K. Liu's Week in Review
In a prelude to next week’s onslaught of software earnings, Atlassian (TEAM) posted fiscal Q1 ’20 results ahead of expectations. The provider of collaboration software solutions added over 7,000 net new customers in the quarter, increasing the total count by 21% Y/Y to nearly 160,000 customers and fueling revenue growth of 36% Y/Y. Per management, over 90% of new customers purchased one or more cloud products, a key focus for FY ’20. The introduction of Free and Premium editions of its cloud products, discounted cloud options for academic and non-profit organizations, and ongoing expansion of integrations with other best-of-breed technology providers are all expected to drive further adoption of the company’s cloud solutions going forward. Analysts on the call raised questions regarding customer response to previously enacted pricing increases as well as broader market conditions, neither of which has affected customer buying patterns from management’s perspective. Guidance for Q2 was above consensus, and management raised its FY ’20 revenue outlook while leaving full year operating margin and EPS expectations unchanged. Despite the strong results and outlook, shares subsequently traded lower, attributable perhaps to the combination of a rich valuation and less of an uptick in guidance than the market may have anticipated.
In conjunction with its earnings release, Atlassian also announced its acquisition of Code Barrel, the developer of Automation for Jira, which is a tool used by over 6,000 organizations to automate repetitive tasks and to simplify other routine operations in Jira. Terms of the transaction were not provided. SailPoint Technologies Holdings (SAIL) also completed a couple of tuck-in deals this week, bolstering its Predictive Identity Platform with the acquisitions of Orkus and OverWatchID for $16.5 million and $20.0 million, respectively. Orkus enables customers to monitor and control access and authorizations across hybrid cloud assets, while OverWatchID leverages activity information to improve access controls for cloud and on-premise applications and infrastructure. In aggregate, the two acquisitions will add approximately $2 million in non-GAAP expenses to Q4 ’19 with no material revenue contribution. Both are expected to be fully integrated in 1H ’20.
As for notable executive moves this week, 2U (TWOU) appointed Paul Lalljie as Chief Financial Officer, succeeding Catherine Graham who previously announced her retirement in August. Mr. Lalljie most recently served as CFO at Neustar from 2009 to 2018. Pluralsight (PS) named Ross Meyercord as Chief Revenue Officer. He joins the company from Salesforce (CRM), where he was Executive Vice President of Sales, and he will oversee Pluralsight’s direct and indirect sales teams, pre-sales, and professional services. On a sadder note, Oracle (ORCL) announced the passing of co-Chief Executive Officer Mark Hurd today. Last month, the company had announced Mr. Hurd was taking a leave of absence for health reasons.
Mergers and Acquisitions
SailPoint Technologies Holdings (SAIL) acquired Orkus and OverWatchID for $16.5 million and $21.0 million, respectively.
Orkus' products assist customers in monitoring and controlling access and authorization across hybrid cloud assets.
OverWatchID’s solutions leverage activity information to improve access controls for cloud applications, cloud computing, hybrid IT environments and on-premise infrastructure.
Both acquisitions will be integrated into the SailPoint Predictive Identity Platform in 1H ’20 and are expected to add approximately $2 million in non-GAAP expenses in Q4 ’19 with no material revenue contribution.
Earnings Releases
Atlassian Announces First Quarter Fiscal Year 2020 Results
Atlassian (TEAM) reported Q1 ’20 results above expectations and raised its revenue outlook for FY ’20.
Revenue was $363 million (+36% Y/Y), above management’s guidance of $349-$353 million and consensus of $352 million. Non-IFRS operating income was $85 million (23% margin), also ahead of management’s guidance for a 21% non-IFRS operating margin and consensus of $74 million. Non-IFRS EPS were $0.28, beating guidance and consensus of $0.24.
Key metrics: added 7,060 net new customers in Q1 for a total of 159,787 customers (+21% Y/Y) at quarter-end; over 90% of new customers opted for one or more cloud products; free cash flow of $62 million (17% margin).
In Q1, the company introduced Free and Premium editions of its cloud offerings, introduced discounted cloud pricing for academic and non-profit organizations, and expanded the number of integrations with other best-of-breed technologies.
Atlassian also announced the acquisition of Code Barrel, the developer of Automation for Jira, which is a tool used by over 6,000 organizations to create recurring tasks and automate other routine operations in Jira without writing code.
Guidance for Q2 includes revenue of $386-$390 million, a non-IFRS operating margin of 22%, and non-IFRS EPS of $0.27, exceeding consensus expectations for $382 million in revenue, a 21% non-IFRS operating margin, and $0.26 in non-IFRS EPS.
Management raised its prior FY ’20 revenue outlook from $1.540-$1.556 billion to $1.560-$1.574 billion and maintained prior expectations for a non-IFRS operating margin of 20% and non-IFRS EPS of approximately $1.00.
Notable News
2U, Inc. Appoints Paul S. Lalljie as Chief Financial Officer
2U (TWOU) appointed Paul S. Lalljie, who previously served as CFO of Neustar from 2009-2018, as the company’s Chief Financial Officer.
Mr. Lalljie succeeds Catherine A. Graham, who announced her retirement in August.
Pluralsight Appoints Former Salesforce Executive Ross Meyercord to Chief Revenue Officer
Pluralsight (PS) named Ross Meyercord as Chief Revenue Officer, a role in which he will oversee the direct and indirect sales teams, pre-sales, and professional services.
Mr. Meyercord most recently served as Executive Vice President of Sales at Salesforce (CRM).