategic investments. And from there, we typically look to opportunistically return capital to shareholders as we're
currently doing through the share repurchase plan.

So Atlassian has always done M&A as part of its growth strategy and that continues to be part of it going forward
as well. Scott?
......................................................................................................................................................................................................................................................
Scott Farquhar
Co-Founder, Co-Chief Executive Officer & Director, Atlassian Corp.
# A

I don't think there's any change to our philosophy irrespective of what our balance sheet numbers look like, we've
always been a company that thinks about the long term in terms of our investments. And it's not going to change
as a result of having a large or a small cash balance out there. We look at the right things – [indiscernible]
(00:44:01) from a acquisition perspective [indiscernible] (00:44:06) we're willing to sit around and wait for
something that really fits us and really provides value to our customers. And so, for us, we're always on the
lookout for great value assets and we'll do them when the time is right, not irrespective of our bank balance.
......................................................................................................................................................................................................................................................

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

##### 15


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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call

Frederick Havemeyer
Analyst, Macquarie Capital (USA), Inc.


Corrected Transcript

03-Aug-2023


Hey, I'm back. Thank you. I wanted to also ask on the ITSM side of the business as well in Jira Service
Management, just the enterprise growth in particular, I think you noted about 80% year-over-year is looking quite
impressive. Just hoping to better understand what's really started to work there to be able to turn on that
enterprise growth within service management?
......................................................................................................................................................................................................................................................
Joe Binz
Chief Financial Officer, Atlassian Corp.
# A

Cameron here. I'll call out the bits – what's driving the enterprise success and IT service management; largely
comes off the back of many of our enterprise investments [ph] broadly (00:45:08) at the Atlassian Cloud platform
level, whether that was data residency, whether that's certifications, all the same benefit that we had for driving
migrations in large enterprise automatically gets translated to Jira Service Management.

However, the Jira Service Management team has also been exceedingly focused on knocking down the specific
IT requirements of those larger customers and you see that largely show up the validation of that as we are in the
leadership quadrant in the Gartner IT Magic Quadrant, which basically shows that, hey, yeah, we check all the
boxes that those customers require while maintaining that unique value of bringing dev and IT together at a get a
relatively competitive price point. So it's really the investment across the board in IT service management, as we
said a few years ago, now we're going to double down this area. And as we've paid off those R&D investments
and focused our go-to-market efforts, as we reach out to our larger customers and we talk to them about
migrating the cloud, we're not just talking about getting what they already have over to the cloud, we talk about
expanding the overall Atlassian value prop as we move to the Atlassian Cloud platform. And that's also helped us
expand the Jira Service Management offerings. Mike?
......................................................................................................................................................................................................................................................
Michael Cannon-Brookes
Co-Founder, Co-Chief Executive Officer & Director, Atlassian Corp.
# A

Yeah. I just wanted to add on one thing I was talking to an enterprise customer maybe a month, month-and-a-half
ago, and one of the things that was coming through to them was the value of the Atlassian platform and one of
the reasons why they opted for JSM. In particular in this case they used Atlassian in their Agile and DevOps, the
Jira software and other products. The combination of development teams and IT change is increasingly important.
We have an incredibly unique value advantage there as every customer, every company becomes a software
company, that connectivity between development teams and IT teams is incredibly important. That's powered by
our investments in the Atlassian platform over time. You're seeing that come through in Atlassian Intelligence and
a whole host of other ways. But it's really gratifying to us to see that resonating with customers, especially the
large customers and it's a big differentiator.

The same actually applies on the connectivity between IT and service teams in an organization and the work
management space. So on the other side of our market combinations, as enterprise service management
continues to roll out, our virtual agent technologies using Atlassian Intelligence, I think will be a huge boon to
larger enterprises in trying to take service management more broadly from IT into HR, finance, marketing and
other capabilities. This all relies on the power of the Atlassian Cloud platform. It'll continue to drive migrations of
our largest customers there and I think be a differentiator in the ITSM space.
......................................................................................................................................................................................................................................................

**Operator: Thank you. That's all the questions we have time for today. I will now turn the call over to Scott for**
closing remarks.
......................................................................................................................................................................................................................................................

##### 16


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#### Atlassian Corp. (TEAM)
Q4 2023 Earnings Call

##### Scott Farquhar
Co-Founder, Co-Chief Executive Officer & Director, Atlassian Corp.


Corrected Transcript

03-Aug-2023


Thank you everyone for joining our call today. As always, we appreciate your thoughtful questions and continued
support and a special thank you to the Atlassian team for your resilience and closing the year with strong
momentum. Also want to say a special thank you to Cameron; that was his last earnings call. I want to say a huge
thank you for the revenues you've given to Atlassian so far. Thank you all. And I'll see you next quarter.

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