Annual Report 2023
FY23 HIG HL IG HTS
250,000+
Cloud customers
$3B+
Revenue
$2B+
Cloud revenue
$868M
Operating cash flow
$842M
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. Refer to page 62 of the Annual Report for a reconciliation of GAAP to non-GAAP financial measures.
To our stockholders,
customers,
partners, and
Atlassians –
We're proud of all we accomplished in fiscal year
2023. We stayed agile, made tough decisions,
These massive opportunities, combined with
Atlassian’s unique business model and track
and delivered on our top priorities. We exited the
fiscal year with over 260,000 customers and
record of winning bets set us up for years of
growth to come. Our job now is to keep the
generated over $3.5 billion in revenue and $868
momentum high whilst delivering exceptional
million in operating cash flow, all in the face of a
customer value across our three markets.
challenging economy.
As we enter fiscal year 2024, our teams are in full
Our three biggest bets – cloud, enterprise, and
execution mode driving toward this year’s big
ITSM – are paying off, further strengthening our
goals, and we feel very lucky. Not every
conviction in our strategy. We delivered
entrepreneur makes it to the 10-year mark, even
innovative new capabilities and integrations
when they do all the right things, and here we
across all our products, and migrated millions
are, 21 years into our Atlassian journey. We’re
more users to our world-class cloud platform. In
more excited than ever about the opportunities
total, more than 250,000 customers now enjoy
in front of us and are fired up to get after them.
our incredible cloud user experience. In ITSM, we
saw increased demand from enterprise
customers thanks to our ability to handle the
most sophisticated use cases at unparalleled
value. Enterprise customers of all stripes
deepened their commitment to Atlassian, citing
To the entire Atlassian team, thank you for your
resilience and trust during a year of
unprecedented change. The achievements we
make as a company would be impossible alone.
It’s your dedication that brings it all to life.
scale and security along with our robust network
Thank you all for your support on our journey to
of partners and dedicated customer success
unleash the potential of every team.
teams as key reasons for doing so. And we did it
all on the back of our trademark GTM efficiency.
The emergence of generative AI is yet another
exciting prospect for Atlassian. We rolled out a
new “virtual teammate” for our customers that
we call Atlassian Intelligence (which is already
driving cloud migrations) and have more time-
saving capabilities in the works. Over the long
term, AI will make software far easier to create,
ultimately giving rise to more software
development teams – as well as the
accompanying sales, support, and service teams.
Scott Farquhar and Mike Cannon-Brookes
Co-Founders and Co-Chief Executive Officers
1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-37651
Atlassian Corporation
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
Delaware
88-3940934
(I.R.S. Employer Identification No.)
350 Bush Street, 13th Floor
San Francisco, California 94104
(Address of principal executive offices and Zip Code)
(415) 701-1110
(Registrant's telephone number, including area code)
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, par value $0.00001 per share
TEAM
Nasdaq Global Select Market
Securities registered pursuant to Section 12(b) of the Act:
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act:
Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of
the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of December 31, 2022, the last business day of the
registrant’s most recently completed second fiscal quarter, was $19.1 billion based upon the closing price reported for such date on the Nasdaq Global Select Market.
As of August 11, 2023, there were 153,294,929 shares of the registrant’s Class A Common Stock and 104,085,737 shares of the registrant’s Class B Common Stock
outstanding.
Portions of the registrant’s definitive proxy statement relating to its 2023 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed within 120 days of the
registrant’s fiscal year ended June 30, 2023, are incorporated by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Except with
DOCUMENTS INCORPORATED BY REFERENCE
respect to information specifically incorporated by reference in this Annual Report on Form 10-K, the Proxy Statement is not deemed to be filed as part of this Annual
Report on Form 10-K.
ANNUAL REPORT
TABLE OF CONTENTS
EXPLANATORY NOTE
INTRODUCTION
FORWARD-LOOKING STATEMENTS
BUSINESS
RISK FACTORS
UNRESOLVED STAFF COMMENTS
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
RESERVED
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
CONTROL AND PROCEDURES
OTHER INFORMATION
DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART I.
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III.
Item 10.
Item 11.
EXECUTIVE COMPENSATION
Item 12.
Item 13.
Item 14.
PART IV.
Item 15.
Item 16.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
PRINCIPAL ACCOUNTANT FEES AND SERVICES
EXHIBIT AND FINANCIAL STATEMENT SCHEDULE
FORM 10-K SUMMARY
SIGNATURES
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EXPLANATORY NOTE
On September 30, 2022, Atlassian Corporation Plc, a public company limited by shares, incorporated under
the laws of England and Wales, completed a redomestication, which was approved by the shareholders of Atlassian
Corporation Plc, resulting in Atlassian Corporation, a Delaware corporation, becoming our publicly traded parent
company (the “U.S. Domestication”). Immediately prior to the effective time of the U.S. Domestication, existing
shares of Atlassian Corporation Plc were exchanged on a one-for-one basis for newly issued shares of
corresponding common stock of Atlassian Corporation, and all issued and outstanding equity awards of Atlassian
Corporation Plc were assumed by Atlassian Corporation and were converted into rights to acquire Atlassian
Corporation shares of Class A Common Stock on the same terms. As a result, all outstanding shareholders of
Atlassian Corporation Plc became common stockholders of Atlassian Corporation. Throughout this Annual Report
on Form 10-K, references to “Atlassian,” the “Company,” “our,” “we” and “us” (i) for periods until the completion of
the U.S. Domestication, refer to Atlassian Corporation Plc and (ii) for periods at or after the completion of the U.S.
Domestication, refer to Atlassian Corporation. Also, throughout this Annual Report on Form 10-K, we refer to our
equity securities (i) for periods until the completion of the U.S. Domestication, as ordinary shares and (ii) for periods
at or after the completion of the U.S. Domestication, as shares of common stock.
INTRODUCTION
Our consolidated financial statements are presented in U.S. dollars. All references in this Annual Report on
Form 10-K to “$,” “U.S. $,” “U.S. dollars” and “dollars” mean U.S. dollars, unless otherwise noted.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Forward-
looking statements generally relate to future events or our future financial or operating performance. In some cases,
you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,”
“plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,”
“potential” or “continue” or the negative of these words or other similar terms or expressions that articulate our
expectations, strategy, plans or intentions. Forward-looking statements contained in this Annual Report on Form 10-
K include, but are not limited to, statements about:
• Our future financial performance, including our revenues, cost of revenues, gross profit or gross margin and
operating expenses;
•
The sufficiency of our cash and cash equivalents to meet our liquidity needs;
• Our ability to increase the number of customers using our software;
• Our ability to attract and retain customers to use our products and solutions;
• Our ability to develop new products and enhancements to our existing products;
• Our ability to successfully expand in our existing markets and into new markets;
• Our ability to effectively manage our growth and future expenses;
• Our ability to prevent security breaches and unauthorized access to customer data;
• Our ability to maintain, protect and enhance our intellectual property;
• Our ability to grow our Cloud offerings, including the impact of customers transitioning from perpetual
licenses to subscription licenses;
• Our future growth and profitability;
• Our ability to comply with modified or new laws and regulations applying to our business, including privacy
and data security regulations;
• Our ability to attract and retain qualified employees and key personnel;
•
•
The effects of our rebalancing of resources;
The effects of our program to repurchase shares of our outstanding Class A Common Stock;
4
•
•
Future acquisitions of, or investments in, complementary companies, products, services or technologies;
and
The impact of general economic conditions, such as inflation and related interest rate increases, political
and social unrest, armed conflict, natural disasters, climate change, diseases and pandemics, and any
associated economic downturn, on our results of operations and financial performance.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this
Annual Report on Form 10-K.
You should not rely upon forward-looking statements as predictions of future events. We have based the
forward-looking statements contained in this Annual Report on Form 10-K primarily on our current expectations and
projections about future events and trends that we believe may affect our business, financial condition, results of
operations and prospects. The outcome of the events described in these forward-looking statements is subject to
risks, uncertainties and other factors described in “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge
from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the
forward-looking statements contained in this Annual Report on Form 10-K. The results, events and circumstances
reflected in the forward-looking statements may not be achieved or occur, and actual results, events or
circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Annual Report on Form 10-K relate only to events as of the date
on which the statements are made. We undertake no obligation to update any forward-looking statements made in
this Annual Report on Form 10-K to reflect events or circumstances after the date of this Annual Report on Form 10-
K or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not
actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should
not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the
potential impact of any future acquisitions, mergers, dispositions, or investments.
5
ITEM 1. BUSINESS
Company Overview
PART I
Our mission is to unleash the potential of every team.
Our products help teams organize, discuss and complete shared work — delivering superior outcomes for
their organizations.
Our primary products include Jira Software and Jira Work Management for planning and project
management, Confluence for content creation and sharing, Trello for capturing and adding structure to fluid, fast-
forming work for teams, Jira Service Management for team service, management and support applications, Jira
Align for enterprise agile planning, and Bitbucket for code sharing and management. Together, our products form an
integrated system for organizing, discussing and completing shared work, becoming deeply entrenched in how
teams collaborate and how organizations run. The Atlassian platform is the common technology foundation for our
products that drives connection between teams, information, and workflows. It allows work to flow seamlessly
across tools, automates the mundane so teams can focus on what matters, and enables better decision-making
based on the data customers choose to put into our products.
Our products serve teams of all shapes and sizes, in virtually every industry. Our pricing strategy is unique
within the enterprise software industry because we transparently share our affordable pricing online for most of our
products and we generally do not follow the practice of opaque pricing and ad hoc discounting. By delivering high-
value, low cost products in pursuit of customer volume, and targeting every organization, regardless of size,
industry, or geography we are able to operate at unusual scale for an enterprise software company, with more than
260,000 customers across virtually every industry sector in approximately 200 countries as of June 30, 2023.
To reach this expansive market, we primarily distribute and sell our products directly online and indirectly
through solutions partners, with limited traditional enterprise sales infrastructure. We offer a self-service, high-
velocity, low-friction distribution model that makes it easy for customers to try, adopt and use our products. By
making our products powerful, simple to try, easy to adopt, and affordable to purchase we generate demand from
word-of-mouth and viral expansion within organizations rather than having to solely rely on a traditional enterprise
sales infrastructure. Our indirect sales channel of solution partners and resellers primarily focus on customers in
regions that require local language support and other customized needs. We plan to continue to invest in our
partner programs to help us enter and grow in new markets, complementing our high-velocity, low-friction approach.
Our product strategy, investment in innovation, distribution model, dedication to customer value and
company culture work in concert to create unique value for our customers and competitive advantages for our
Company.
Our mission is possible with deep investment in product development to create and refine high-quality and
versatile products that users love. We invest significantly more in research and development activities than in
traditional sales activities relative to other enterprise software companies. These investments in developing and
continually improving our versatile products and platform help teams achieve their full potential.
Our Product Strategy
We have developed and acquired a broad portfolio of products that help teams large and small to organize,
discuss, and complete their work in a new way that is coordinated, efficient and innovative. Our products serve the
needs of teams of software developers, information technology ("IT”) professionals, and knowledge workers. While
our products can provide a range of distinct functionality to users, they share certain core attributes:
•
•
Built for Teams - Our products are singularly designed to help teams work better together and achieve
more. We design products that help our customers collaborate more effectively, be more transparent, and
operate in a coordinated manner.
Easy to Adopt and Use - We invest significantly in research and development to enable our products to be
both powerful and easy to use. Our software is designed to be accessed from the internet and immediately
put to work. By reducing the friction that usually accompanies the purchasing process of business software
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and eliminating the need for complicated and costly implementation and training, we believe we attract
more people to try, use, derive value from, and buy our software.
Versatile and Adaptable - We design simple products that are useful in a broad range of workflows and
projects. We believe that our products can improve any process involving teams, multiple work streams,
and deadlines. For example, Jira Software, which enables software teams to plan, build, and ship code, is
also used by thousands of our customers to manage workflows related to product design, supply chain
management, expense management, and legal document review.
Integrated - Our products are integrated and designed to work well together. For example, the status of an
IT service ticket generated in Jira Service Management can be viewed in Confluence, providing visibility to
business stakeholders.
•
•
• Open - We are dedicated to making our products open and interoperable with a range of other platforms
and applications, such as Microsoft, Zoom, Slack, Salesforce, Workday, and Dropbox. In order to provide a
platform for our partners and to promote useful products for our users, we developed the Atlassian
Marketplace, an online marketplace that features thousands of apps created by a growing global network of
independent developers and vendors. The Atlassian Marketplace provides customers a wide range of apps
they can use to extend or enhance our products, further increasing the value of our platform.
Our Distribution Model
Our high-velocity, low-friction distribution model is designed to drive exceptional customer scale by making
products that are free to try and affordable to purchase online. We prioritize product quality, automated distribution,
transparent pricing, and customer service over a costly traditional sales infrastructure. We primarily rely on word-of-
mouth and low-touch demand generation to drive trial, adoption, and expansion of our products.
The following are key attributes of our unique model:
•
•
Innovation-driven - Relative to other enterprise software companies, we invest significantly in research
and development rather than marketing and sales. Our goal is to focus our spending on new product and
feature development, measures that improve quality, ease of adoption, and expansion, and create organic
customer demand for our products. We also invest in ways to automate and streamline distribution and
customer support functions to enhance our customer experience and improve our efficiency.
Simple and Affordable - We offer our products at affordable prices in a simple and transparent format. For
example, a customer can use a free version of our products, which includes the core functionality of our
standard edition, for a certain number of users. In addition, a customer coming to our website can evaluate
and purchase a Jira Software subscription, for 10 users or 50,000+ users, based on a transparent list price,
without any interaction with a sales person. This approach, which stands in contrast to the opaque and
complex pricing plans offered by most traditional enterprise software vendors, is designed to complement
the easy-to-use, easy-to-adopt nature of our products and accelerate adoption by large volumes of new
customers.
• Organic and Expansive - Our model benefits significantly from customer word-of-mouth driving traffic to
our website. The vast majority of our transactions are conducted on our website, which drastically reduces
our customer acquisition costs. We also benefit from distribution leverage via our network of solution
partners, who resell and customize our products. Once we have landed within a customer team, the
networked nature and flexibility of our products tend to lead to adoption by other teams and departments,
resulting in user growth, new use cases, and the adoption of our other products.
•
Scale-oriented - Our model is designed to generate and benefit from significant customer scale and our
goal is to maximize the number of individual users of our software. With more than 260,000 customers
using our software today, we are able to reach a vast number of users, gather insights to continually
improve our offerings, and generate revenue growth by expanding within our customer accounts. Many of
our customers started as significantly smaller customers and we have demonstrated our ability to grow
within our existing customer base. Our products drive mission-critical workflows within customers of all
sizes, including enterprise customers. We offer enhanced capabilities in the premium and enterprise
editions of our products, and we efficiently evolve our expansion sales motion within these larger
customers. Ultimately, our model is designed to serve customers large and small and to benefit from the
data, network effects, and customer insights that emerge from such scale.
7
•
Data-driven - Our scale and the design of our model allows us to gather insights into and improve the
customer experience. We track, test, nurture and refine every step of the customer journey and our users'
experience. This allows us to intelligently manage our funnel of potential users, drive conversion and
expansion, and promote additional products to existing users. Our scale enables us to experiment with
various approaches to these motions and constantly tune our strategies for user satisfaction and growth.
Our Products
We offer a range of team collaboration products, including:
Jira Software and Jira Work Management for project management;
Confluence for team collaboration, content creation and sharing;
Jira Service Management for team service and support applications;
Trello for capturing and adding structure to fluid, fast-forming work for teams;
Jira Align for enterprise agile planning and value stream management;
Bitbucket for source code management;
Atlassian Access for enterprise-grade security and centralized administration; and
Jira Product Discovery for prioritization and product roadmapping.
•
•
•
•
•
•
•
•
These products can be deployed by users in the cloud and many of our products can be deployed behind the
firewall on the customers’ own infrastructure.
Jira Software and Jira Work Management. Jira Software and Jira Work Management provide a sophisticated and
flexible project management system that connects technical and business teams so they can better plan, organize,
track and manage their work and projects. Jira’s flexible ways to view work, customizable dashboards and
automation, and powerful reporting features keep distributed teams aligned and on track.
Confluence. Confluence provides a connected workspace that organizes knowledge across all teams to move work
forward. As a content collaboration hub, Confluence enables teams to create pages, ideate on projects, and better
connect and visualize work. Through Confluence’s rich features, our customers can create and share their work -
meeting notes, blogs, display images, data, roadmaps, code, and more - with their team or guests outside of their
organization. Confluence’s collaborative capabilities enable teams to streamline work and stay focused.
Jira Service Management. Jira Service Management is an intuitive and flexible service desk product for creating
and managing service experiences for a variety of service team providers, including IT, legal, and HR teams. Jira
Service Management features an elegant self-service portal, best-in-class team collaboration, ticket management,
integrated knowledge, asset and configuration management, service level agreement support, and real-time
reporting.
Trello. Trello is a collaboration and organization product that captures and adds structure to fluid, fast-forming work
for teams. A project management application that can organize your tasks into lists and boards, Trello can tell users
and their teams what is being worked on, by whom, and how far along the task or project is. At the same time, Trello
is extremely simple and flexible, which allows it to serve a vast number of other collaboration and organizational
needs.
Jira Align. Jira Align is Atlassian’s enterprise agility solution designed to help businesses quickly adapt and respond
to dynamic business conditions with a focus on value-creation. Through data-driven tools, Jira Align makes cross-
portfolio work visible, so leaders can identify bottlenecks, risks, and dependencies, and execution is aligned to
company strategy.
Bitbucket. Bitbucket is an enterprise-ready Git solution that enables professional dev teams to manage, collaborate
on, and deploy quality code.
Atlassian Access. Atlassian Access is an enterprise-wide product for enhanced security and centralized
administration that works across every Atlassian cloud product.
Jira Product Discovery. Jira Product Discovery is a prioritization and roadmapping tool. It helps transform product
management into a team sport, empowering product teams to bring structure to chaos, align stakeholders on
8
strategy and roadmaps, and bridge the gap between business and tech teams so they can build products that make
an impact - all in Jira.
Other Products
We also offer additional products, including Atlas, Bamboo, Crowd, Crucible, Fisheye, Opsgenie, Sourcetree,
Statuspage, and Atlassian cloud apps.
Our Technology, Infrastructure and Operations
Our products and technology infrastructure are designed to provide simple-to-use and versatile products with
industry-standard security and data protection that scales to organizations of all sizes, from small teams to large
organizations with thousands of users. Maintaining the security and integrity of our infrastructure is critical to our
business. As such, we leverage standard security and monitoring tools to ensure performance across our network.
The Atlassian Cloud Platform
The Atlassian platform is the foundation of our cloud solutions, connecting software developers, IT, and
business teams. It is designed to break down information silos with cross-product experiences and flexible
integrations and ensures that data remains secure, compliant, private, and available with enterprise-grade
centralized admin visibility and controls. It enables modern and connected experiences across teams, tools,
workflows, and data, including collaboration, analytics, automation, and artificial intelligence capabilities.
Our strategy is to build more common services and functionality shared across our platform. This approach
allows us to develop and introduce new products faster, as we can leverage common foundational services that
already exist. This also allows our products to more seamlessly integrate with one another, and provides customers
better experiences when using multiple products.
The Atlassian platform is extensible, meaning teams have the freedom to add, integrate, customize, or build
new functionality on the Atlassian platform as needed. New apps can be found on the Atlassian Marketplace or can
be developed using Forge, our cloud app development platform or Atlassian Connect, a development framework for
extending Atlassian cloud products.
The Atlassian Marketplace and Ecosystem
The Atlassian Marketplace is a hosted online marketplace for free and purchasable apps to enhance our
products. The Atlassian Marketplace offers thousands of apps from a large and growing ecosystem of third-party
vendors and developers.
We offer the Atlassian Marketplace to customers to simplify the discovery and purchase of add-on capabilities
for our products. Additionally, it serves as a platform for third-party vendors and developers to more easily reach our
customer base, while also streamlining license management and renewals. In fiscal year 2023, the Atlassian
Marketplace generated over $700 million in purchases of third-party apps.
Atlassian Ventures makes investments in the developer ecosystem, including cloud apps in the Atlassian
Marketplace, integrations with our product suite, and deeper strategic partnerships that create shared customer
value.
Forge is our cloud app development platform designed to standardize how Atlassian cloud products are
customized, extended, and integrated. Developers can rely on Forge’s hosted infrastructure, storage, and function-
as-a-service to build new cloud apps for themselves or for the Atlassian Marketplace.
Research and Development
Our research and development organization is primarily responsible for the design, development, testing and
delivery of our products and platform. It is also responsible for our customer services platforms, including billing and
support, our Marketplace platform, and marketing and sales systems that power our high-velocity, low friction
distribution model.
As of June 30, 2023, over 50% of our employees were involved in research and development activities. Our
research and development organization consists of flexible and dynamic teams that follow agile development
methodologies to enable rapid product releases across our various products and deployment options. In addition to
investing in our internal development teams, we invest heavily in our developer ecosystem to enable external
software developers to build features and solutions on top of our platform. Given our relentless focus on customer
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value, we work closely with our customers to develop our products and have designed a development process that
incorporates the feedback that matters most from our users. From maintaining an active online community to
measuring user satisfaction for our products, we are able to address our users’ greatest needs. We released new
products, versions, features, and cloud platform capabilities to drive existing customer success and expansion as
well as attract new customers to our products. We will continue to make significant investment in research and
development to support these efforts.
Customers
We pursue customer volume, targeting every organization, regardless of size, industry, or geography. This
allows us to operate at unusual scale for an enterprise software company, with more than 260,000 customers
across virtually every industry sector in approximately 200 countries as of June 30, 2023. Our customers range from
small organizations that have adopted one of our products for a small group of users, to over two-thirds of the
Fortune 500, many of which use a combination of our products across thousands of users.
We take a long-term view of our customer relationships and our opportunity. We recognize that users drive
the adoption and proliferation of our products and, as a result, we focus on enabling a self-service, low-friction
distribution model that makes it easy for users to try, adopt, and use our products. We are relentlessly focused on
measuring and improving user satisfaction as we know that one happy user will beget another, thereby expanding
the large and organic word-of-mouth community that helps drive our growth.
Sales and Marketing
Sales
Our website is our primary forum for sales and supports thousands of commercial transactions daily. We
share a wide variety of information directly with prospective customers, including detailed product information and
product pricing. Over the years, we have grown our sales force to augment our sales motion. Our sales team
primarily focuses on expanding the relationships with our largest existing customers. We do not solely rely on a
traditional, commissioned direct sales force because our sales model focuses on enabling customer self-service,
data-driven targeting and automation. We focus on allowing purchasing to be completed online through an
automated, easy-to-use web-based process that permits payment using a credit card or bank/wire transfer.
We also have a global network of solution partners with unique expertise, services and products that
complement the Atlassian portfolio, such as deployment and customization services, localized purchasing
assistance around currency, and language and specific in-country compliance requirements. Sales programs
consist of activities and teams focused on supporting our solution partners, tracking channel sales activity,
supporting and servicing our largest customers by helping optimize their experience across our product portfolio,
helping customers expand their use of our products across their organizations and helping product evaluators learn
how they can use our tools most effectively.
Marketing
Our go-to-market approach is driven by the strength and innovation of our products and organic user demand.
Our model focuses on a land-and-expand strategy, automated and low-touch customer service, superior product
quality, and disruptive pricing. We make our products free to try and easy to set up, which facilitates rapid and
widespread adoption of our software. Our products are built for teams, and thus have natural network effects that
help them spread organically, through word-of-mouth, across teams and departments. This word-of-mouth
marketing increases as more individual users and teams discover our products.
Our marketing efforts focus on growing our company brand, building broader awareness and increasing
demand for each of our products. We invest in brand and product promotion, demand generation through direct
marketing and advertising, and content development to help educate the market about the benefits of our products.
We also leverage insights gathered from our users and customers to improve our targeting and ultimately the
return-on-investment from our marketing activities. Data-driven marketing is an important part of our business
model, which focuses on continuous product improvement and automation in customer engagement and service.
Our Competition
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Our products serve teams of all shapes and sizes in every industry, from software and technical teams to IT
and service teams, to a broad array of business teams.
Our competitors range from large technology vendors to new and emerging businesses in each of the
markets we serve:
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Software Teams - Our competitors include large technology vendors, including Microsoft (including GitHub)
and IBM, and smaller companies like Gitlab that offer project management, collaboration and developer
tools.
IT Teams - Our competitors range from cloud vendors, including ServiceNow, PagerDuty, and Freshworks,
to legacy vendors such as BMC Software (Remedy) that offer service desk solutions.
Business Teams - Our competitors range from large technology vendors, including Microsoft and Alphabet,
that offer a suite of products, to smaller companies like Asana, Monday.com, Notion and Smartsheet, which
offer point solutions for team collaboration.
In most cases, due to the flexibility and breadth of our products, we co-exist within our own customer base
alongside many of our competitors’ products, such as Microsoft, Gitlab, ServiceNow and Asana.
The principal competitive factors in our markets include product capabilities, flexibility, total cost of ownership,
ease of access and use, performance and scalability, integration, customer satisfaction and global reach. Our
product strategy, distribution model and company culture allow us to compete favorably on all these factors.
Through our focus on research and development we are able to rapidly innovate, offer a breadth of products that
are easy to use yet powerful, are integrated and delivered through multiple deployment options from the cloud to
highly scalable data center solutions. Our high-velocity, low-friction online distribution model allows us to efficiently
reach customers globally, and we complement this with our network solution partners and sales teams that focus on
expansion within our largest customers. Our culture enables us to focus on customer success through superior
products, transparent pricing and world-class customer support.
Intellectual Property
We protect our intellectual property through a combination of trademarks, domain names, copyrights, trade
secrets and patents, as well as contractual provisions and restrictions governing access to our proprietary
technology.
We registered ‘‘Atlassian’’ as a trademark in the United States, Australia, the EU, Russia, China, Japan,
Switzerland, Norway, Singapore, Israel, Korea, and Canada, as well as other jurisdictions. We have also registered
or filed for trademark registration of product-related trademarks and logos in the United States, Australia, the EU,
Brazil, Russia, India, and China, and certain other jurisdictions, and will pursue additional trademark registrations to
the extent we believe it would be beneficial and cost effective.
As of June 30, 2023, we had 386 issued patents and have over 250 applications pending in the United States.
We also have a number of patent applications pending before the European Patent Office. These patents and
patent applications seek to protect proprietary inventions relevant to our business. We intend to pursue additional
patent protection to the extent we believe it would be beneficial and cost effective.
We are the registered holder of a variety of domain names that include ‘‘Atlassian’’ and similar variations.
In addition to the protection provided by our registered intellectual property rights, we protect our intellectual
property rights by imposing contractual obligations on third parties who develop or access our technology. We enter
into confidentiality agreements with our employees, consultants, contractors and business partners. Our employees,
consultants and contractors are also subject to invention assignment agreements, pursuant to which we obtain
rights to technology that they develop for us. We further protect our rights in our proprietary technology and
intellectual property through restrictive license and service use provisions in both the general and product-specific
terms of use on our website and in other business contracts.
Governmental Regulations
As a public company with global operations, we are subject to various federal, state, local, and foreign laws
and regulations. These laws and regulations, which may differ among jurisdictions, include, among others, those
related to financial and other disclosures, accounting standards, privacy and data protection, intellectual property, AI
and machine learning, corporate governance, tax, government contracting, trade, antitrust and competition,
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employment, import/export, and anti-corruption. Compliance with these laws and regulations may be onerous and
could, individually or in the aggregate, increase our cost of doing business, or otherwise have an adverse effect on
our business, reputation, financial condition, and operating results. For a further discussion of the risks associated
with government regulations that may materially impact us, see “Risk Factors” included in Part I, Item 1A of this
Annual Report on Form 10-K.
Human Capital Management
Our employees are our greatest asset and we strive to foster a collaborative, productive and fun work
environment. As of June 30, 2023, 2022 and 2021, we had 10,726, 8,813, and 6,433 employees, respectively.
In addition to focusing on building and maintaining a strong culture and talent recruitment and development
approaches, we also invest in additional areas that help us attract and retain a talented, global, and distributed
workforce that reflects our core values and drives positive value for our customers. This includes sustainability;
diversity, equity, and inclusion; and competitive total rewards including benefits and perks and our distributed work
approach, Team Anywhere. This has led to external recognition for our workplace and Company.
Our Culture
Our company culture is exemplified by our core values:
The following are the key elements of our corporate culture that contribute to our ability to drive customer
value and achieve competitive differentiation:
• Openness and Innovation - We value transparency and openness as an organization. We believe that
putting product pricing and documentation online promotes trust and makes customers more comfortable
engaging with our low-touch model. In addition, we are dedicated to innovation and encourage our
employees to invent new capabilities, applications, uses, and improvements for our software. We run our
Company using our own products, which promotes open communication and transparency throughout the
organization.
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•
Dedication to the Customer - Customer service and support is at the core of our business. Our customer
support teams strive to provide unparalleled service to our customers. We also encourage our service
teams to build scalable, self-service solutions that customers will love, as we believe superior service drives
greater customer happiness, which in turn breeds positive word-of-mouth.
Team-driven - As our mission is to unleash the potential of every team, we value teamwork highly. We
encourage our employees to be both team oriented and entrepreneurial in identifying problems and
inventing solutions. Dedication to teamwork starts at the top of our organization with our unique co-CEO
structure, and is celebrated throughout our Company.
Long-term Focused - We believe that we are building a company that can grow and prosper for decades
to come. Our model, in which we expand across our customers’ organizations over time, requires a patient,
long-term approach, and a dedication to continuous improvement. This is exemplified by our investment in
research and development, which is significant relative to traditional software models and is designed to
drive the long-term sustainability of our product leadership. Given the choice between short-term results
and building long-term scale, we choose the latter.
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Sustainability and Diversity, Equity and Inclusion
Atlassian’s Sustainability strategy is focused on the Company’s impact on our planet, people, customers, and
communities. Atlassian has set science-based targets to achieve net zero emissions by 2040, invested in a
diversity, equity, and inclusion program, committed to respecting human rights, and laid out guiding principles on
responsible technology.
Atlassian’s diversity, equity, and inclusion strategy is focused on building a diverse Atlassian team, ensuring
equitable outcomes for all, and fostering inclusive experiences through nine remote-first employee resource groups.
For more about our strategy, progress, and workforce and emissions data, please view our annual
Sustainability Reports on the corporate social responsibility portion of our website, under the “About us” section.
The contents of, or accessible through, our website are not incorporated into this filing.
Distributed Work and Other Benefits and Perks
Team Anywhere is Atlassian’s approach to distributed work: Employees can work from home, the office, or a
combination of the two within 13 countries in which the Company has legal entities, with the option to work outside
of an employee’s “home base” for short periods each year. This approach allows for greater flexibility for our
employees, opens up new talent pools beyond the urban hubs where our offices are located, and imagines new
ways of working for both our workforce and customers.
For more about our approach to Team Anywhere, please visit the ways of working portion of our website. The
contents of, or accessible through, our website are not incorporated into this filing.
Atlassian offers a variety of perks and benefits to support employees, their families, and to help them engage
with local communities. Beyond standard benefits like paid time off and healthcare coverage, offerings include:
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26 weeks of paid leave for birthing parents, 20 weeks of paid parental leave for non-birthing parents, and
family formation support;
Flexible working arrangements;
Fitness and wellness reimbursements;
Free and confidential tools for mental wellbeing, coaching, and therapy consultation; and
Annual learning budget and free online development courses and resources.
For more about our global benefits, please visit the candidate resource hub portion of our website, under the
Careers section. The contents of, or accessible through, our website are not incorporated into this filing.
Available Information
You can obtain copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K, and other filings with the SEC, and all amendments to these filings, free of charge from our website at
https://investors.atlassian.com/financials/sec-filings as soon as reasonably practicable after we file or furnish any of
these reports with the SEC. The SEC maintains an internet site that contains reports, proxy and information
statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The
contents of, or accessible through, these websites are not incorporated into this filing and our references to the
URLs for these websites are intended to be inactive textual references only.
ITEM 1A. RISK FACTORS
A description of the risks and uncertainties associated with our business is set forth below. You should
carefully consider such risks and uncertainties, together with the other information contained in this Annual Report
on Form 10-K, and in our other public filings. If any such risks and uncertainties actually occur, our business,
financial condition or results of operations could differ materially from the plans, projections and other forward-
looking statements included elsewhere in this Annual Report on Form 10-K and in our other public filings. In
addition, if any of the following risks and uncertainties, or if any other risks and uncertainties, actually occur, our
business, financial condition, or results of operations could be harmed substantially.
Risk Factor Summary
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Our business is subject to numerous risks and uncertainties, including those highlighted in this section titled
“Risk Factors” and summarized below. We have various categories of risks, including risks related to our business
and industry, risks related to information technology, intellectual property, data security and privacy, risks related to
legal, regulatory, accounting, and tax matters, risks related to ownership of our Class A Common Stock, risks
related to our indebtedness, and general risks, which are discussed more fully below. As a result, this risk factor
summary does not contain all of the information that may be important to you, and you should read this risk factor
summary together with the more detailed discussion of risks and uncertainties set forth following this summary, as
well as elsewhere in this Annual Report on Form 10-K. These risks include, but are not limited to, the following:
• Our rapid growth makes it difficult to evaluate our future prospects and may increase the risk that we will not
continue to grow at or near historical rates.
• We may not be able to sustain our revenue growth rate or achieve profitability in the future.
•
The continuing global economic and geopolitical volatility, the COVID-19 pandemic, including any
associated economic and social impacts, increased inflation and measures taken in response to these
events, could harm our business and results of operations.
The markets in which we participate are intensely competitive, and if we do not compete effectively, our
business, results of operations, and financial condition could be harmed.
•
• Our distribution model of offering and selling on-premises offerings of certain of our products, in addition to
offering and selling Cloud offerings of these products, increases our expenses, may impact revenue
recognition timing, and may pose other challenges to our business.
• Our business depends on our customers renewing their subscriptions and maintenance plans and
purchasing additional licenses or subscriptions from us, and any decline in our customer retention or
expansion could harm our future results of operations.
If we are not able to develop new products and enhancements to our existing products that achieve market
acceptance and that keep pace with technological developments, our business and results of operations
could be harmed.
•
• Our quarterly results have fluctuated in the past and may fluctuate significantly in the future and may not
fully reflect the underlying performance of our business.
• Our business model relies on a high volume of transactions and affordable pricing. As lower cost or free
products are introduced by our competitors, our ability to generate new customers could be harmed.
If we fail to effectively manage our growth, our business and results of operations could be harmed.
•
• Our recent restructuring may not result in anticipated alignment with customer needs and business priorities
or operational efficiencies, could result in total costs and expenses that are greater than expected, and
could disrupt our business.
If our current marketing model is not effective in attracting new customers, we may need to incur additional
expenses to attract new customers and our business and results of operations could be harmed.
•
• Our Credit Facility and overall debt level may limit our flexibility in obtaining additional financing and in
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pursuing other business opportunities or operating activities.
Legal, regulatory, social and ethical issues relating to the use of new and evolving technologies, such as AI
and machine learning, in our offerings may result in reputational harm and liability.
If our security measures are breached or unauthorized or inappropriate access to customer data is
otherwise obtained, our products may be perceived as insecure, we may lose existing customers or fail to
attract new customers, and we may incur significant liabilities.
Interruptions or performance problems associated with our technology and infrastructure could harm our
business and results of operations.
Real or perceived errors, failures, vulnerabilities or bugs in our products or in the products on Atlassian
Marketplace could harm our business and results of operations.
Changes in laws or regulations relating to data privacy or data protection, or any actual or perceived failure
by us to comply with such laws and regulations or our privacy policies, could harm our business and results
of operations.
Because our products rely on the movement of data across national boundaries, global privacy and data
security concerns could result in additional costs and liabilities to us or inhibit sales of our products globally.
• Our global operations and structure subject us to potentially adverse tax consequences.
•
The dual class structure of our common stock has the effect of concentrating voting control with certain
stockholders, in particular, our Co-Chief Executive Officers and their affiliates, which will limit our other
stockholders’ ability to influence the outcome of important transactions, including a change in control.
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Risks Related to Our Business and Industry
Our rapid growth makes it difficult to evaluate our future prospects and may increase the risk that we will
not continue to grow at or near historical rates.
We have been growing rapidly over the last several years, and as a result, our ability to forecast our future
results of operations is subject to a number of uncertainties, including our ability to effectively plan for and model
future growth. Our recent and historical growth should not be considered indicative of our future performance. We
have encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by
growing companies in rapidly changing industries, such as the recent weakening economic conditions. If our
assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect
or change, or if we do not address these risks successfully, our operating and financial results could differ materially
from our expectations, our growth rates may slow, and our business would suffer.
We may not be able to sustain our revenue growth rate or achieve profitability in the future.
Our historical growth rate should not be considered indicative of our future performance and may decline in
the future. Our revenue growth rate has fluctuated in prior periods and, in future periods, our revenue could grow
more slowly than in recent periods or decline for a number of reasons, including any reduction in demand for our
products, increase in competition, limited ability to, or our decision not to, increase pricing, contraction of our overall
market, a slower than anticipated adoption of or migration to our Cloud offerings, or our failure to capitalize on
growth opportunities. For example, beginning in the first quarter of fiscal year 2023, we have seen growth from
existing customers moderate, which we believe is due to customers being impacted by weakening economic
conditions. Additionally, beginning in February 2021, we ceased sales of new perpetual licenses for our products,
and beginning in February 2022, we ceased sales of upgrades to these on-premises versions of our products. We
also plan to end maintenance and support for these on-premises versions of our products in February 2024. If our
customers do not transition from our on-premises offerings to our Cloud or Data Center offerings prior to February
2024, our revenue growth rates and profitability may be negatively impacted.
In addition, we expect expenses to increase substantially in the near term, particularly as we continue to
make significant investments in research and development and technology infrastructure for our Cloud offerings,
expand our operations globally and develop new products and features for, and enhancements of, our existing
products. As a result of these significant investments, and in particular stock-based compensation associated with
our growth, we may not be able to achieve profitability as determined under U.S. generally accepted accounting
principles (“GAAP”) in future periods. The additional expenses we will incur may not lead to sufficient additional
revenue to maintain historical revenue growth rates and profitability.
The continuing global economic and geopolitical volatility, the COVID-19 pandemic, including any
associated economic and social impacts, increased inflation and measures taken in response to these
events, could harm our business and results of operations.
The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, and
created significant volatility and disruption of financial markets. Additionally, the Russian invasion of Ukraine in 2022
has led to further economic disruptions. The conflict has increased inflationary pressures and supply chain
constraints, which have negatively impacted the global economy. Inflationary pressure may result in decreased
demand for our products and services, increases in our operating costs (including our labor costs), reduced liquidity,
and limits on our ability to access credit or otherwise raise capital. In response to the concerns over inflation risk,
the U.S. Federal Reserve raised interest rates multiple times in 2022 and 2023 and may continue to do so in the
future. It is especially difficult to predict the impact of such events on the global economic markets, which have been
and will continue to be highly dependent upon the actions of governments, businesses, and other enterprises in
response to such events, and the effectiveness of those actions.
The adverse public health developments of COVID-19, including orders to shelter-in-place, travel restrictions,
and mandated business closures, have adversely affected workforces, organizations, customers, economies, and
financial markets globally, leading to increased macroeconomic and market volatility. It has also disrupted the
normal operations of many businesses, including ours. Following an initial movement to remote work due to the
COVID-19 pandemic, we subsequently announced that most employees will have flexibility to work remotely
indefinitely as part of our “Team Anywhere” policy. Our remote-work arrangements could strain our business
continuity plans, introduce operational risk, including cybersecurity risks and increased costs, and impair our ability
to effectively manage our business, which may negatively impact our business, results of operations, and financial
condition. We are actively monitoring the impacts of the situation and may continue to adjust our current policies
and practices.
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Our business depends on demand for business software applications generally and for collaboration software
solutions in particular. In addition, the market adoption of our products and our revenue is dependent on the number
of users of our products. The COVID-19 pandemic, including intensified measures undertaken to contain the spread
of COVID-19, the Russian invasion of Ukraine, increased inflation and interest rates and the resulting economic and
social impacts of these events could reduce the number of personnel providing development or engineering
services, decrease technology spending, including the purchasing of software products, adversely affect demand for
our products, affect our ability to accurately forecast our future results, cause some of our paid customers or
suppliers to file for bankruptcy protection or go out of business, affect the ability of our customer support team to
conduct in-person trainings or our solutions partners to conduct in-person sales, impact expected spending from
new customers or renewals, expansions or reductions in paid seats from existing customers, negatively impact
collections of accounts receivable, result in elongated sales cycles, and harm our business, results of operations,
and financial condition. In particular, we have revenue exposure to customers who are small- and medium-sized
businesses. If these customers’ business operations and finances are negatively affected, they may not purchase or
renew our products, may reduce or delay spending, or request extended payment terms or price concessions,
which would negatively impact our business, results of operations, and financial condition. For example, rising
interest rates and slowing economic conditions have contributed to the recent failure of banking institutions, such as
Silicon Valley Bank and First Republic Bank. While we have not had any direct exposure to recently failed banking
institutions to date, if other banks and financial institutions enter receivership or become insolvent in the future in
response to financial conditions affecting the banking system and financial markets, our ability or our customers’
ability to access existing cash, cash equivalents, and investments may be threatened and affect our customers’
ability to pay for our products and could have a material adverse effect on our business and financial condition.
The extent to which these factors ultimately impact our business, results of operations, and financial position
will depend on future developments, which are uncertain and cannot be fully predicted at this time, including, but not
limited to, the continued duration and spread of the COVID-19 outbreak and related variants, its severity, the actions
taken by governments and authorities to contain the virus or treat its impact, the effectiveness of current vaccine
and therapeutic treatments, and the extent to which normal economic and operating conditions continue to resume,
future developments regarding Russia’s invasion of Ukraine, continued inflationary pressures and governmental
actions, such as interest rate increases to respond to such pressures. As a result of these and other recent
macroeconomic events, we have seen the growth from existing customers moderate and experienced volatility in
the trading prices for our Class A Common Stock, and such volatility may continue in the long term. Any sustained
adverse impacts from these and other recent macroeconomic events could materially and adversely affect our
business, financial condition, operating results, and earnings guidance that we may issue from time to time, which
could have a material effect on the value of our Class A Common Stock.
The markets in which we participate are intensely competitive, and if we do not compete effectively, our
business, results of operations, and financial condition could be harmed.
The markets for our solutions are fragmented, rapidly evolving, highly competitive, and have relatively low
barriers to entry. We face competition from both traditional, larger software vendors offering full collaboration and
productivity suites and smaller companies offering point products for features and use cases. Our principal
competitors vary depending on the product category and include Microsoft (including GitHub), IBM, Alphabet,
ServiceNow, PagerDuty, Gitlab, Freshworks, Asana, Monday.com, Notion and Smartsheet. In addition, some of our
competitors have made acquisitions to offer a more comprehensive product or service offering, which may allow
them to compete more effectively with our products. We expect this trend to continue as companies attempt to
strengthen or maintain their market positions in an evolving industry. Following such potential consolidations,
companies may create more compelling product offerings and be able to offer more attractive pricing options,
making it more difficult for us to compete effectively.
Our competitors, particularly our competitors with greater financial and operating resources, may be able to
respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or
customer requirements. With the adoption of new technologies, such as artificial intelligence (“AI”) and machine
learning, the evolution of our products, and new market entrants, we expect competition to intensify in the future.
For example, as we continue to expand our focus into new use cases or other product offerings beyond software
development teams, we expect competition to increase. Pricing pressures and increased competition generally
could result in reduced sales, reduced margins, losses, or the failure of our products to achieve or maintain more
widespread market acceptance, any of which could harm our business, results of operations and financial condition.
Many of our current and potential competitors have greater resources than we do, with established marketing
relationships, large enterprise sales forces, access to larger customer bases, pre-existing customer relationships,
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and major distribution agreements with consultants, system integrators and resellers. Additionally, some current and
potential customers, particularly large organizations, have elected, and may in the future elect, to develop or acquire
their own internal collaboration and productivity software tools that would reduce or eliminate the demand for our
solutions.
Our products seek to serve multiple markets, and we are subject to competition from a wide and varied field of
competitors. Some competitors, particularly new and emerging companies with sizeable venture capital investment,
could focus all their energy and resources on one product line or use case and, as a result, any one competitor
could develop a more successful product or service in a particular market we serve which could decrease our
market share and harm our brand recognition and results of operations. For all of these reasons and others we
cannot anticipate today, we may not be able to compete successfully against our current and future competitors,
which could harm our business, results of operations, and financial condition.
Our distribution model of offering and selling on-premises offerings of certain of our products, in addition
to offering and selling Cloud offerings of these products, increases our expenses, may impact revenue
recognition timing, and may pose other challenges to our business.
We currently offer and sell both on-premises and Cloud offerings of certain of our products. For these
products, our Cloud offering enables quick setup and subscription pricing, while our on-premises offering permits
more customization, a perpetual or term license fee structure, and complete application control. Although a
substantial majority of our revenue was historically generated from customers using our on-premises products, over
time our customers have moved and will continue to move to our Cloud offerings, and our Cloud offerings will
become more central to our distribution model. For example, beginning in February 2021, we ceased sales of new
perpetual licenses for our products, and beginning in February 2022, we ceased sales of upgrades to these on-
premises versions of our products. We also plan to end maintenance and support for these on-premises versions of
our products in February 2024. We may be subject to additional competitive and pricing pressures from our Cloud
offerings compared to our on-premises offerings, which could harm our business. Further, revenues from our Cloud
offerings are typically lower in the initial year compared to our on-premises offerings, which may impact our near-
term revenue growth rates and margins, and we incur higher or additional costs to supply our Cloud offerings, such
fees associated with hosting our cloud infrastructure. Additionally, we offered discounts to certain of our enterprise-
level on-premises customers to incentivize migration to our Cloud offerings, which impacted our near-term revenue
growth. If our customers do not transition from our on-premises offerings to our Cloud or Data Center offerings prior
to February 2024, our revenue growth rates and profitability may be negatively impacted. If our Cloud offerings do
not develop as quickly as we expect, if we are unable to continue to scale our systems to meet the requirements of
successful, large Cloud offerings, or if we lose customers currently using our on-premises products due to our
increased focus on our Cloud offerings or our inability to successfully migrate them to our Cloud products, our
business could be harmed. We are directing a significant portion of our financial and operating resources to
implement robust Cloud offerings for our products and to migrate our existing customers to our Cloud offerings, but
even if we continue to make these investments, we may be unsuccessful in growing or implementing our Cloud
offering that competes successfully against our current and future competitors and our business, results of
operations, and financial condition could be harmed.
Our business depends on our customers renewing their subscriptions and maintenance plans and
purchasing additional licenses or subscriptions from us, and any decline in our customer retention or
expansion could harm our future results of operations.
In order for us to maintain or improve our results of operations, it is important that our customers renew their
subscriptions and maintenance plans when existing contract terms expire and that we expand our commercial
relationships with our existing customers. Our customers have no obligation to renew their subscriptions or
maintenance plans, and our customers may not renew subscriptions or maintenance plans with a similar contract
duration or with the same or greater number of users. Our customers generally do not enter into long-term
contracts, rather they primarily have monthly or annual terms. Some of our customers have elected not to renew
their agreements with us and it is difficult to accurately predict long-term customer retention.
Our customer retention and expansion may decline or fluctuate as a result of a number of factors, including
our customers’ satisfaction with our products, new market entrants, our product support, our prices and pricing
plans, the prices of competing software products, reductions in our customers’ spending levels, new product
releases and changes to packaging of our product offerings, mergers and acquisitions affecting our customer base,
our increased focus on our Cloud offerings, our decision to end the sale of new perpetual licenses for our products,
or the effects of global economic conditions, including the impacts on us or our customers, partners and suppliers
from inflation and related interest rate increases. We may be unable to timely address any retention issues with
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specific customers, which could harm our results of operations. If our customers do not purchase additional licenses
or subscriptions or renew their subscriptions or maintenance plans, renew on less favorable terms, or fail to add
more users, our revenue may decline or grow less quickly, which could harm our future results of operations and
prospects.
If we are not able to develop new products and enhancements to our existing products that achieve market
acceptance and that keep pace with technological developments, our business and results of operations
could be harmed.
Our ability to attract new customers and retain and increase revenue from existing customers depends in
large part on our ability to enhance and improve our existing products and to introduce compelling new products
that reflect the changing nature of our markets. The success of any enhancement to our products depends on
several factors, including timely completion and delivery, competitive pricing, adequate quality testing, integration
with existing technologies and our platform, and overall market acceptance. Any new product that we develop may
not be introduced in a timely or cost-effective manner, may contain bugs, or may not achieve the market acceptance
necessary to generate significant revenue. If we are unable to successfully develop new products, enhance our
existing products to meet customer requirements, or otherwise gain market acceptance, our business, results of
operations, and financial condition could be harmed.
If we cannot continue to expand the use of our products beyond our initial focus on software developers,
our ability to grow our business could be harmed.
Our ability to grow our business depends in part on our ability to persuade current and future customers to
expand their use of our products to additional use cases beyond software developers, including information
technology and business teams. If we fail to predict customer demands or achieve further market acceptance of our
products within these additional areas and teams, or if a competitor establishes a more widely adopted product for
these applications, our ability to grow our business could be harmed.
We invest significantly in research and development, and to the extent our research and development
investments do not translate into new products or material enhancements to our current products, or if we
do not use those investments efficiently, our business and results of operations would be harmed.
A key element of our strategy is to invest significantly in our research and development efforts to develop new
products and enhance our existing products to address additional applications and markets. In fiscal years 2023
and 2022, our research and development expenses were 53% and 46% of our revenue, respectively. If we do not
spend our research and development budget efficiently or effectively on compelling innovation and technologies, our
business could be harmed and we may not realize the expected benefits of our strategy. Moreover, research and
development projects can be technically challenging and expensive. The nature of these research and development
cycles may cause us to experience delays between the time we incur expenses associated with research and
development and the time we are able to offer compelling products and generate revenue, if any, from such
investment. Additionally, anticipated customer demand for a product we are developing could decrease after the
development cycle has commenced, and we would nonetheless be unable to avoid substantial costs associated
with the development of any such product. If we expend a significant amount of resources on research and
development and our efforts do not lead to the successful introduction or improvement of products that are
competitive in our current or future markets, it could harm our business and results of operations.
If we fail to effectively manage our growth, our business and results of operations could be harmed.
We have experienced and expect to continue to experience rapid growth, both in terms of employee
headcount and number of customers, which has placed, and may continue to place, significant demands on our
management, operational, and financial resources. We operate globally and sell our products to customers in
approximately 200 countries. Further, we have employees in Australia, the U.S., the United Kingdom (the “UK”), the
Netherlands, the Philippines, Poland, India, Turkey, Canada, Japan, Germany, France and New Zealand and a
substantial number of our employees have been with us for fewer than 24 months. We plan to continue to invest in
and grow our team, and to expand our operations into other countries in the future, which will place additional
demands on our resources and operations. As our business expands across numerous jurisdictions, we may
experience difficulties, including in hiring, training, and managing a diffuse and growing employee base.
We have also experienced significant growth in the number of customers, users, transactions and data that
our products and our associated infrastructure support. If we fail to successfully manage our anticipated growth and
change, the quality of our products may suffer, which could negatively affect our brand and reputation and harm our
ability to retain and attract customers. Finally, our organizational structure is becoming more complex and if we fail
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to scale and adapt our operational, financial, and management controls and systems, as well as our reporting
systems and procedures, to manage this complexity, our business, results of operations, and financial condition
could be harmed. We will require significant capital expenditures and the allocation of management resources to
grow and change in these areas.
Our recent restructuring may not result in anticipated alignment with customer needs and business
priorities or operational efficiencies, could result in total costs and expenses that are greater than expected,
and could disrupt our business.
In March 2023, we announced a plan to reduce our global headcount by approximately 5% and to reduce our
office space. These actions are part of our initiatives to better position ourselves to execute against our largest
growth opportunities. This includes continuing to invest in strategic areas of the business, aligning talent to best
meet customer needs and business priorities, and consolidating our leases for purposes of optimizing operational
efficiency. We may incur other charges or cash expenditures not currently contemplated due to unanticipated events
that may occur, including in connection with the implementation of these actions. We may not realize, in full or in
part, the anticipated benefits from this restructuring due to unforeseen difficulties, delays or unexpected costs. If we
are unable to realize the expected operational efficiencies from the restructuring, we may need to undertake
additional restructuring activities, and our operating results and financial condition could be adversely affected.
Furthermore, our restructuring efforts may be disruptive to our operations and could yield unanticipated
consequences, such as attrition beyond planned staff reductions, increased difficulties in our day-to-day operations
and reduced employee morale. If employees who were not affected by the reduction in force seek alternative
employment, this could result in unplanned additional expenses to ensure adequate resourcing or harm our
productivity. Our restructuring could also harm our ability to attract and retain qualified personnel who are critical to
our business, the failure of which could adversely affect our business.
Our corporate values have contributed to our success, and if we cannot maintain these values as we grow,
we could lose the innovative approach, creativity, and teamwork fostered by our values, and our business
could be harmed.
We believe that a critical contributor to our success has been our corporate values, which we believe foster
innovation, teamwork, and an emphasis on customer-focused results. In addition, we believe that our values create
an environment that drives and perpetuates our product strategy and low-cost distribution approach. As we undergo
growth in our customers and employee base, transition to a remote-first “Team Anywhere” work environment, and
continue to develop the infrastructure of a public company, we may find it difficult to maintain our corporate values.
Any failure to preserve our values could harm our future success, including our ability to retain and recruit
personnel, innovate and operate effectively, and execute on our business strategy.
Our quarterly results have fluctuated in the past and may fluctuate significantly in the future and may not
fully reflect the underlying performance of our business.
Our quarterly financial results have fluctuated in the past and may fluctuate in the future as a result of a
variety of factors, many of which are outside of our control. If our quarterly financial results fall below the
expectations of investors or any securities analysts who follow us, the price of our Class A Common Stock could
decline substantially. Factors that may cause our revenue, results of operations and cash flows to fluctuate from
quarter to quarter include, but are not limited to:
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our ability to attract new customers, retain and increase sales to existing customers, and satisfy our
customers’ requirements;
the timing of customer renewals;
changes in our or our competitors’ pricing policies and offerings;
new products, features, enhancements, or functionalities introduced by our competitors;
the amount and timing of operating costs and capital expenditures related to the operations and expansion
of our business;
significant security breaches, technical difficulties, or interruptions to our products;
our increased focus on our Cloud offerings, including customer migrations to our Cloud products;
the number of new employees added or, conversely, reductions in force;
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changes in foreign currency exchange rates or adding additional currencies in which our sales are
denominated;
the amount and timing of acquisitions or other strategic transactions;
extraordinary expenses such as litigation, tax settlements, adverse audit rulings or other dispute-related
settlement payments;
general economic conditions, such as recent inflation and related interest rate increases, that may
adversely affect either our customers’ ability or willingness to purchase additional licenses, subscriptions,
and maintenance plans, delay a prospective customer’s purchasing decisions, reduce the value of new
license, subscription, or maintenance plans, or affect customer retention;
the impact of political and social unrest, armed conflict, natural disasters, climate change, diseases and
pandemics, and any associated economic downturn, on our results of operations and financial performance;
seasonality in our operations;
the impact of new accounting pronouncements and associated system implementations; and
the timing of the grant or vesting of equity awards to employees, contractors, or directors.
Many of these factors are outside of our control, and the occurrence of one or more of them might cause our
revenue, results of operations, and cash flows to vary widely. As such, we believe that quarter-to-quarter
comparisons of our revenue, results of operations, and cash flows may not be meaningful and should not be relied
upon as an indication of future performance.
We may require additional capital to support our operations or the growth of our business and we cannot
be certain that we will be able to secure this capital on favorable terms, or at all.
We may require additional capital to respond to business opportunities, challenges, acquisitions, a decline in
the level of license, subscription or maintenance revenue for our products, or other unforeseen circumstances. We
may not be able to timely secure debt or equity financing on favorable terms, or at all. This inability to secure
additional debt or equity financing could be exacerbated in times of economic uncertainty and tighter credit, such as
is currently the case in the U.S. and abroad. In addition, recent increases in interest rates could make any debt
financing that we are able to secure much more expensive than in the past. Our current Credit Facility contains
certain restrictive covenants and any future debt financing obtained by us could involve restrictive covenants
relating to financial and operational matters, which may make it more difficult for us to obtain additional capital and
to pursue business opportunities, including potential acquisitions. If we raise additional funds through further
issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders
could suffer significant dilution in their percentage ownership of Atlassian, and any new equity securities we issue
could have rights, preferences and privileges senior to those of holders of our Class A Common Stock. If we are
unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to
continue to grow or support our business and to respond to business challenges could be significantly limited.
If our current marketing model is not effective in attracting new customers, we may need to incur additional
expenses to attract new customers and our business and results of operations could be harmed.
Unlike traditional enterprise software vendors, who rely on direct sales methodologies and face long sales
cycles, complex customer requirements and substantial upfront sales costs, we primarily utilize a viral marketing
model to target new customers. Through this word-of-mouth marketing, we have been able to build our brand with
relatively low marketing and sales costs. We also build our customer base through various online marketing
activities as well as targeted web-based content and online communications. This strategy has allowed us to build a
substantial customer base and community of users who use our products and act as advocates for our brand and
solutions, often within their own corporate organizations. Attracting new customers and retaining existing customers
requires that we continue to provide high-quality products at an affordable price and convince customers of our
value proposition. If we do not attract new customers through word-of-mouth referrals, our revenue may grow more
slowly than expected, or decline. In addition, high levels of customer satisfaction and market adoption are central to
our marketing model. Any decrease in our customers’ satisfaction with our products, including as a result of our own
actions or actions outside of our control, could harm word-of-mouth referrals and our brand. If our customer base
does not continue to grow through word-of-mouth marketing and viral adoption, we may be required to incur
significantly higher marketing and sales expenses in order to acquire new subscribers, which could harm our
business and results of operations.
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One of our marketing strategies is to offer free trials, limited free versions or affordable starter licenses for
certain products, and we may not be able to realize the benefits of this strategy.
We offer free trials, limited free versions or affordable starter licenses for certain products in order to promote
additional usage, brand and product awareness, and adoption. Historically, a majority of users never convert to a
paid version of our products from these free trials or limited free versions or upgrade beyond the starter license. Our
marketing strategy also depends in part on persuading users who use the free trials, free versions or starter
licenses of our products to convince others within their organization to purchase and deploy our products. To the
extent that these users do not become, or lead others to become, customers, we will not realize the intended
benefits of this marketing strategy, and our ability to grow our business could be harmed.
Our business model relies on a high volume of transactions and affordable pricing. As lower cost or free
products are introduced by our competitors, our ability to generate new customers could be harmed.
Our business model is based in part on selling our products at prices lower than competing products from
other commercial vendors. For example, we offer entry-level or free pricing for certain products for small teams at a
price that typically does not require capital budget approval and is orders-of-magnitude less than the price of
traditional enterprise software. As a result, our software is frequently purchased by first-time customers to solve
specific problems and not as part of a strategic technology purchasing decision. We have historically increased, and
will continue to increase, prices from time to time. As competitors enter the market with low cost or free alternatives
to our products, it may become increasingly difficult for us to compete effectively and our ability to garner new
customers could be harmed. Additionally, some customers may consider our products to be discretionary
purchases, which may contribute to reduced demand for our offerings in times of economic uncertainty, inflation and
related interest rate increases. If we are unable to sell our software in high volume, across new and existing
customers, our business, results of operations and financial condition could be harmed.
Our sales model does not rely primarily on a direct enterprise sales force, which could impede the growth
of our business.
Our sales model does not rely primarily on traditional, quota-carrying sales personnel. Although we believe
our business model can continue to adequately serve our customers without a large, direct enterprise sales force,
our viral marketing model may not continue to be as successful as we anticipate, and the absence of a large, direct,
enterprise sales function may impede our future growth. As we continue to scale our business, a more traditional
sales infrastructure could assist in reaching larger enterprise customers and growing our revenue. Identifying,
recruiting, training, and retaining such a qualified sales force would require significant time, expense and attention
and would significantly impact our business model. In addition, expanding our sales infrastructure would
considerably change our cost structure and results of operations, and we may have to reduce other expenses, such
as our research and development expenses, in order to accommodate a corresponding increase in marketing and
sales expenses and maintain positive free cash flow. If our lack of a large, direct enterprise sales force limits us from
reaching larger enterprise customers and growing our revenue, and we are unable to hire, develop, and retain
talented sales personnel in the future, our revenue growth and results of operations could be harmed.
We derive a majority of our revenue from Jira Software and Confluence.
We derive a majority of our revenue from Jira Software and Confluence. As such, the market acceptance of
these products is critical to our success. Demand for these products and our other products is affected by a number
of factors, many of which are beyond our control, such as continued market acceptance of our products by
customers for existing and new use cases, the timing of development and release of new products, features,
functionality and lower cost alternatives introduced by our competitors, technological changes and developments
within the markets we serve, and growth or contraction in our addressable markets. If we are unable to continue to
meet customer demands or to achieve more widespread market acceptance of our products, our business, results
of operations, and financial condition could be harmed.
We recognize certain revenue streams over the term of our subscription and maintenance contracts.
Consequently, downturns in new sales may not be immediately reflected in our results of operations and
may be difficult to discern.
We generally recognize subscription and maintenance revenue from customers ratably over the terms of their
contracts. As a result, a significant portion of the revenue we report in each quarter is derived from the recognition of
deferred revenue relating to subscription and maintenance plans entered into during previous quarters.
Consequently, a decline in new or renewed licenses, subscriptions, and maintenance plans in any single quarter
may only have a small impact on our revenue results for that quarter. However, such a decline will negatively affect
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our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our
products, and potential changes in our pricing policies or rate of expansion or retention, may not be fully reflected in
our results of operations until future periods. For example, the impact of the current economic uncertainty may
cause customers to request concessions, including better pricing, or to slow their rate of expansion or reduce their
number of licenses, which may not be reflected immediately in our results of operations. We may also be unable to
reduce our cost structure in line with a significant deterioration in sales. In addition, a significant majority of our costs
are expensed as incurred, while a significant portion of our revenue is recognized over the life of the agreement with
our customer. As a result, increased growth in the number of our customers could continue to result in our
recognition of more costs than revenue in the earlier periods of the terms of certain of our customer agreements.
Our subscription and maintenance revenue also makes it more difficult for us to rapidly increase our revenue
through additional sales in any period, as revenue from certain new customers must be recognized over the
applicable term.
If the Atlassian Marketplace does not continue to be successful, our business and results of operations
could be harmed.
We operate the Atlassian Marketplace, an online marketplace, for selling third-party, as well as Atlassian-built,
apps. We rely on the Atlassian Marketplace to supplement our promotional efforts and build awareness of our
products, and we believe that third-party apps from the Atlassian Marketplace facilitate greater usage and
customization of our products. If we do not continue to add new vendors and developers, are unable to sufficiently
grow the number of cloud apps our customers demand, or our existing vendors and developers stop developing or
supporting the apps that they sell on Atlassian Marketplace, our business could be harmed.
In addition, third-party apps on Atlassian Marketplace may not meet the same quality standards that we apply
to our own development efforts and, in the past, third-party apps have caused disruptions affecting multiple
customers. To the extent these apps contain bugs, vulnerabilities, or defects, such apps may create disruptions in
our customers’ use of our products, lead to data loss or unauthorized access to customer data, they may damage
our brand and reputation, and affect the continued use of our products, which could harm our business, results of
operations and financial condition.
Any failure to offer high-quality product support could harm our relationships with our customers and our
business, results of operations, and financial condition.
In deploying and using our products, our customers depend on our product support teams to resolve complex
technical and operational issues. We may be unable to respond quickly enough to accommodate short-term
increases in customer demand for product support. We also may be unable to modify the nature, scope and delivery
of our product support to compete with changes in product support services provided by our competitors. Increased
customer demand for product support, without corresponding revenue, could increase costs and harm our results of
operations. In addition, as we continue to grow our operations and reach a global and vast customer base, we need
to be able to provide efficient product support that meets our customers’ needs globally at scale. The number of our
customers has grown significantly and that has put additional pressure on our product support organization. The
end customers may also reach out to us requesting support for third-party apps sold on the Atlassian Marketplace.
In order to meet these needs, we have relied in the past and will continue to rely on third-party vendors to fulfill
requests about third-party apps and self-service product support to resolve common or frequently asked questions
for Atlassian products, which supplement our customer support teams. If we are unable to provide efficient product
support globally at scale, including through the use of third-party vendors and self-service support, our ability to
grow our operations could be harmed and we may need to hire additional support personnel, which could harm our
results of operations. For example, in April 2022, a very small subset of our customers experienced a full outage
across their Atlassian cloud products due to a faulty script used during a maintenance procedure. While we restored
access for these customers with minimal to no data loss, these affected customers experienced disruptions in using
our Cloud products during the outage. Our sales are highly dependent on our business reputation and on positive
recommendations from our existing customers. Any failure to maintain high-quality product support, or a market
perception that we do not maintain high-quality product support, could harm our reputation, our ability to sell our
products to existing and prospective customers, and our business, results of operations and financial condition.
If we are unable to develop and maintain successful relationships with our solution partners, our business,
results of operations, and financial condition could be harmed.
We have established relationships with certain solution partners to distribute our products. We believe that
continued growth in our business is dependent upon identifying, developing and maintaining strategic relationships
with our existing and potential solution partners that can drive substantial revenue and provide additional value-
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added services to our customers. For fiscal year 2023, we derived over 40% of our revenue from channel partners’
sales efforts.
Successfully managing our indirect channel distribution efforts is a complex process across the broad range
of geographies where we do business or plan to do business. Our solution partners are independent businesses we
do not control. Notwithstanding this independence, we still face legal risk and reputational harm from the activities of
our solution partners including, but not limited to, export control violations, workplace conditions, corruption and anti-
competitive behavior.
Our agreements with our existing solution partners are non-exclusive, meaning they may offer customers the
products of several different companies, including products that compete with ours. They may also cease marketing
our products with limited or no notice and with little or no penalty. We expect that any additional solution partners we
identify and develop will be similarly non-exclusive and unbound by any requirement to continue to market our
products. If we fail to identify additional solution partners in a timely and cost-effective manner, or at all, or are
unable to assist our current and future solution partners in independently distributing and deploying our products,
our business, results of operations, and financial condition could be harmed. If our solution partners do not
effectively market and sell our products, or fail to meet the needs of our customers, our reputation and ability to
grow our business could also be harmed.
Our Credit Facility and overall debt level may limit our flexibility in obtaining additional financing and in
pursuing other business opportunities or operating activities.
Our Credit Facility requires compliance with various financial and non-financial covenants, including
affirmative covenants relating to the provision of periodic financial statements, compliance certificates and other
notices, maintenance of properties and insurance, payment of taxes and compliance with laws and negative
covenants, including, among others, restrictions on the incurrence of certain indebtedness, granting of liens and
mergers, dissolutions, consolidations and dispositions. The Credit Facility also provides for a number of events of
default, including, among others, failure to make a payment, bankruptcy, breach of a covenant, representation and
warranty, default under material indebtedness (other than the Credit Facility), change of control and judgment
defaults.
Under the terms of the Credit Facility, we may be restricted from engaging in business or operating activities
that may otherwise improve our business or from financing future operations or capital needs. Failure to comply with
the covenants, including the financial covenant, if not cured or waived, will result in an event of default that could
trigger acceleration of our indebtedness, which would require us to repay all amounts owing under our Credit
Facility and could have a material adverse impact on our business.
Overdue amounts under the Credit Facility accrue interest at a default rate. We cannot be certain that our
future operating results will be sufficient to ensure compliance with the financial covenant in our Credit Facility or to
remedy any defaults. In addition, in the event of default and related acceleration, we may not have or be able to
obtain sufficient funds to make the accelerated payments required under the Credit Facility.
We continue to have the ability to incur additional debt, subject to the limitations in our Credit Facility. Our
level of debt could have important consequences to us, including the following:
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our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions
or other purposes may be impaired or such financing may not be available on favorable terms;
we may need a substantial portion of our cash flow to make principal and interest payments on our debt,
reducing the funds that would otherwise be available for investment in operations and future business
opportunities;
our debt level will make us more vulnerable than our competitors with less debt to competitive pressures or
a downturn in our business or the economy generally; and
our debt level may limit our flexibility in responding to changing business and economic conditions.
Our ability to service our debt will depend upon, among other things, our future financial and operating
performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other
factors, some of which are beyond our control. If our operating results are not sufficient to service our current or
future indebtedness, we will be forced to take actions such as reducing or delaying our business activities,
acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt, or seeking
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additional equity capital or bankruptcy protection. We may not be able to effect any of these remedies on
satisfactory terms to us or at all.
In addition, our Credit Facility has a floating interest rate that is based on variable and unpredictable U.S. and
international economic risks and uncertainties and an increase in interest rates, such as has occurred recently and
is expected in the future, may negatively impact our financial results. We enter into interest rate hedging
transactions that reduce, but do not eliminate, the impact of unfavorable changes in interest rates. We attempt to
minimize credit exposure by limiting counterparties to internationally recognized financial institutions, but even these
counterparties are subject to default and contract risk and this risk is beyond our control. There is no guarantee that
our hedging efforts will be effective or, if effective in one period will continue to remain effective in future periods.
We have amended our Credit Facility to utilize the Secured Overnight Financing Right (“SOFR”) to calculate
the amount of accrued interest on any borrowings in place of London Interbank Offered Rate (“LIBOR”), which
ceased publication on June 30, 2023. SOFR is intended to be a broad measure of the cost of borrowing cash
overnight that is collateralized by U.S. Treasury securities. However, because SOFR is a broad U.S. Treasury repo
financing rate that represents overnight secured funding transactions, it differs fundamentally from LIBOR. The
change from LIBOR to SOFR could result in interest obligations that are more than or that do not otherwise
correlate over time with the payments that would have been made on this debt if LIBOR were available. This may
result in an increase in the cost of our borrowings under our existing Credit Facility and any future borrowings.
If we are not able to maintain and enhance our brand, our business, results of operations, and financial
condition could be harmed.
We believe that maintaining and enhancing our reputation as a differentiated and category-defining company
is critical to our relationships with our existing customers and to our ability to attract new customers. The successful
promotion of our brand attributes will depend on a number of factors, including our and our solution partners’
marketing efforts, our ability to continue to develop high-quality products, our ability to minimize and respond to
errors, failures, outages, vulnerabilities or bugs, and our ability to successfully differentiate our products from
competitive products. In addition, independent industry analysts often provide analyses of our products, as well as
the products offered by our competitors, and perception of the relative value of our products in the marketplace may
be significantly influenced by these analyses. If these analyses are negative, or less positive as compared to those
of our competitors’ products, our brand may be harmed.
The promotion of our brand requires us to make substantial expenditures, and we anticipate that the
expenditures will increase as our market becomes more competitive, as we expand into new markets, and as more
sales are generated through our solution partners. To the extent that these activities yield increased revenue, this
revenue may not offset the increased expenses we incur. If we do not successfully maintain and enhance our brand,
our business may not grow, we may have reduced pricing power relative to competitors, and we could lose
customers or fail to attract new customers, any of which could harm our business, results of operations, and
financial condition.
Legal, regulatory, social and ethical issues relating to the use of new and evolving technologies, such as AI
and machine learning, in our offerings may result in reputational harm and liability.
We are building AI and machine learning into our products. The rapid evolution of AI and machine learning will
require the application of resources to develop, test and maintain our products and services to help ensure that AI
and machine learning are implemented responsibly in order to minimize unintended, harmful impact. Failure to
properly do so may cause us to incur increased research and development costs, or divert resources from other
development efforts, to address social and ethical issues related to AI and machine learning. As with many cutting-
edge innovations, AI and machine learning present new risks and challenges. Existing laws and regulations may
apply to us or our vendors in new ways and new laws and regulations may be instituted, the effects of which are
difficult to predict. The risks and challenges presented by AI and machine learning could undermine public
confidence in AI and machine learning, which could slow its adoption and affect our business. If we enable or offer
AI and machine learning products that draw controversy due to their perceived or actual impact on human rights,
intellectual property, privacy, security, employment, the environment or in other social contexts, we may experience
brand or reputational harm, competitive harm or legal liability. Data governance practices by us or others that result
in controversy could also impair the acceptance of AI solutions. This in turn could undermine the decisions,
predictions, analysis or other outputs that AI applications produce, subjecting us to competitive harm, legal liability
and brand or reputational harm.
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Uncertainty around new and emerging AI applications such as generative AI content creation may require
additional investment in the development of proprietary datasets, machine learning models and systems to test for
accuracy, bias and other variables, which are often complex, may be costly and could impact our profit margin as
we expand generative AI into our product offerings. Developing, testing and deploying AI systems may also increase
the cost profile of our offerings due to the nature of the computing costs involved in such systems. Potential
government regulation specifically related to AI may also increase the burden and cost of research and
development in this area. For example, countries are considering legal frameworks on AI, which is a trend that may
increase now that the European Commission (the “EC”) of the European Union (the “EU”) has proposed the first
such framework. Stakeholders and those affected by the development and use of AI and machine learning
(including our employees and customers) who are dissatisfied with our public statements, policies, practices, or
solutions related to the development and use of AI and machine learning may express opinions that could introduce
reputational or business harm, or legal liability.
If we fail to integrate our products with a variety of operating systems, software applications, platforms and
hardware that are developed by others, our products may become less marketable, less competitive, or
obsolete and our results of operations could be harmed.
Our products must integrate with a variety of network, hardware, and software platforms, and we need to
continuously modify and enhance our products to adapt to changes in hardware, software, networking, browser and
database technologies. In particular, we have developed our products to be able to easily integrate with third-party
applications, including the applications of software providers that compete with us, through the interaction of
application programming interfaces (“APIs”). In general, we rely on the fact that the providers of such software
systems continue to allow us access to their APIs to enable these customer integrations. To date, we have not relied
on long-term written contracts to govern our relationship with these providers. Instead, we are subject to the
standard terms and conditions for application developers of such providers, which govern the distribution, operation
and fees of such software systems, and which are subject to change by such providers from time to time. Our
business could be harmed if any provider of such software systems:
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discontinues or limits our access to its APIs;
• modifies its terms of service or other policies, including fees charged to, or other restrictions on us or other
application developers;
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changes how customer information is accessed by us or our customers;
establishes more favorable relationships with one or more of our competitors; or
develops or otherwise favors its own competitive offerings over ours.
We believe a significant component of our value proposition to customers is the ability to optimize and
configure our products with these third-party applications through our respective APIs. If we are not permitted or
able to integrate with these and other third-party applications in the future, demand for our products could decline
and our business and results of operations could be harmed.
In addition, an increasing number of organizations and individuals within organizations are utilizing mobile
devices to access the internet and corporate resources and to conduct business. We have designed and continue to
design mobile applications to provide access to our products through these devices. If we cannot provide effective
functionality through these mobile applications as required by organizations and individuals that widely use mobile
devices, we may experience difficulty attracting and retaining customers. Failure of our products to operate
effectively with future infrastructure platforms and technologies could also reduce the demand for our products,
resulting in customer dissatisfaction and harm to our business. If we are unable to respond to changes in a cost-
effective manner, our products may become less marketable, less competitive or obsolete and our results of
operations could be harmed.
Acquisitions of, or investments in, other businesses, products, or technologies could disrupt our business,
and we may be unable to integrate acquired businesses and technologies successfully or achieve the
expected benefits of such acquisitions.
We have completed a number of acquisitions and strategic investments and continue to evaluate and
consider additional strategic transactions, including acquisitions of, or investments in, businesses, technologies,
services, products, and other assets in the future. We also may enter into strategic relationships with other
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businesses to expand our products, which could involve preferred or exclusive licenses, additional channels of
distribution, discount pricing or investments in other companies.
Any acquisition, investment or business relationship may result in unforeseen operating difficulties and
expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies,
products, personnel, or operations of the acquired companies, particularly if the key personnel of the acquired
companies choose not to work for us, their software and services are not easily adapted to work with our products,
or we have difficulty retaining the customers of any acquired business due to changes in ownership, management
or otherwise. Acquisitions may also disrupt our business, divert our resources, and require significant management
attention that would otherwise be available for development of our existing business. We may not successfully
evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition
transaction, including accounting charges. Moreover, the anticipated benefits of any acquisition, investment, or
business relationship may not be realized or we may be exposed to unknown risks or liabilities.
In the future, we may not be able to find suitable acquisition or strategic investment candidates, and we may
not be able to complete acquisitions or strategic investments on favorable terms, if at all. Our previous and future
acquisitions or strategic investments may not achieve our goals, and any future acquisitions or strategic investments
we complete could be viewed negatively by users, customers, developers or investors.
Negotiating these transactions can be time consuming, difficult and expensive, and our ability to complete
these transactions may often be subject to approvals that are beyond our control. Consequently, these transactions,
even if announced, may not be completed. For one or more of those transactions, we may:
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issue additional equity securities that would dilute our existing stockholders;
use cash that we may need in the future to operate our business;
incur large charges, expenses, or substantial liabilities;
incur debt on terms unfavorable to us or that we are unable to repay;
encounter difficulties retaining key employees of the acquired company or integrating diverse software
codes or business cultures; and
become subject to adverse tax consequences, substantial depreciation, impairment, or deferred
compensation charges.
We are subject to risks associated with our strategic investments, including partial or complete loss of
invested capital. Significant changes in the value of this portfolio could negatively impact our financial
results.
We have strategic investments in publicly traded and privately held companies in both domestic and
international markets, including in emerging markets. These companies range from early-stage companies to more
mature companies with established revenue streams and business models. Many such companies generate net
losses and the market for their products, services or technologies may be slow to develop, and, therefore, they are
dependent on the availability of later rounds of financing from banks or investors on favorable terms to continue
their operations. The financial success of our investment in any privately held company is typically dependent on a
liquidity event, such as a public offering, acquisition or other favorable market event reflecting appreciation relative
to the cost of our initial investment. Likewise, the financial success of our investment in any publicly held company is
typically dependent upon an exit in favorable market conditions, and to a lesser extent on liquidity events. The
capital markets for public offerings and acquisitions are dynamic and the likelihood of successful liquidity events for
the companies we have invested in could significantly worsen. Further, valuations of privately held companies are
inherently complex due to the lack of readily available market data.
Privately held companies in which we invest have in the past and others may in the future undertake an initial
public offering. We may also decide to invest in companies in connection with or as part of such company’s initial
public offering or other transactions directly or indirectly resulting in it being publicly traded. Therefore, our
investment strategy and portfolio have also expanded to include public companies. In certain cases, our ability to
sell these investments may be constrained by contractual obligations to hold the securities for a period of time after
a public offering, including market standoff agreements and lock-up agreements.
All of our investments, especially our investments in privately held companies, are subject to a risk of a partial
or total loss of investment capital and our investments have lost value in the past. In addition, we have in the past,
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and may in the future, continue to deploy material investments in individual investee companies, resulting in the
increasing concentration of risk in a small number of companies. Partial or complete loss of investment capital of
these individual companies could be material to our financial statements.
The expected benefits of the U.S. Domestication may not be realized.
On September 30, 2022, we completed the U.S. Domestication. We believe that the U.S. Domestication will
increase access to a broader set of investors, support inclusion in additional stock indices, streamline our corporate
structure, and provide more flexibility in accessing capital and, as a result, will be beneficial to our business and
operations, the holders of our ordinary shares, and other stakeholders. The success of the U.S. Domestication will
depend, in part, on our ability to realize the anticipated benefits associated with the U.S. Domestication and
associated reorganization of our corporate structure. There can be no assurance that all of the anticipated benefits
of the U.S. Domestication will be achieved, particularly as the achievement of the benefits are subject to factors that
we do not and cannot control.
We expect to incur additional costs related to the U.S. Domestication, including recurring costs resulting
from financial reporting obligations of being a “domestic issuer” as opposed to a “foreign private issuer” in
the United States.
We will incur additional legal, accounting and other expenses that may exceed the expenses we incurred prior
to the U.S. Domestication. The obligations of being a public company in the U.S. require significant expenditures
and will place significant demands on our management and other personnel, including costs resulting from public
company reporting obligations under the Exchange Act, and the rules and regulations regarding corporate
governance practices, including those under the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010, and the listing requirements of the Nasdaq Global
Select Market. These rules require that we maintain effective disclosure and financial controls and procedures,
internal control over financial reporting and changes in corporate governance practices, among many other complex
rules that are often difficult to monitor and maintain compliance with. While we were subject to many of these
requirements prior to the U.S. Domestication, additional legal and accounting requirements apply to us following the
U.S. Domestication. Our management and other personnel will need to devote additional time to ensure compliance
with all of these requirements and to keep pace with new regulations, otherwise we may fall out of compliance and
risk becoming subject to litigation or being delisted, among other potential problems.
Risks Related to Information Technology, Intellectual Property, and Data Security and Privacy
If our security measures are breached or unauthorized or inappropriate access to customer data is
otherwise obtained, our products may be perceived as insecure, we may lose existing customers or fail to
attract new customers, and we may incur significant liabilities.
Use of our products involves the storage, transmission, and processing of our customers’ proprietary data,
including potentially personal or identifying information. Unauthorized or inappropriate access to, or security
breaches of, our products could result in unauthorized or inappropriate access to data and information, and the loss,
compromise or corruption of such data and information. In the event of a security breach, we could suffer loss of
business, severe reputational damage adversely affecting customer or investor confidence, regulatory investigations
and orders, litigation, indemnity obligations, damages for contract breach, penalties for violation of applicable laws
or regulations, significant costs for remediation, and other liabilities. We have incurred and expect to incur significant
expenses to prevent security breaches, including costs related to deploying additional personnel and protection
technologies, training employees, and engaging third-party solution providers and consultants. Our errors and
omissions insurance coverage covering certain security and privacy damages and claim expenses may not be
sufficient to compensate for all liabilities we may incur.
Although we expend significant resources to create security protections that shield our customer data against
potential theft and security breaches, such measures cannot provide absolute security. We have in the past
experienced breaches of our security measures and other inappropriate access to our systems. Certain of these
incidents have resulted in unauthorized access to certain data processed through our products. Our products are at
risk for future breaches and inappropriate access, including, without limitation, inappropriate access that may be
caused by errors or breaches that may occur as a result of third-party action, including from state actors, or
employee, vendor or contractor error or malfeasance, and other causes. For example, the ongoing Russian invasion
of Ukraine may result in a heightened threat environment and create unknown cyber risks, including increased risk
of retaliatory cyber-attacks from Russian actors against non-Russian companies. Additionally, we have transitioned
to a remote-first “Team Anywhere” work environment that may pose additional data security risks.
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As we further transition to selling our products via our Cloud offerings, continue to collect more personal and
sensitive information, and operate in more countries, our risks continue to increase and evolve. For instance, we
rely on third-party partners to develop apps on the Atlassian Marketplace that connect with and enhance our Cloud
offerings for our customers. These apps may not meet the same quality standards that we apply to our own
development efforts and may contain bugs, vulnerabilities, or defects that could pose data security risks. Our ability
to mandate security standards and ensure compliance by these third parties may be limited. Additionally, our
products may be subject to vulnerabilities in the third-party software on which we rely. For example, in December
2021, a vulnerability in a widely-used open-source software application, known as Apache Log4j, was identified that
could have allowed bad actors to remotely access a target, potentially stealing data or taking control of a target’s
system. We promptly worked to remediate vulnerabilities related to Apache Log4j in our products while working with
our partners to ensure the same. While this issue has not materially affected our business, reputation or financial
results, there is no guarantee that our actions effectively remediated the vulnerabilities and there is no assurance
that other incidents could not occur in the future with a material adverse effect on our business. We are likely to face
increased risks that real or perceived vulnerabilities of our systems could seriously harm our business and our
financial performance, by tarnishing our reputation and brand and limiting the adoption of our products.
Because the techniques used to obtain unauthorized access or to sabotage systems change frequently and
generally are not identified until they are launched against a target, we may be unable to anticipate these
techniques or to implement adequate preventative measures. We may also experience security breaches that may
remain undetected for an extended period and, therefore, have a greater impact on the products we offer, the
proprietary data processed through our services, and, ultimately, on our business.
Interruptions or performance problems associated with our technology and infrastructure could harm our
business and results of operations.
We rely heavily on our network infrastructure and information technology systems for our business operations,
and our continued growth depends in part on the ability of our existing and potential customers to access our
solutions at any time and within an acceptable amount of time. In addition, we rely almost exclusively on our
websites for the downloading of, and payment for, all our products. We have experienced, and may in the future
experience, disruptions, data loss and corruption, outages and other performance problems with our infrastructure
and websites due to a variety of factors, including infrastructure changes, introductions of new functionality, human
or software errors, capacity constraints, denial of service attacks, or other security-related incidents. In some
instances, we have not been able to, and in the future may not be able to, identify the cause or causes of these
performance problems within an acceptable period of time. It may become increasingly difficult to maintain and
improve our performance, especially during peak usage times and as our products and websites become more
complex and our user traffic increases.
If our products and websites are unavailable, if our users are unable to access our products within a
reasonable amount of time, or at all, or if our information technology systems for our business operations
experience disruptions, delays or deficiencies, our business could be harmed. Moreover, we provide service level
commitments under certain of our paid customer cloud contracts, pursuant to which we guarantee specified
minimum availability. If we fail to meet these contractual commitments, we could be obligated to provide credits for
future service, or face contract termination with refunds of prepaid amounts related to unused subscriptions, which
could harm our business, results of operations, and financial condition. From time to time, we have granted, and in
the future will continue to grant, credits to paid customers pursuant to, and sometimes in addition to, the terms of
these agreements. For example, in April 2022, a very small subset of our customers experienced a full outage
across their Atlassian cloud products due to a faulty script used during a maintenance procedure. While we restored
access for these customers with minimal to no data loss, these affected customers experienced disruptions in using
our cloud products during the outage. We incurred certain costs associated with offering service level credits and
other concessions to these customers, although the overall impact did not have a material impact on our results of
operations or financial condition. However, other future events like this may materially and adversely impact our
results of operations or financial condition. Further, disruptions, data loss and corruption, outages and other
performance problems in our cloud infrastructure may cause customers to delay or halt their transition to our Cloud
offerings, to the detriment of our increased focus on our Cloud offerings, which could harm our business, results of
operations and financial condition.
Additionally, we depend on services from various third parties, including Amazon Web Services, to maintain
our infrastructure and distribute our products via the internet. Any disruptions in these services, including as a result
of actions outside of our control, would significantly impact the continued performance of our products. In the future,
these services may not be available to us on commercially reasonable terms, or at all. Any loss of the right to use
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any of these services could result in decreased functionality of our products until equivalent technology is either
developed by us or, if available from another provider, is identified, obtained and integrated into our infrastructure.
To the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and
continually develop our technology and network architecture to accommodate actual and anticipated changes in
technology, our business, results of operations and financial condition could be harmed.
Real or perceived errors, failures, vulnerabilities or bugs in our products or in the products on Atlassian
Marketplace could harm our business and results of operations.
Errors, failures, vulnerabilities, or bugs may occur in our products, especially when updates are deployed or
new products are rolled out. Our solutions are often used in connection with large-scale computing environments
with different operating systems, system management software, equipment, and networking configurations, which
may cause errors, failures of products, or other negative consequences in the computing environment into which
they are deployed. In addition, deployment of our products into complicated, large-scale computing environments
may expose errors, failures, vulnerabilities, or bugs in our products. Any such errors, failures, vulnerabilities, or bugs
have in the past not been, and in the future may not be, found until after they are deployed to our customers. Real
or perceived errors, failures, vulnerabilities, or bugs in our products have and could result in negative publicity, loss
of or unauthorized access to customer data, loss of or delay in market acceptance of our products, loss of
competitive position, or claims by customers for losses sustained by them, all of which could harm our business and
results of operations.
In addition, third-party apps on Atlassian Marketplace may not meet the same quality standards that we apply
to our own development efforts and, in the past, third-party apps have caused disruptions affecting multiple
customers. To the extent these apps contain bugs, vulnerabilities, or defects, such apps may create disruptions in
our customers’ use of our products, lead to data loss or unauthorized access to customer data, they may damage
our brand and reputation, and affect the continued use of our products, which could harm our business, results of
operations and financial condition.
Changes in laws or regulations relating to data privacy or data protection, or any actual or perceived failure
by us to comply with such laws and regulations or our privacy policies, could harm our business and
results of operations.
Privacy and data security have become significant issues in the U.S., Europe and in many other jurisdictions
where we offer our products. The regulatory framework for the collection, use, retention, safeguarding, sharing,
disclosure, and transfer of data worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable
future.
Globally, virtually every jurisdiction in which we operate has established its own data security and privacy
frameworks with which we, and/or our customers, must comply. These laws and regulations often are more
restricted than those in the United States.
The European General Data Protection regulation (“GDPR”), which is supplemented by national laws in
individual member states and the guidance of national supervisory authorities and the European Data Protection
Board, applies to any company established in the European Economic Area (“EEA”) as well as to those outside the
EEA if they collect and use personal data in connection with the offering of goods or services to individuals in the
EEA or the monitoring of their behavior. GDPR enhances data protection obligations for processors and controllers
of personal data, including, for example, expanded disclosures about how personal information is collected and
used, limitations on retention of information, mandatory data breach notification requirements, and extensive
obligations on services providers. Non-compliance can trigger steep fines. In addition, the UK has established its
own domestic regime with the UK GDPR and amendments to the Data Protection Act, which so far mirrors the
obligations in the GDPR, poses similar challenges and imposes substantially similar penalties.
Additionally, in the U.S., various laws and regulations apply to the collection, processing, disclosure and
security of certain types of data, including the Federal Trade Commission Act, and state equivalents, the Electronic
Communications Privacy Act and the Computer Fraud and Abuse Act. There are also various state laws relating to
privacy and data security. The California Consumer Privacy Act (“CCPA”) as modified by California Privacy Rights
Act (“CPRA”), broadly defines personal information and gives California residents expanded privacy rights and
protections and provides for civil penalties for violations and a private right of action for data breaches.
Since the CPRA passed, various other states have passed their own comprehensive privacy statutes that
share similarities with CCPA and CPRA. Some observers see this influx of state privacy regimes as a trend towards
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more stringent privacy legislation in the United States, including a potential federal privacy law, all of which could
increase our potential liability and adversely affect our business.
We expect that there will continue to be new proposed laws and regulations around the globe and we cannot
yet determine the full impact these developments may have on our business, nor assure ongoing compliance with
all such laws or regulations. For example, the EEA is in the process of finalizing the e-Privacy Regulation to replace
the European e-Privacy Directive (Directive 2002/58/EC as amended by Directive 2009/136/EC). We may face
difficulties in marketing to current and potential customers under applicable laws, which impacts our ability to spread
awareness of our products and services and, in turn, grow a customer base. As rules evolve, we also expect to
incur additional costs to comply with new requirements. As another example, countries are considering legal
frameworks on AI, which is a trend that may increase now that the EC has proposed the first such framework. The
interpretation and application of these laws are, and will likely remain, uncertain, and it is possible that these laws
may be interpreted and applied in a manner that is inconsistent with our existing data management practices or
product features. If so, in addition to the possibility of fines, lawsuits and other claims and penalties, we could be
required to fundamentally change our business activities and practices or modify our products, which could harm
our business. Any inability to adequately address privacy and data security concerns or comply with applicable
privacy or data security laws, regulations and policies could result in additional cost and liability to us, damage our
reputation, inhibit sales, and harm our business.
Moreover, record-breaking enforcement actions globally have shown that regulators wield their right to impose
substantial fines for violations of privacy regulations, and these enforcement actions could result in guidance from
regulators that would require changes to our current compliance strategy. Given the breadth and depth of changes
in data protection obligations, complying with global data protection requirements requires time, resources, and a
review of our technology and systems currently in use against regulatory requirements.
In addition, privacy advocates and industry groups may propose new and different self-regulatory standards
that either legally or contractually apply to us. Further, our customers may require us to comply with more stringent
privacy and data security contractual requirements or obtain certifications that we do not currently have, and any
failure to obtain these certifications could reduce the demand for our products and our business could be harmed. If
we were required to obtain additional industry certifications, we may incur significant additional expenses and have
to divert resources, which could slow the release of new products, all of which could harm our ability to effectively
compete.
Further, any failure or perceived failure by us to comply with our posted privacy policies, our privacy-related
obligations to users or other third parties, or any other legal obligations or regulatory requirements relating to
privacy, data protection or information security may result in governmental investigations or enforcement actions,
litigation, claims or public statements against us by consumer advocacy groups or others and could result in
significant liability, cause our users to lose trust in us, and otherwise materially and adversely affect our reputation
and business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations and
policies that are applicable to the businesses of our users may limit the adoption and use of, and reduce the overall
demand for, our platform. Additionally, if third parties we work with violate applicable laws, regulations or
agreements, such violations may put our users’ data at risk, could result in governmental investigations or
enforcement actions, fines, litigation, claims, or public statements against us by consumer advocacy groups or
others and could result in significant liability, cause our users to lose trust in us and otherwise materially and
adversely affect our reputation and business. Further, public scrutiny of, or complaints about, technology companies
or their data handling or data protection practices, even if unrelated to our business, industry or operations, may
lead to increased scrutiny of technology companies, including us, and may cause government agencies to enact
additional regulatory requirements, or to modify their enforcement or investigation activities, which may increase our
costs and risks.
Because our products rely on the movement of data across national boundaries, global privacy and data
security concerns could result in additional costs and liabilities to us or inhibit sales of our products
globally.
Certain privacy legislation restricts the cross-border transfer of personal data and some countries have
introduced or are currently considering legislation that imposes local storage and processing of data to avoid any
form of transfer to a third country, or other restrictions on transfer and disclosure of personal data, outside of that
country. Specifically, the EEA and UK data protection laws generally prohibit the transfer of personal data to third
countries, including to the U.S., unless the transfer is to an entity established in a third country deemed to provide
adequate protection or the parties to the transfer implement supplementary safeguards and measures to protect the
transferred personal data. Currently, where we transfer personal data from the EEA and the UK to third countries
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outside the EEA and UK that are not deemed to be “adequate,” we rely on standard contractual clauses (“SCCs”) (a
standard form of contract approved by the EC as an adequate personal data transfer mechanism), and we are
certifying with the successor to the EU-U.S. Privacy Shield Framework (“Privacy Shield”).
In the July 16, 2020 case of Data Protection Commissioner v. Facebook Ireland Limited and Maximillian
Schrems (“Schrems II”), though the court upheld the adequacy of the SCCs, it made clear that reliance on them
alone may not necessarily be sufficient in all circumstances. Use of the SCCs must now be assessed on a case-by-
case basis taking into account the legal regime applicable in the destination country, in particular applicable
surveillance laws and rights of individuals and additional measures and/or contractual provisions may need to be
put in place, as per the contractual requirement built into the EC’s new SCCs and the UK equivalent to conduct and
document Data Transfer Impact Assessments addressing these issues. The Court of Justice of the European Union
(“CJEU”) further stated that if a competent supervisory authority believes that the SCCs cannot be complied with in
the destination country and the required level of protection cannot be secured by other means, such supervisory
authority is under an obligation to suspend or prohibit that transfer. Supervisory authorities have pursued
enforcement in cases where they have deemed the level of protection in the destination country to be insufficient.
In July 2023, the EC published its adequacy decision for the EU-U.S. Data Privacy Framework to replace the
Privacy Shield, which was invalidated by the CJEU in its Schrems II judgment. Like past transfer frameworks, the
new framework is likely to be subject to legal challenges and may be struck down by the CJEU.
SCCs and other international data transfer mechanisms and data localization requirements will continue to
evolve and face additional scrutiny across the EEA, the UK and other countries. We continue to monitor and update
our data protection compliance strategy accordingly and will continue to explore other options for processing and
transferring data from the EEA and UK, including without limitation, conducting (or assisting data exporters in
conducting) assessments and due diligence of the related data flows and destination countries across our supply
chain and customer base, re-evaluating and amending our contractual and organizational arrangements, all of this
activity may involve substantial expense and distraction from other aspects of our business.
To the extent we are unsuccessful in establishing an adequate mechanism for international data transfers or
do not comply with the applicable requirements in respect of international transfers of data and localization, there is
a risk that any of our data transfers could be halted or restricted. In addition, we could be at risk of enforcement
action taken by an EEA or UK data protection authority including regulatory action, significant fines and penalties (or
potential contractual liabilities) until such point in time that we ensure an adequate mechanism for EEA and UK data
transfers to the U.S. and other countries is in place. This could damage our reputation, inhibit sales and harm our
business.
We may be sued by third parties for alleged infringement or misappropriation of their intellectual property
rights.
There is considerable patent and other intellectual property development activity in our industry. Our future
success depends in part on not infringing upon or misappropriating the intellectual property rights of others. We
have received, and may receive in the future, communications and lawsuits from third parties, including practicing
entities and non-practicing entities, claiming that we are infringing upon or misappropriating their intellectual
property rights, and we may be found to be infringing upon or misappropriating such rights. We may be unaware of
the intellectual property rights of others that may cover some or all of our technology, or technology that we obtain
from third parties. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted
against us, could require that we pay substantial damages or ongoing royalty or license payments, prevent us from
offering our products or using certain technologies, require us to implement expensive workarounds, refund fees to
customers or require that we comply with other unfavorable terms. In the case of infringement or misappropriation
caused by technology that we obtain from third parties, any indemnification or other contractual protections we
obtain from such third parties, if any, may be insufficient to cover the liabilities we incur as a result of such
infringement or misappropriation. We may also be obligated to indemnify our customers or business partners in
connection with any such claims or litigation and to obtain licenses, modify our products or refund fees, which could
further exhaust our resources. Even if we were to prevail in the event of claims or litigation against us, any claim or
litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our
management and other employees from our business operations and disrupt our business.
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Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual
property infringement and other losses.
Our agreements with customers and other third parties may include indemnification or other provisions under
which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of
intellectual property infringement, damages caused by us to property or persons, or other liabilities relating to or
arising from our products or other acts or omissions. The term of these contractual provisions often survives
termination or expiration of the applicable agreement. Large indemnity payments or damage claims from contractual
breach could harm our business, results of operations and financial condition. Although we generally contractually
limit our liability with respect to such obligations, we may still incur substantial liability related to them. Any dispute
with a customer with respect to such obligations could have adverse effects on our relationship with that customer
and other current and prospective customers, reduce demand for our products, damage our reputation and harm
our business, results of operations and financial condition.
We use open source software in our products that may subject our products to general release or require
us to re-engineer our products, which could harm our business.
We use open source software in our products and expect to continue to use open source software in the
future. There are uncertainties regarding the proper interpretation of and compliance with open source software
licenses. Consequently, there is a risk that the owners of the copyrights in such open source software may claim
that the open source licenses governing their use impose certain conditions or restrictions on our ability to use the
software that we did not anticipate. Such owners may seek to enforce the terms of the applicable open source
license, including by demanding release of the source code for the open source software, derivative works of such
software, or, in some cases, our proprietary source code that uses or was developed using such open source
software. These claims could also result in litigation, require us to purchase a costly license or require us to devote
additional research and development resources to change our products, any of which could result in additional cost,
liability and reputational damage to us, and harm to our business and results of operations. In addition, if the license
terms for the open source software we utilize change, we may be forced to re-engineer our products or incur
additional costs to comply with the changed license terms or to replace the affected open source software. Although
we have implemented policies and tools to regulate the use and incorporation of open source software into our
products, we cannot be certain that we have not incorporated open source software in our products in a manner that
is inconsistent with such policies.
Any failure to protect our intellectual property rights could impair our ability to protect our proprietary
technology and our brand.
Our success and ability to compete depend in part upon our intellectual property. We primarily rely on a
combination of patent, copyright, trade secret and trademark laws, trade secret protection and confidentiality or
license agreements with our employees, customers, business partners and others to protect our intellectual property
rights. However, the steps we take to protect our intellectual property rights may be inadequate. We make business
decisions about when to seek patent protection for a particular technology and when to rely upon trade secret
protection, and the approach we select may ultimately prove to be inadequate. Even in cases where we seek patent
protection, there is no assurance that the resulting patents will effectively protect every significant feature of our
products. In addition, we believe that the protection of our trademark rights is an important factor in product
recognition, protecting our brand and maintaining goodwill and if we do not adequately protect our rights in our
trademarks from infringement, any goodwill that we have developed in those trademarks could be lost or impaired,
which could harm our brand and our business. In any event, in order to protect our intellectual property rights, we
may be required to spend significant resources to monitor and protect these rights.
For example, in order to promote the transparency and adoption of our downloadable software, we provide
our customers with the ability to request a copy of the source code of those products, which they may customize for
their internal use under limited license terms, subject to confidentiality and use restrictions. If any of our customers
misuses or distributes our source code in violation of our agreements with them, or anyone else obtains access to
our source code, it could cost us significant time and resources to enforce our rights and remediate any resulting
competitive harms.
Litigation brought to protect and enforce our intellectual property rights could be costly, time consuming and
distracting to management. Furthermore, our efforts to enforce our intellectual property rights may be met with
defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights,
which could result in the impairment or loss of portions of our intellectual property rights. Our failure to secure,
protect and enforce our intellectual property rights could harm our brand and our business.
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Risks Related to Legal, Regulatory, Accounting, and Tax Matters
Our global operations and structure subject us to potentially adverse tax consequences.
We are subject to income taxes as well as non-income-based taxes in the U.S., Australia and various other
jurisdictions. Significant judgment is often required in the determination of our worldwide provision for income taxes.
Our effective tax rate could be impacted by changes in our earnings and losses in countries with differing statutory
tax rates, changes in transfer pricing, changes in operations, changes in non-deductible expenses, changes in
excess tax benefits of stock-based compensation expense, changes in the valuation of deferred tax assets and
liabilities and our ability to utilize them, the applicability of withholding taxes, effects from acquisitions, and changes
in accounting principles and tax laws. Any changes or uncertainty in taxing jurisdictions’ administrative
interpretations, decisions, policies and positions could also materially impact our income tax liabilities. Our
intercompany relationships are subject to complex transfer pricing regulations administered by taxing authorities in
various jurisdictions. The relevant revenue and taxing authorities may disagree with positions we have taken
generally, or our determinations as to the value of assets sold or acquired, or income and expenses attributable to
specific jurisdictions. For example, we are in ongoing negotiations with the Australian Taxation Office (“ATO’’) to
establish a unilateral advance pricing agreements (‘’APA’’) relating to our transfer pricing arrangements between
Australia and the U.S., and we have recorded a related uncertain tax position. Although our recorded tax reserves
are the best estimate of our liabilities, differences may occur in the future, depending on resolution of the APA
negotiations. In addition, in the ordinary course of our business we are subject to tax audits from various taxing
authorities. Although we believe our tax positions are appropriate, the final determination of any future tax audits
could be materially different from our income tax provisions, accruals and reserves. If such a disagreement were to
occur, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax
charges, a higher effective tax rate, reduced cash flows and lower overall profitability of our operations.
Tax laws in the U.S. and in foreign jurisdictions are subject to change. For example, the Tax Cuts and Jobs
Act (“TCJA”), signed into law in 2017, enacted significant tax law changes which impacted our tax obligations and
effective tax rate beginning in our fiscal year 2023. The TCJA eliminates the option to deduct research and
development expenditures, instead requiring taxpayers to capitalize and amortize such expenditures over five or
fifteen years beginning in fiscal year 2023. Although Congress is considering legislation that would defer the
capitalization and amortization requirement, there is no assurance that the provision will be repealed or otherwise
modified. The Inflation Reduction Act (“IRA”), signed into law in 2022, includes various corporate tax provisions
including a new alternative corporate minimum tax on applicable corporations. The IRA tax provisions may become
applicable in future years, which could result in additional taxes, a higher effective tax rate, reduced cash flows and
lower overall profitability of our operations.
Certain government agencies in jurisdictions where we do business have had an extended focus on issues
related to the taxation of multinational companies. In addition, the Organization for Economic Cooperation and
Development (the “OECD”) has introduced various guidelines changing the way tax is assessed, collected and
governed. Of note are the efforts around base erosion and profit shifting which seek to establish certain international
standards for taxing the worldwide income of multinational companies. These measures have been endorsed by the
leaders of the world’s 20 largest economies.
In March 2018, the EC proposed a series of measures aimed at ensuring a fair and efficient taxation of digital
businesses operating within the EU. As collaborative efforts by the OECD and EC continue, some countries have
unilaterally moved to introduce their own digital service tax or equalization levy to capture tax revenue on digital
services more immediately. Notably France, Italy, Austria, Spain, the UK, Turkey and India have enacted this tax,
generally 2% on specific in-scope sales above a revenue threshold. The EU and the UK have recently established a
mandate that focuses on the transparency of cross-border arrangements concerning at least one EU member state
through mandatory disclosure and exchange of cross-border arrangements rules. These regulations (known as
MDR in the UK and DAC 6 in the EU) require taxpayers to disclose certain transactions to the tax authorities
resulting in an additional layer of compliance and require careful consideration of the tax benefits obtained when
entering into transactions that need to be disclosed.
The OECD has proposed significant changes to the international tax law framework in the form of the Pillar
Two proposal. The proposal aims to provide a set of coordinated rules to prevent multinational enterprises from
shifting profits to low-tax jurisdictions and to implement a 15% global minimum tax. A number of countries have
agreed to implement the proposal, including the member states of the EU, which are required to codify the rules into
domestic law by December 31, 2023. Pillar Two is progressively being enacted in the many of the countries in which
we operate. The potential effects of Pillar Two may vary depending on the specific provisions and rules implemented
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by each country that adopts Pillar Two and may include tax rate changes, higher effective tax rates, potential tax
disputes and adverse impacts to our cash flows, tax liabilities, results of operations and financial position.
Global tax developments applicable to multinational companies may continue to result in new tax regimes or
changes to existing tax laws. If the U.S. or foreign taxing authorities change tax laws, our overall taxes could
increase, lead to a higher effective tax rate, harm our cash flows, results of operations and financial position.
Taxing authorities may successfully assert that we should have collected or in the future should collect
sales and use, value-added or similar taxes, and we could be subject to liability with respect to past or
future sales, which could harm our results of operations.
We do not collect sales and use, value-added and similar taxes in all jurisdictions in which we have sales,
based on our understanding that such taxes are not applicable. Sales and use, value-added and similar tax laws
and rates vary greatly by jurisdiction. Certain jurisdictions in which we do not collect such taxes may assert that
such taxes are applicable, which could result in tax assessments, penalties, and interest, and we may be required to
collect such taxes in the future. Such tax assessments, penalties and interest, or future requirements could harm
our results of operations.
The requirements of being a public company, including additional rules and regulations that we must
comply with now that we are no longer a foreign private issuer, may strain our resources, divert
management’s attention, and affect our ability to attract and retain executive officers and qualified board
members.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of Nasdaq and other applicable
securities rules and regulations. Compliance with these rules and regulations has increased our legal and financial
compliance costs, making some activities more difficult, time-consuming, and costly, and has increased demand on
our systems and resources. The Exchange Act requires, among other things, that we file annual reports with respect
to our business and results of operations. The Sarbanes-Oxley Act requires, among other things, that we maintain
effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if
required, improve our disclosure controls and procedures and internal control over financial reporting to meet this
standard, significant resources and management oversight is required.
Additionally, as of September 30, 2022, we are no longer a foreign private issuer, and we are required to
comply with all of the provisions applicable to a U.S. domestic issuer under the Exchange Act, including filing an
annual report on Form 10-K, quarterly periodic reports and current reports for certain events, complying with the
sections of the Exchange Act regulating the solicitation of proxies, requiring insiders to file public reports of their
share ownership and trading activities and insiders being liable for profit from trades made in a short period of time.
We are also no longer exempt from the requirements of Regulation FD promulgated under the Exchange Act related
to selective disclosures. We are also no longer permitted to follow our home country’s rules in lieu of the corporate
governance obligations imposed by Nasdaq, and are required to comply with the governance practices required by
U.S. domestic issuers listed on Nasdaq. We are also required to comply with all other rules of Nasdaq applicable to
U.S. domestic issuers. In addition, we are required to report our financial results under GAAP, including our
historical financial results, which have previously been prepared in accordance with International Financial
Reporting Standards.
The regulatory and compliance costs associated with the reporting and governance requirements applicable
to U.S. domestic issuers may be significantly higher than the costs we previously incurred as a foreign private
issuer. We expect to continue to incur significant legal, accounting, insurance and other expenses and to expend
greater time and resources to comply with these requirements. Additionally, as a result of the complexity involved in
complying with the rules and regulations applicable to public companies, our management’s attention may be
diverted from other business concerns, which could harm our business, results of operations and financial condition.
In addition, the pressures of operating a public company may divert management’s attention to delivering short-term
results, instead of focusing on long-term strategy. In addition, we may need to develop our reporting and compliance
infrastructure and may face challenges in complying with the new requirements applicable to us. If we fall out of
compliance, we risk becoming subject to litigation or being delisted, among other potential problems.
Further, as a public company it is more expensive for us to maintain adequate director and officer liability
insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain
coverage. These factors could also make it more difficult for us to attract and retain qualified executive officers and
members of our board of directors.
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If we are unable to maintain effective internal control over financial reporting in the future, investors may
lose confidence in the accuracy and completeness of our financial reports and the market price of our
Class A Common Stock could be negatively affected.
As a public company, we are required to maintain internal controls over financial reporting and to report any
material weaknesses in such internal controls. We are required to furnish a report by management on the
effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. If we
identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the
requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective,
or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our
internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our
financial reports and the market price of Class A Common Stock could be negatively affected, and we could become
subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory
authorities, which could require additional financial and management resources.
We face exposure to foreign currency exchange rate fluctuations.
While we primarily sell our products in U.S. dollars, we incur expenses in currencies other than the U.S. dollar,
which exposes us to foreign currency exchange rate fluctuations. A large percentage of our expenses are
denominated in the Australian dollar and the Indian rupee, and fluctuations in these currencies could have a
material negative impact on our results of operations. Moreover, our subsidiaries, other than our U.S. subsidiaries,
maintain net assets that are denominated in currencies other than the U.S. dollar. In addition, we transact in non-
U.S. dollar currencies for our products, and, accordingly, changes in the value of non-U.S. dollar currencies relative
to the U.S. dollar could affect our revenue and results of operations due to transactional and translational
remeasurements that are reflected in our results of operations.
We have a foreign exchange hedging program to hedge a portion of certain exposures to fluctuations in non-
U.S. dollar currency exchange rates. We use derivative instruments, such as foreign currency forward contracts, to
hedge the exposures. The use of such hedging instruments may not fully offset the adverse financial effects of
unfavorable movements in foreign currency exchange rates over the limited time the hedges are in place. Moreover,
the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with
such instruments or if we are unable to forecast hedged exposures accurately.
We and our customers are subject to increasing and changing laws and regulations that may expose us to
liability and increase our costs.
Federal, state, local and foreign government bodies or agencies have in the past adopted, and may in the
future adopt, laws or regulations affecting the technology industry or the industries in which are customers operate,
including imposing taxes, fees, or other charges. Changes in these laws or regulations could require us to modify
our products in order to comply with these changes. The costs of compliance with, and other burdens imposed by,
industry-specific laws, regulations and interpretive positions may limit our customers’ use and adoption of our
services and reduce overall demand for our services. Compliance with these regulations may also require us to
devote greater resources to support certain customers, which may increase costs and lengthen sales cycles. For
example, some financial services regulators in various jurisdictions have imposed guidelines for use of cloud
computing services that mandate specific controls or require financial services enterprises to obtain regulatory
approval prior to outsourcing certain functions. In the United States, the implementation of a cybersecurity Executive
Order released in May 2021 may result in further changes and enhancements to compliance and incident reporting
standards in order to obtain certain public sector contracts in the future. If we are unable to comply with these
guidelines or controls, or if our customers are unable to obtain regulatory approval to use our services where
required, our business may be harmed.
Additionally, various of our products are subject to U.S. export controls, including the U.S. Department of
Commerce’s Export Administration Regulations and economic and trade sanctions regulations administered by the
U.S. Treasury Department’s Office of Foreign Assets Controls. These regulations may limit the export of our
products and provision of our services outside of the U.S., or may require export authorizations, including by
license, a license exception, or other appropriate government authorizations, including annual or semi-annual
reporting and the filing of an encryption registration. Export control and economic sanctions laws may also include
prohibitions on the sale or supply of certain of our products to embargoed or sanctioned countries, regions,
governments, persons and entities. In addition, various countries regulate the importation of certain products
through import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute
our products. Import, export and economic sanctions laws may also change rapidly due to political events, such as
has occurred in response to Russia’s invasion of Ukraine. The exportation, reexportation, and importation of our
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products, and the provision of services, including by our solution partners, must comply with these laws or else we
may be adversely affected through reputational harm, government investigations, penalties, and a denial or
curtailment of our ability to export our products or provide services. Complying with export control and sanctions
laws can be time consuming and complex and may result in the delay or loss of sales opportunities. Although we
take precautions to prevent our products from being provided in violation of such laws, we are aware of previous
exports of certain of our products to a small number of persons and organizations that are the subject of U.S.
sanctions or located in countries or regions subject to U.S. sanctions. If we are found to be in violation of U.S.
sanctions or export control laws, it could result in substantial fines and penalties for us and for the individuals
working for us. Changes in export or import laws or corresponding sanctions may delay the introduction and sale of
our products in international markets, or, in some cases, prevent the export or import of our products to certain
countries, regions, governments, persons or entities altogether, which could adversely affect our business, financial
condition and results of operations. Changes in import and export laws are occurring in the jurisdictions in which we
operate and we may fail to comply with new or changing regulations in a timely manner, which could result in
substantial fines and penalties for us and could adversely affect our business, financial condition and results of
operation.
We are also subject to various domestic and international anti-corruption laws, such as the U.S. Foreign
Corrupt Practices Act and the UK Bribery Act, as well as other similar anti-bribery and anti-kickback laws and
regulations. These laws and regulations generally prohibit companies and their employees and intermediaries from
authorizing, offering, or providing improper payments or benefits to officials and other recipients for improper
purposes. We rely on certain third parties to support our sales and regulatory compliance efforts and can be held
liable for their corrupt or other illegal activities, even if we do not explicitly authorize or have actual knowledge of
such activities. Although we take precautions to prevent violations of these laws, our exposure for violating these
laws increases as our international presence expands and as we increase sales and operations in additional
jurisdictions.
Finally. as we expand our products and services and evolve our business models, we may become subject to
additional government regulation or increased regulatory scrutiny. Regulators (both in the U.S. and in other
jurisdictions in which we operate) may adopt new laws or regulations, change existing regulations, or their
interpretation of existing laws or regulations may differ from ours. For example, the regulation of emerging
technologies that we may incorporate into our offerings, such as AI and machine learning, is still an evolving area,
and it is possible that we could become subject to new regulations that negatively impact our plans, operations and
results. Additionally, many jurisdictions across the world are currently considering, or have already begun
implementing, changes to antitrust and competition laws, regulations or their enforcement to enhance competition in
digital markets and address practices by certain digital platforms that they perceive to be anticompetitive, which may
impact our ability to invest in, acquire or enter into joint ventures with other entities.
New legislation, regulation, public policy considerations, changes in the cybersecurity environment, litigation
by governments or private entities, changes to or new interpretations of existing laws may result in greater oversight
of the technology industry, restrict the types of products and services that we can offer, limit how we can distribute
our products, or otherwise cause us to change the way we operate our business. We may not be able to respond
quickly to such regulatory, legislative and other developments, and these changes may in turn increase our cost of
doing business and limit our revenue opportunities. In addition, if our practices are not consistent with new
interpretations of existing laws, we may become subject to lawsuits, penalties, and other liabilities that did not
previously apply.
Investors’ and other stakeholders’ expectations of our performance relating to environmental, social and
governance factors may impose additional costs and expose us to new risks.
There is an increasing focus from certain investors, customers, employees, other stakeholders and regulators
concerning environmental, social and governance matters (“ESG”). Some investors may use these non-financial
performance factors to guide their investment strategies and, in some cases, may choose not to invest in us if they
believe our policies and actions relating to ESG are inadequate. We may face reputational damage in the event that
we do not meet the ESG standards set by various constituencies.
As ESG best practices and reporting standards continue to develop, we may incur increasing costs relating to
ESG monitoring and reporting and complying with ESG initiatives. For example, the SEC has recently proposed
climate change and ESG reporting requirements, which, if approved, would increase our compliance costs. We may
also face greater costs to comply with new ESG standards or initiatives in the European Union. We publish an
annual Sustainability Report, which describes, among other things, the measurement of our greenhouse gas
emissions and our efforts to reduce emissions. In addition, our Sustainability Report provides highlights of how we
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are supporting our workforce, including our efforts to promote diversity, equity, and inclusion. Our disclosures on
these matters, or a failure to meet evolving stakeholder expectations for ESG practices and reporting, may
potentially harm our reputation and customer relationships. Due to new regulatory standards and market standards,
certain new or existing customers, particularly those in the European Union, may impose stricter ESG guidelines or
mandates for, and may scrutinize relationships more closely with, their counterparties, including us, which may
lengthen sales cycles or increase our costs.
Furthermore, if our competitors’ ESG performance is perceived to be better than ours, potential or current
investors may elect to invest with our competitors instead. In addition, in the event that we communicate certain
initiatives or goals regarding ESG matters, we could fail, or be perceived to fail, in our achievement of such
initiatives or goals, or we could be criticized for the scope of such initiatives or goals. If we fail to satisfy the
expectations of investors, customers, employees and other stakeholders or our initiatives are not executed as
planned, our business, financial condition, results of operations, and prospects could be adversely affected.
If we are deemed to be an investment company under the Investment Company Act of 1940, our results of
operations could be harmed.
Under Sections 3(a)(1)(A) and (C) of the Investment Company Act of 1940, as amended (the “Investment
Company Act”), a company generally will be deemed to be an “investment company” for purposes of the Investment
Company Act if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the
business of investing, reinvesting, or trading in securities or (ii) it engages, or proposes to engage, in the business
of investing, reinvesting, owning, holding, or trading in securities and it owns or proposes to acquire investment
securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and
cash items) on an unconsolidated basis. We do not believe that we are an “investment company,” as such term is
defined in either of these sections of the Investment Company Act. We currently conduct, and intend to continue to
conduct, our operations so that neither we, nor any of our subsidiaries, is required to register as an “investment
company” under the Investment Company Act. If we were obligated to register as an “investment company,” we
would have to comply with a variety of substantive requirements under the Investment Company Act that impose,
among other things, limitations on capital structure, restrictions on specified investments, prohibitions on
transactions with affiliates, and compliance with reporting, record keeping, voting, proxy disclosure and other rules
and regulations that would increase our operating and compliance costs, could make it impractical for us to continue
our business as contemplated, and could harm our results of operations.
Risks Related to Ownership of Our Class A Common Stock
The dual class structure of our common stock has the effect of concentrating voting control with certain
stockholders, in particular, our Co-Chief Executive Officers and their affiliates, which will limit our other
stockholders’ ability to influence the outcome of important transactions, including a change in control.
Shares of our Class B Common Stock have ten votes per share and shares of our Class A Common Stock
have one vote per share. As of June 30, 2023, stockholders who hold our Class B Common Stock collectively hold
approximately 87% of the voting power of our outstanding share capital and in particular, entities affiliated with our
Co-Chief Executive Officers, Michael Cannon-Brookes and Scott Farquhar, collectively hold approximately 87% of
the voting power of our outstanding share capital. The holders of our Class B Common Stock will collectively
continue to control a majority of the combined voting power of our capital stock and therefore be able to control
substantially all matters submitted to our stockholders for approval so long as the outstanding shares of our Class B
Common Stock represent at least 10% of all shares of our outstanding Class A Common Stock and Class B
Common Stock in the aggregate. These holders of our Class B Common Stock may also have interests that differ
from holders of our Class A Common Stock and may vote in a way which may be adverse to such interests. This
concentrated control may have the effect of delaying, preventing or deterring a change in control of Atlassian, could
deprive our stockholders of an opportunity to receive a premium for their shares as part of a sale of Atlassian and
might ultimately affect the market price of our Class A Common Stock.
If Messrs. Cannon-Brookes and Farquhar retain a significant portion of their holdings of our Class B Common
Stock for an extended period of time, they will control a significant portion of the voting power of our capital stock for
the foreseeable future. As members of our board of directors, Messrs. Cannon-Brookes and Farquhar each owe
statutory and fiduciary duties to Atlassian and must act in good faith and in a manner they consider would be most
likely to promote the success of Atlassian for the benefit of stockholders as a whole. As stockholders, Messrs.
Cannon-Brookes and Farquhar are entitled to vote their shares in their own interests, which may not always be in
the interests of our stockholders generally.
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The market price of our Class A Common Stock is volatile, has fluctuated significantly in the past, and
could continue to fluctuate significantly regardless of our operating performance resulting in substantial
losses for our Class A ordinary stockholders.
The trading price of our Class A Common Stock is volatile, has fluctuated significantly in the past, and could
continue to fluctuate significantly, regardless of our operating performance, in response to numerous factors, many
of which are beyond our control, including:
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general economic conditions;
actual or anticipated fluctuations in our results of operations;
the financial projections we may provide to the public, any changes in these projections or our failure to
meet these projections;
failure of securities analysts to initiate or maintain coverage of Atlassian, publication of inaccurate or
unfavorable research about our business, changes in financial estimates or ratings changes by any
securities analysts who follow Atlassian or our failure to meet these estimates or the expectations of
investors;
announcements by us or our competitors of significant technical innovations, new products, acquisitions,
pricing changes, strategic partnerships, joint ventures or capital commitments;
changes in operating performance and stock market valuations of other technology companies generally, or
those in our industry in particular;
price and volume fluctuations in the overall stock market from time to time, including as a result of trends in
the economy as a whole;
actual or anticipated developments in our business or our competitors’ businesses or the competitive
landscape generally;
developments or disputes concerning our intellectual property or our products, or third-party proprietary
rights;
changes in accounting standards, policies, guidelines, interpretations or principles;
new laws or regulations, new interpretations of existing laws, or the new application of existing regulations
to our business;
changes in tax laws or regulations;
any major change in our board of directors or management;
additional shares of Class A Common Stock being sold into the market by us or our existing stockholders or
the anticipation of such sales;
the existence of our program to repurchase up to $1.0 billion of our outstanding Class A Common Stock (the
“Share Repurchase Program”) and purchases made pursuant to that program or any failure to repurchase
shares as planned, including failure to meet expectations around the timing, price or amount of share
repurchases, and any reduction, suspension or termination of our Share Repurchase Program;
cyber-security and privacy breaches;
lawsuits threatened or filed against us; and
other events or factors, including those resulting from geopolitical risks, natural disasters, climate change,
diseases and pandemics, macroeconomic factors such as inflationary pressures or recession, war,
including Russia’s invasion of Ukraine, financial institution instability, incidents of terrorism, or responses to
these events.
In addition, the stock markets, and in particular the market on which our Class A Common Stock is listed,
have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices
of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in
a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders
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have instituted securities class action litigation following periods of market volatility. In February 2023, a purported
securities class action complaint was filed against us and certain of our officers in U.S. federal court. Our
involvement in this or other securities litigation could subject us to substantial costs, divert resources and the
attention of management from operating our business, and harm our business, results of operations and financial
condition.
Substantial future sales of our Class A Common Stock could cause the market price of our Class A
Common Stock to decline.
The market price of our Class A Common Stock could decline as a result of substantial sales of shares of our
Class A Common Stock, particularly sales by our directors, executive officers and significant stockholders, or the
perception in the market that holders of a large number of shares intend to sell their shares. As of June 30, 2023,
we had 152,442,673 outstanding Class A Common Stock and 105,124,103 outstanding convertible Class B
Common Stock.
We have also registered shares of Class A Common Stock that we issue under our employee equity incentive
plans. These shares may be sold freely in the public market upon issuance.
Certain holders of our Class A Common Stock and our Class B Common Stock, including our founders, have
rights, subject to certain conditions, to require us to file registration statements covering their shares or to include
their shares in registration statements that we may file for ourselves or our stockholders. Sales of our Class A
Common Stock pursuant to these registration rights may make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate. These sales also could cause the market price of our
Class A Common Stock to fall and make it more difficult for our investors to sell our Class A Common Stock at a
price that they deem appropriate.
We cannot guarantee that our Share Repurchase Program will be fully consummated or that it will enhance
long-term stockholder value. Repurchases of shares of our Class A Common Stock could also increase the
volatility of the trading price of our Class A Common Stock and could diminish our cash reserves.
In January 2023, our board of directors authorized a Share Repurchase Program to repurchase up to $1.0
billion of our outstanding Class A Common Stock. Under the Share Repurchase Program, stock repurchases may
be made from time to time through open market purchases, in privately negotiated transactions, or by other means,
including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in
accordance with applicable securities laws and other restrictions. The Share Repurchase Program does not have a
fixed expiration date, may be suspended or discontinued at any time, and does not obligate us to acquire any
amount of Class A Common Stock. The timing, manner, price, and amount of any repurchases will be determined by
us at our discretion and will depend on a variety of factors, including business, economic and market conditions,
prevailing stock prices, corporate and regulatory requirements, and other considerations. We cannot guarantee that
the Share Repurchase Program will be fully consummated or that it will enhance long-term stockholder value. The
Share Repurchase Program could also affect the trading price of our Class A Common Stock and increase volatility,
and any announcement of a reduction, suspension or termination of the Share Repurchase Program may result in a
decrease in the trading price of our Class A Common Stock. In addition, repurchasing our Class A Common Stock
could diminish our cash and cash equivalents and marketable securities available to fund working capital,
repayment of debt, capital expenditures, strategic acquisitions, investments, or business opportunities, and other
general corporate purposes.
We do not expect to declare dividends in the foreseeable future.
We currently anticipate that we will retain future earnings for the development, operation and expansion of our
business and to fund our Share Repurchase Program, and do not anticipate declaring or paying any cash dividends
for the foreseeable future. As a result, stockholders must rely on sales of their shares of Class A Common Stock
after price appreciation, if any, as the only way to realize any future gains on their investment.
Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended
and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Our amended and restated certificate of incorporation and amended and restated bylaws contain, and the
General Corporation Law of the State of Delaware (the “Delaware General Corporation Law”) contains, provisions
which could have the effect of rendering more difficult, delaying or preventing an acquisition deemed undesirable by
our board of directors. These provisions provide for the following:
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a dual-class structure which provides our holders of Class B Common Stock with the ability to significantly
influence the outcome of matters requiring stockholder approval, even if they own significantly less than a
majority of the shares of our outstanding Class A Common Stock and Class B Common Stock;
no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect
director candidates;
the exclusive right of our board of directors to set the size of the board of directors and to elect a director to
fill a vacancy, however occurring, including by an expansion of the board of directors, which prevents
stockholders from being able to fill vacancies on our board of directors;
the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine
the price and other terms of those shares, including voting or other rights or preferences, without
stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder
approval;
in addition to our board of directors’ ability to adopt, amend, or repeal our amended and restated bylaws,
our stockholders may adopt, amend, or repeal our amended and restated bylaws only with the affirmative
vote of the holders of at least 66 2/3% of the voting power of the outstanding shares of capital stock entitled
to vote generally in the election of directors, voting together as a single class;
the required approval of at least 66 2/3% of the voting power of the outstanding shares of capital stock
entitled to vote thereon, voting together as a single class, to adopt, amend, or repeal certain provisions of
our amended and restated certificate of incorporation;
the ability of stockholders to act only at an annual or special meeting of stockholders;
the requirement that a special meeting of stockholders may be called only by certain specified officers of the
Company, a majority of our board of directors then in office or the chairperson of our board of directors;
advance notice procedures that stockholders must comply with in order to nominate candidates to our
board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage
or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of
directors or otherwise attempting to obtain control of us; and
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the limitation of liability of, and provision of indemnification to, our directors and officers.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or
changes in our management.
As a Delaware corporation, we are also subject to provisions of the Delaware General Corporation Law,
including Section 203 thereof, which prevents some stockholders holding more than 15% of our outstanding
common stock from engaging in certain business combinations without approval of the holders of substantially all of
our outstanding common stock.
Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or the
Delaware General Corporation Law that has the effect of delaying or deterring a change in control could limit the
opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect
the price that some investors are willing to pay for our common stock.
Claims for indemnification by our directors and officers may reduce our available funds to satisfy
successful third-party claims against us and may reduce the amount of money available to us.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will
indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law.
In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated
bylaws and our indemnification agreements that we have entered or intend to enter into with our directors and
officers provide that:
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we will indemnify our directors and officers to the fullest extent permitted by Delaware law. Delaware law
provides that a corporation may indemnify such person if such person acted in good faith and in a manner
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such person reasonably believed to be in or not opposed to the best interests of the registrant and, with
respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was
unlawful;
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we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is
permitted by applicable law;
we are required to advance expenses, as incurred, to our directors and officers in connection with
defending a proceeding, except that such directors or officers will undertake to repay such advances if it is
ultimately determined that such person is not entitled to indemnification;
the rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter
into indemnification agreements with our directors, officers, employees and agents and to obtain insurance
to indemnify such persons, both of which we have done; and
we may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification
obligations to directors, officers, employees, and agents.
While we have procured directors’ and officers’ liability insurance policies, such insurance policies may not be
available to us in the future at a reasonable rate, may not cover all potential claims for indemnification, and may not
be adequate to indemnify us for all liability that may be imposed.
Our amended and restated certificate of incorporation and amended and restated bylaws provide for an
exclusive forum in the Court of Chancery of the State of Delaware for certain disputes between us and our
stockholders, and that the federal district courts of the United States will be the exclusive forum for the
resolution of any complaint asserting a cause of action under the Securities Act.
Our amended and restated certificate of incorporation and amended and restated bylaws provide, that unless
we consent in writing to the selection of an alternative forum, (a) the Court of Chancery of the State of Delaware (or,
if such court does not have subject matter jurisdiction thereof, the federal district court for the District of Delaware or
other state courts of the State of Delaware) will, to the fullest extent permitted by law, be the sole and exclusive
forum for: (i) any derivative action, suit or proceeding brought on behalf of the Company, (ii) any action, suit or
proceeding asserting a claim of breach of a fiduciary duty owed by any director, officer or stockholder to the
Company or our stockholders, (iii) any action, suit or proceeding arising pursuant to any provision of the Delaware
General Corporation Law or our amended and restated certificate of incorporation or amended and restated bylaws,
or (iv) any action, suit or proceeding asserting a claim against the Company that is governed by the internal affairs
doctrine; and (b) the federal district courts of the United States will be the exclusive forum for the resolution of any
complaint asserting a cause or causes of action arising under the Securities Act, including all causes of action
asserted against any defendant to such complaint. Any person or entity purchasing or otherwise acquiring any
interest in any security of the Company will be deemed to have notice of and consented to these provisions. Nothing
in our amended and restated certificate of incorporation or amended and restated bylaws precludes stockholders
that assert claims under the Exchange Act, from bringing such claims in federal court to the extent that the
Exchange Act confers exclusive federal jurisdiction over such claims, subject to applicable law.
We believe these provisions may benefit us by providing increased consistency in the application of Delaware
law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving
corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and
protection against the burdens of multi-forum litigation. If a court were to find the choice of forum provision that is
contained in our amended and restated certificate of incorporation or amended and restated bylaws to be
inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in
other jurisdictions, which could materially adversely affect our business, results of operations, and financial
condition. For example, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts
over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations
thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision
as written in connection with claims arising under the Securities Act.
The choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds
favorable for disputes with us or any of our current or former director, officer or stockholder to the Company, which
may discourage such claims against us or any of our current or former director, officer or stockholder to the
Company and result in increased costs for investors to bring a claim.
General Risk Factors
41
Our global operations subject us to risks that can harm our business, results of operations, and financial
condition.
A key element of our strategy is to operate globally and sell our products to customers around the world.
Operating globally requires significant resources and management attention and subjects us to regulatory,
economic, geographic, and political risks. In particular, our global operations subject us to a variety of additional
risks and challenges, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
increased management, travel, infrastructure, and legal compliance costs associated with having operations
in many countries;
difficulties in enforcing contracts, including “clickwrap” contracts that are entered into online, of which we
have historically relied as part of our product licensing strategy, but which may be subject to additional legal
uncertainty in some foreign jurisdictions;
increased financial accounting and reporting burdens and complexities;
requirements or preferences within other regions for domestic products, and difficulties in replacing products
offered by more established or known regional competitors;
differing technical standards, existing or future regulatory and certification requirements, and required
features and functionality;
communication and integration problems related to entering and serving new markets with different
languages, cultures, and political systems;
compliance with foreign privacy and security laws and regulations and the risks and costs of non-
compliance;
compliance with laws and regulations for foreign operations, including anti-bribery laws (such as the U.S.
Foreign Corrupt Practices Act, the U.S. Travel Act, and the UK Bribery Act), import and export control laws,
tariffs, trade barriers, economic sanctions, and other regulatory or contractual limitations on our ability to sell
our products in certain foreign markets, and the risks and costs of non-compliance;
heightened risks of unfair or corrupt business practices in certain geographies that may impact our financial
results and result in restatements of our consolidated financial statements;
fluctuations in currency exchange rates, rising interest rates, and related effects on our results of
operations;
difficulties in repatriating or transferring funds from, or converting currencies in certain countries;
weak economic conditions which could arise in each country or region in which we operate or sell our
products, including due to rising inflation or hyperinflation, such as is occurring in Turkey, and related
interest rate increases, or general political and economic instability around the world, including as a result of
Russia’s invasion of Ukraine;
differing labor standards, including restrictions related to, and the increased cost of, terminating employees
in some countries;
difficulties in recruiting and hiring employees in certain countries;
the preference for localized software and licensing programs and localized language support;
reduced protection for intellectual property rights in some countries and practical difficulties associated with
enforcing our legal rights abroad;
imposition of travel restrictions, prohibitions of non-essential travel, modifications of employee work
locations, or cancellation or reorganization of certain sales and marketing events as a result of pandemics
or public health emergencies;
compliance with the laws of numerous foreign taxing jurisdictions, including withholding obligations, and
overlapping of different tax regimes; and
geopolitical risks, such as political and economic instability, and changes in diplomatic and trade relations.
42
Compliance with laws and regulations applicable to our global operations substantially increases our cost of
doing business in foreign jurisdictions. We may be unable to keep current with changes in government requirements
as they change from time to time. Failure to comply with these laws and regulations could harm our business. In
many countries, it is common for others to engage in business practices that are prohibited by our internal policies
and procedures or other regulations applicable to us. Although we have implemented policies and procedures
designed to ensure compliance with these regulations and policies, there can be no assurance that all of our
employees, contractors, business partners and agents will comply with these regulations and policies. Violations of
laws, regulations or key control policies by our employees, contractors, business partners, or agents could result in
delays in revenue recognition, financial reporting misstatements, enforcement actions, reputational harm,
disgorgement of profits, fines, civil and criminal penalties, damages, injunctions, other collateral consequences, or
the prohibition of the importation or exportation of our products and could harm our business, results of operations,
and financial condition.
Catastrophic events may disrupt our business.
Natural disasters, pandemics other public health emergencies, geopolitical conflicts, social or political unrest,
or other catastrophic events may cause damage or disruption to our operations, international commerce and the
global economy, and thus could harm our business. We have a large employee presence and operations in the San
Francisco Bay Area of California and Australia. The west coast of the U.S. contains active earthquake zones and is
often at risk from wildfires. Australia has recently experienced significant wildfires and flooding that have impacted
our employees. In the event of a major earthquake, hurricane, typhoon or catastrophic event such as fire, power
loss, telecommunications failure, cyber-attack, war or terrorist attack in any of the regions or localities in which we
operate, we may be unable to continue our operations and may endure system interruptions, reputational harm,
delays in our application development, lengthy interruptions in our product availability, breaches of data security and
loss of critical data, all of which could harm our business, results of operations and financial condition.
Additionally, we rely on our network and suppliers of third-party infrastructure and applications, internal
technology systems, and our websites for our development, marketing, internal controls, operational support, hosted
services and sales activities. If these systems were to fail or be negatively impacted as a result of a natural disaster,
disease or pandemic, or catastrophic event, our ability to conduct normal business operations and deliver products
to our customers could be impaired.
As we grow our business, the need for business continuity planning and disaster recovery plans will grow in
significance. If we are unable to develop adequate plans to ensure that our business functions continue to operate
during and after a disaster, disease or pandemic, or catastrophic event, or if we are unable to successfully execute
on those plans, our business and reputation could be harmed.
Climate change may have a long-term impact on our business.
The long-term effects of climate change on the global economy and the technology industry in particular are
unclear, however we recognize that there are inherent climate-related risks wherever business is conducted.
Climate-related events, including the increasing frequency of extreme weather events and their impact on critical
infrastructure in the U.S., Australia and elsewhere, have the potential to disrupt our business, our third-party
suppliers, and/or the business of our customers, and may cause us to experience extended product downtimes, and
losses and additional costs to maintain and resume operations.
We depend on our executive officers and other key employees and the loss of one or more of these
employees or the inability to attract and retain highly skilled employees could harm our business.
Our success depends largely upon the continued services of our executive officers and key employees. We
rely on our leadership team and other key employees in the areas of research and development, products, strategy,
operations, security, go-to-market, marketing, IT, support, and general and administrative functions. From time to
time, there may be changes in our executive management team resulting from the hiring or departure of executives,
which could disrupt our business. For example, we announced in August 2023 that our current Chief Revenue
Officer will step down from his role effective December 31, 2023. In addition, we do not have employment
agreements with our executive officers or other key personnel that require them to continue to work for us for any
specified period and, therefore, they could terminate their employment with us at any time. The loss of one or more
of our executive officers, especially our Co-Chief Executive Officers, or other key employees could harm our
business.
In addition, in order to execute our growth plan, we must attract and retain highly qualified personnel.
Competition for these personnel in Sydney, Australia, the San Francisco Bay Area, and in other locations where we
43
maintain offices, is intense, especially for engineers experienced in designing and developing software and cloud-
based services. We have from time to time experienced, and we expect to continue to experience, difficulty hiring
and retaining employees with appropriate qualifications. In particular, recruiting and hiring senior product
engineering personnel (particularly with AI and machine learning backgrounds) has been, and we expect it to
continue to be, challenging. In addition, our rebalancing in March 2023, and any future rebalancing efforts intended
to improve operational efficiencies and operating costs, may adversely affect our ability to attract and retain
employees. If we are unable to hire and retain talented product engineering personnel, we may be unable to scale
our operations or release new products in a timely fashion and, as a result, customer satisfaction with our products
may decline.
Many of the companies with which we compete for experienced personnel have greater resources than we
have. If we hire employees from competitors or other companies, these employers may attempt to assert that the
employees or we have breached certain legal obligations, resulting in a diversion of our time and resources. In
addition, job candidates and existing employees often consider the value of the equity awards they receive in
connection with their employment. If the value or perceived value of our equity awards declines, it could harm our
ability to recruit and retain highly skilled employees. If we fail to attract new personnel or fail to retain and motivate
our current personnel, our business, results of operations and financial condition could be harmed.
We are exposed to credit risk and fluctuations in the market values of our investment portfolio.
Given the global nature of our business, we may have diversified U.S. and non-U.S. investments. Credit
ratings and pricing of our investments can be negatively affected by liquidity, credit deterioration, financial results,
economic risk, including from impacts of inflation and Russia’s invasion of Ukraine, political risk, sovereign risk or
other factors. As a result, the value and liquidity of our investments may fluctuate substantially. Therefore, although
we have not realized any significant losses on our investments, future fluctuations in their value could result in a
significant realized loss.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
As of June 30, 2023, our principal offices consist of approximately 167,000 and 146,000 square feet of leased
office facilities in Sydney, Australia and the San Francisco Bay Area, California, United States, respectively.
Excluded from this amount is approximately 6,000 square feet and 130,000 square feet in Sydney, Australia and the
San Francisco Bay Area, California, United States, respectively, currently available to sublease as we made a
decision to consolidate our leases to optimize our real estate footprint in March 2023. We also lease other office
facilities around the world, including Austin, Texas and New York, New York, the Netherlands; Japan; the
Philippines; India; Poland; and Turkey.
See Note 15, “Restructuring” in the notes to the consolidated financial statements included in Part II, Item 8,
"Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for additional information
regarding our facilities consolidation efforts.
We believe that our existing facilities and offices are adequate to meet our current requirements.
ITEM 3. LEGAL PROCEEDINGS
On February 3, 2023, a putative securities class action (the “Putative Class Action”) was filed in the U.S.
District Court for the Northern District of California, captioned City of Hollywood Firefighters’ Pension Fund vs.
Atlassian Corporation, Case No. 3:23-cv-00519, naming us and certain of our officers as defendants. The lawsuit is
purportedly brought on behalf of purchasers of our securities between August 5, 2022 and November 3, 2022 (the
“Class Period”). The complaint alleges claims under Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5
promulgated thereunder, based on allegedly false and misleading statements about our business and prospects
during the Class Period. The lawsuit seeks unspecified damages. On May 15, 2023, the Court appointed City of
Hollywood Firefighters’ Pension Fund and Oklahoma Firefighters Pension and Retirement System as co-lead
plaintiffs (the “Plaintiffs”) in the Putative Class Action and approved their selection of lead counsel. The Plaintiffs filed
an amended complaint on July 14, 2023, which alleges the same claims against the same defendants for the same
Class Period as the original complaint. The defendants’ motion to dismiss the amended complaint is due by
September 8, 2023. The defendants intend to deny the allegations of wrongdoing and vigorously defend against the
claims in this lawsuit.
44
In March and April 2023, two stockholder derivative lawsuits were filed in the U.S. District Court for the District
of Delaware against the members of our board of directors and certain of our officers, captioned Silva v. Cannon-
Brookes, Case No. 1:23-cv-00283; and Keane v. Cannon-Brookes, Case No. 1:23-cv-00399. We are named as a
nominal defendant. These stockholder derivative lawsuits are based largely on the same allegations as the Putative
Class Action, including allegations relating to our disclosures during the Class Period as well as, in certain
instances, alleged insider trading. The lawsuits purport to assert claims for, among other things, breach of fiduciary
duty, corporate waste, unjust enrichment, and violations of 10(b) of the Exchange Act, and Rule 10b-5 promulgated
thereunder. The complaint seeks unspecified damages and other relief on our behalf. The court has consolidated
these cases and stayed them pending resolution of any motions to dismiss in the Putative Class Action. In August
2023, a third stockholder derivative lawsuit was filed in the U.S. District Court for the District of Delaware asserting
substantially the same claims as the previously filed derivative lawsuits discussed above, captioned Azzawi v.
Cannon-Brookes, et al., Case No. 1:23-cv-00884. The defendants intend to seek to have this case consolidated and
stayed with the previously filed stockholder derivative lawsuits.
In addition to the matters discussed above, from time to time, we are party to litigation and other legal
proceedings in the ordinary course of business. While we do not believe the ultimate resolution of pending legal
matters is likely to have a material adverse effect on our financial position, the results of any litigation or other legal
proceedings are uncertain and as such the resolution of such legal proceedings, either individually or in the
aggregate, could have a material adverse effect on our business, results of operations, financial condition or cash
flows. We accrue for loss contingencies when it is both probable that we will incur the loss and when we can
reasonably estimate the amount of the loss or range of loss. For the periods presented, we have not recorded any
liabilities as a result of the litigation or other legal proceedings in our consolidated financial statements.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Price of Our Class A Common Stock
Our Class A Common Stock is traded on The Nasdaq Global Select Market under the symbol “TEAM.” Our
Class B Common Stock is neither listed nor traded.
Stockholders
As of June 30, 2023, there were nine stockholders of record of our Class A Common Stock, including The
Depository Trust Company, which holds shares of our Class A Common Stock on behalf of an indeterminate number
of beneficial owners. As of June 30, 2023, there were three stockholders of record of our Class B Common Stock.
Dividends
While we have in the past paid limited dividends, we do not have any present or future plan to pay dividends
on our shares. Any future determination as to the declaration and payment of dividends, if any, will be at the
discretion of our board of directors, subject to applicable laws, and will depend on then existing conditions, including
our financial condition, results of operations, contractual restrictions, capital requirements, general business
conditions, business prospects and other factors our board of directors may deem relevant.
Stock Performance Graph
This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC, for purposes of
Section 18 of the Exchange Act, or otherwise subject to the liabilities under that section, and shall not be deemed
incorporated by reference into any of our other filings under the Securities Act or the Exchange Act except to the
extent we specifically incorporate it by reference into such filing.
The graph below compares the cumulative total stockholder return on our Class A Common Stock with the
cumulative total return on the Nasdaq Composite Index, S&P 500 Index, and the Standard & Poor 500 Systems
Software Index for each of the last five fiscal years ended June 30, 2018 through June 30, 2023, assuming an initial
45
investment of $100. Data for the Nasdaq Composite Index, the S&P 500 Index, and the Standard & Poor 500
Systems Software Index assume reinvestment of dividends.
The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to
forecast, future performance of our Class A Common Stock.
Atlassian Corporation
Nasdaq Composite
S&P 500 Index
S&P 500 Systems Software
Issuer Purchases of Equity Securities
June 30,
2018
2019
2020
2021
2022
2023
$
100 $ 209.28 $ 288.34 $ 410.86 $ 299.77 $ 268.44
100
100
100
106.60
108.22
134.53
133.93
114.05
197.18
193.12
158.10
264.57
146.85
139.25
249.70
183.59
163.72
333.88
Share repurchases of our Class A Common Stock for the three months ended June 30, 2023 were as follows
(in thousands, except for average price paid per share):
Total Number of
Shares Purchased
(1)
Average Price Paid
Per Share (2)
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)
Approximate Dollar
Value of Shares
that May Yet Be
Purchased Under
the Plans or
Programs
238 $
312
204
753
158.72
146.82
171.36
238 $
312
204
753
926,591
880,859
845,842
April 2023
May 2023
June 2023
Total
46
Comparison of Cumulative Total ReturnAtlassian CorporationNasdaq CompositeS&P 500 IndexS&P 500 Systems Software06/30/1806/30/1906/30/2006/30/2106/30/2206/30/23$0$50$100$150$200$250$300$350$400$450
(1)
In January 2023, the Board of Directors authorized a program to repurchase up to $1.0 billion of our
outstanding Class A Common Stock (the “Share Repurchase Program”). The Share Repurchase Program does not
have a fixed expiration date, may be suspended or discontinued at any time, and does not obligate us to repurchase
any specific dollar amount or to acquire any specific number of shares. We may repurchase shares of Class A
Common Stock from time to time through open market purchases, in privately negotiated transactions, or by other
means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in
accordance with applicable securities laws and other restrictions. The timing, manner, price, and amount of any
repurchases will be determined by us at our discretion and will depend on a variety of factors, including business,
economic and market conditions, prevailing stock prices, corporate and regulatory requirements, and other
considerations.
(2) Average price paid per share includes costs associated with the repurchases, when applicable.
ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This section of our Annual Report on Form 10-K discusses our financial condition and results of operations for
fiscal years 2023, 2022, and 2021, and year-to-year comparisons between fiscal years 2023 and 2022, and fiscal
years 2022, and 2021, in accordance with U.S. generally accepted accounting principles (“GAAP”).
You should read the following discussion and analysis of our financial condition and results of operations
together with our consolidated financial statements and the related notes appearing under “Financial Statements
and Supplementary Data” in Item 8 in this Annual Report on Form 10-K. As discussed in the section titled “Forward-
Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks
and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results
to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those identified below, and those discussed in the
section titled “Risk Factors” under Part I, Item 1A in this Annual Report on Form 10-K.
Company Overview
Our mission is to unleash the potential of every team.
Our products help teams organize, discuss and complete their work — delivering superior outcomes for their
organizations.
Our products serve teams of all shapes and sizes, in virtually every industry. Our primary products include Jira
Software and Jira Work Management for planning and project management, Confluence for content creation and
sharing, Trello for capturing and adding structure to fluid, fast-forming work for teams, Jira Service Management for
team service, management and support applications, Jira Align for enterprise agile planning, and Bitbucket for code
sharing and management. Together, our products form an integrated system for organizing, discussing and
completing shared work, becoming deeply entrenched in how people collaborate and how organizations run.
Our mission is possible with a deep investment in product development to create and refine high-quality and
versatile products that users love. By making our products affordable for organizations of all sizes and transparently
sharing our pricing online for most of our products, we generally do not follow the practice of opaque pricing and ad
hoc discounting that is typical in the enterprise software industry. We pursue customer volume, targeting every
organization, regardless of size, industry, or geography. This allows us to operate at unusual scale for an enterprise
software company, with more than 260,000 customers across virtually every industry sector in approximately 200
countries as of June 30, 2023. Our customers range from small organizations that have adopted one of our
products for a small group of users, to over two-thirds of the Fortune 500, many of which use a combination of our
products across thousands of users.
To reach this expansive market, we primarily distribute and sell our products online where our customers can
get started in minutes without the need for assistance. We focus on enabling a self-service, low-friction model that
makes it easy for customers to try, adopt and use our products. By making our products simple, powerful, affordable
and easy to adopt, we generate demand from word-of-mouth and viral expansion within organizations.
Our culture of innovation, transparency and dedication to customer service drives our success in
implementing and refining this unique approach. We believe this approach creates a self-reinforcing effect that
47
fosters innovation, quality, customer success, and scale. As a result of this strategy, we invest significantly more in
research and development activities than in traditional sales activities relative to other enterprise software
companies.
A substantial majority of our sales are automated through our website, including sales of our products through
our solution partners and resellers. For fiscal year 2023, we derived over 40% of our revenue from channel partners’
sales efforts. Our solution partners and resellers primarily focus on customers in regions that require local language
support and other customized needs. We plan to continue to invest in our partner programs to help us enter and
grow in new markets, complementing our automated, low-touch approach.
We generate revenues primarily in the form of subscriptions, maintenance and other sources. Subscription
revenues consist primarily of fees earned from subscription-based arrangements for providing customers the right to
use our software in a cloud-based-infrastructure that we provide (“Cloud offerings”). We also sell on-premises term
license agreements for our Data Center products (“Data Center offerings”), consisting of software licensed for a
specified period and support and maintenance service that is bundled with the license for the term of the license
period. Subscription revenues also include subscription-based agreements for our premier support services. From
time to time, we make changes to our product offerings, prices and pricing plans for our products which may impact
the growth rate of our revenue, our deferred revenue balances, and customer retention.
Maintenance provides our customers with access to unspecified future updates, upgrades and enhancements
and technical product support on an if-and-when-available basis for perpetual license products purchased and
operated by our customers on their premises (“Server offerings”). Maintenance revenue combined with our
subscription revenue business, through our Cloud and Data Center products, results in a large recurring revenue
base. In each of the past three fiscal years, more than 80% of our total revenues have been of a recurring nature
from subscription and maintenance fees.
Customers typically pay us maintenance fees annually, at the beginning of each contractual year. We typically
recognize revenue on the license portion of term license agreements (Data Center offerings) once the customer
obtains control of the license, which is generally upon delivery of the license, and for maintenance and
subscriptions, revenue is recognized ratably over the term of the contract. Any invoice amounts or payments
received in advance of revenue recognition from subscriptions or maintenance are included in our deferred revenue
balance. The deferred revenue balance is influenced by several factors, including customer decisions around the
timing of renewals, length of contracts and invoice timing within the period. We no longer sell perpetual licenses or
upgrades for our Server offerings and plan to end maintenance and support for these Server offerings in February
2024. We will proactively help our customers transition to other versions of our products with our migration tools and
programs, customer support teams, and pricing and packaging options.
Economic Conditions
Our results of operations may vary based on the impact of changes in the global economy on us or our
customers. Our business depends on demand for business software applications generally and for collaboration
software solutions in particular. We believe that weakening macroeconomic conditions, in part due to rising inflation,
increases in interest rates, Russia’s invasion of Ukraine and remaining effects of the COVID-19 pandemic, have
impacted our results of operations during fiscal year 2023. Primarily, we have seen the growth from existing
customers moderate during fiscal year 2023. We also saw moderating growth in the rate of conversions from our
free to paid products. We believe these events are largely due to customers impacted by weakening economic
conditions. The extent to which these risks ultimately impact our business, results of operations, and financial
position will depend on future developments, which are uncertain and cannot be predicted at this time.
Restructuring
On March 6, 2023, we announced a rebalancing of resources resulting in the elimination of certain roles
impacting about 500 full-time employees, or approximately 5% of the Company’s then-current workforce. These
actions are part of our initiatives to accelerate progress against our largest growth opportunities. These actions
include continuing to invest in strategic areas of the business, and aligning talent to best meet customer needs and
business priorities. In addition, we consolidated our leases, including planned subleasing, of several office spaces,
to optimize our real estate footprint. We continue to evaluate our real estate needs and may incur additional charges
in the future.
48
A summary of our restructuring charges for fiscal year 2023 by major activity type is as follows (in thousands):
Severance and
Other Termination
Benefits
Stock-based
Compensation
Lease
Consolidation
Total
Cost of revenue
Research and development
Marketing and sales
General and administrative
Total
$
$
1,011 $
288 $
7,893 $
8,279
7,069
8,961
5,866
1,815
2,306
29,004
14,984
9,418
25,320 $
10,275 $
61,299 $
9,192
43,149
23,868
20,685
96,894
The execution of these actions, including the related cash payments have been substantially completed as of
June 30, 2023. Refer to Note 15, “Restructuring,” to the notes to our consolidated financial statements for additional
information.
Key Business Metrics
We utilize the following key metrics to evaluate our business, measure our performance, identify trends
affecting our business, formulate business plans and make strategic decisions.
Customers
We have successfully demonstrated a history of growing both our customer base and spend per customer
through growth in users, purchase of new licenses and adoption of new products. We believe that our ability to
attract new customers and grow our customer base drives our success as a business.
We define the number of customers at the end of any particular period to be the number of organizations with
unique domains that have at least one active and paid non-starter license or subscription, with two or more seats.
While a single customer may have distinct departments, operating segments, or subsidiaries with multiple active
licenses or subscriptions of our products, if the product deployments share a unique domain name, we only include
the customer once for purposes of calculating this metric. We define active licenses as those licenses that are under
an active maintenance or subscription contract as of period end.
Our customers, as defined in this metric, have generated substantially all of our revenue in each of the
periods presented. Including single-user accounts and organizations who have only adopted our free or starter
products, the active use of our products extends well beyond our more than 260,000 customers. With these
customers using our software today, we are able to reach a vast number of users, gather insights to refine our
offerings and generate growing revenue by expanding within our customer base. No single customer contributed
more than 5% of our total revenues during fiscal year 2023.
The following table sets forth our number of customers as of the dates presented:
Number of customers
Free Cash Flow
As of June 30,
2023
2022
2021
262,337
242,623
204,754
Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by operating activities
less net cash used in investing activities for capital expenditures. 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 to fund our commitments, repay our debt, and for strategic
opportunities, such as reinvesting in our business, making strategic acquisitions, and strengthening our financial
position. Free cash flow is not a measure calculated in accordance with GAAP and should not be considered in
isolation from, or as a substitute for financial information prepared in accordance with GAAP, such as GAAP net
cash provided by operating activities. In addition, free cash flow may not be comparable to similarly titled metrics of
other companies due to differences among methods of calculation. The following table presents a reconciliation of
net cash provided by operating activities to free cash flow for the periods presented (in thousands):
49
Net cash provided by operating activities
Less: Capital expenditures
Free cash flow
Fiscal Year Ended June 30,
2023
2022
2021
$
$
868,111 $
821,044 $
789,960
(25,652)
(70,583)
(31,520)
842,459 $
750,461 $
758,440
Free cash flow increased by $92.0 million during fiscal year 2023 as compared to fiscal year 2022. The
increase of free cash flow was primarily attributable to the increase of net cash provided by operating activities and
a decrease in capital expenditures. The increase of net cash provided by operating activities was primarily
attributable to an increase in cash received from customers, offset by an increase in cash paid to suppliers and
employees, and cash used to pay income taxes.
For more information about net cash provided by operating activities, please see “Liquidity and Capital
Resources.”
Components of Results of Operations
On September 30, 2022, . Atlassian Corporation Plc, a public company limited by shares, incorporated under
the laws of England and Wales, completed a redomestication, which was approved by the shareholders of Atlassian
Corporation Plc, resulting in Atlassian Corporation, a Delaware corporation, becoming our publicly traded parent
company (the “U.S. Domestication”). In fiscal year 2022 and prior periods, we prepared our financial information in
accordance with International Financial Reporting Standards (“IFRS”). As a consequence of becoming a U.S.
domestic issuer, beginning with the Quarterly Report on Form 10-Q for the three months ended September 30,
2022, we are required to present our financial information in accordance with GAAP. The below financial information
has been prepared in accordance with GAAP. The financial information should not be expected to correspond to
figures we have previously presented under IFRS.
Sources of Revenues
Subscription Revenues
Subscription revenues consist primarily of fees earned from subscription-based arrangements for providing
customers the right to use our software in a cloud-based-infrastructure that we provide. We also sell on-premises
term license agreements for our Data Center products, which consist of software licensed for a specified period and
include support and maintenance services that are bundled with the license for the term of the license period.
Subscription revenues also include subscription-based agreements for our premier support services. Subscription
revenues are driven primarily by the number and size of active licenses, the type of product and the price of the
licenses. Our subscription-based arrangements generally have a contractual term of one to twelve months, with a
majority being one month. For Cloud offerings, subscription revenue is recognized ratably as services are
performed, commencing with the date the service is made available to customers. For Data Center products, we
recognize revenue upfront for the portion that relates to the delivery of the term license and the support and related
revenue is recognized ratably as the services are delivered over the term of the arrangement. Premier support
consists of subscription-based arrangements for a higher level of support across different deployment options, and
revenue is recognized ratably as the services are delivered over the term of the arrangement.
Maintenance Revenues
Maintenance revenues represent fees earned from providing customers unspecified future updates, upgrades
and enhancements and technical product support for perpetual license products on an if-and-when-available basis.
Maintenance revenue is recognized ratably over the term of the support period.
Other Revenues
Other revenues primarily include perpetual license revenue and fees received for sales of third-party apps in
the Atlassian Marketplace. Technical account management, consulting and training services are also included in
other revenues. Perpetual license revenues represent fees earned from the license of software to customers for use
on the customer’s premises other than Data Center products. Software is licensed on a perpetual basis. Perpetual
license revenues consist of the revenues recognized from sales of licenses to customers. The Company no longer
sells perpetual licenses or upgrades for our Server offerings. The Company typically recognized revenue on the
license portion of perpetual license arrangements once the customer obtained control of the license, which is
generally upon delivery of the license. Revenue from the sale of third-party apps via Atlassian Marketplace is
50
recognized on the date of product delivery given that all of our obligations have been met at that time and on a net
basis the Company functions as the agent in the relationship. Revenue from technical account management is
recognized over the time period that the customer has access to the service. Revenue from consulting and training
is recognized over time as the services are performed.
We expect subscription revenue to increase and continue to be our primary driver of revenue growth as our
customers continue to migrate to our Cloud and Data Center offerings. Migrating our larger customers to the cloud
continues to be one of our most important priorities over the coming year. Consistent with our strategy, our Server
business is expected to contract. Maintenance revenue is expected to decline as Server customers migrate to our
Cloud and Data Center offerings.
Cost of Revenues
Cost of revenues primarily consists of expenses related to compensation expenses for our employees,
including stock-based compensation, hosting our cloud infrastructure, which includes third-party hosting fees and
depreciation associated with computer equipment and software; payment processing fees; consulting and
contractors costs, associated with our customer support and infrastructure service teams; amortization of acquired
intangible assets, such as the amortization of the cost associated with an acquired company’s developed
technology; certain IT program fees; and facilities and related overhead costs. To support our cloud-based
infrastructure, we utilize third-party managed hosting facilities. We allocate stock-based compensation based on the
expense category in which the employee works. We allocate overhead such as information technology costs, rent
and occupancy charges in each expense category based on headcount in that category. As such, general overhead
expenses are reflected in cost of revenues and operating expense categories.
We expect cost of revenues to increase as we continue to invest in our cloud-based infrastructure to support
migrations and our cloud customers.
Gross Profit and Gross Margin
Gross profit is total revenues less total cost of revenues. Gross margin is gross profit expressed as a
percentage of total revenues. Gross margin can fluctuate from period to period as a result of changes in product
and services mix.
We expect gross margin to decrease due to the sales mix shift from Server and Data Center offerings to
Cloud offerings. This impact will be primarily driven by increased hosting costs as well as additional personnel costs
to support migrations and our cloud customers.
Operating Expenses
Our operating expenses are classified as research and development, marketing and sales, and general and
administrative. For each functional category, the largest component is compensation expenses, which include
salaries and bonuses, stock-based compensation, employee benefit costs, and contractor costs. We allocate
overhead such as information technology costs, rent, and occupancy charges in each expense category based on
headcount in that category.
Research and Development
Research and development expenses consist primarily of compensation expense for our employees,
including stock-based compensation, consulting and contractor costs, contract software development costs,
facilities and related overhead costs, certain IT program expenses, and restructuring charges. We continue to focus
our research and development efforts on building new products, adding new features and services, integrating
acquired technologies, increasing functionality, enhancing our cloud infrastructure and developing our mobile
capabilities.
Marketing and Sales
Marketing and sales expenses consist primarily of compensation expense for our employees, including stock-
based compensation, marketing and sales programs, consulting and contractor costs, facilities and related
overhead costs, certain IT program expenses, and restructuring charges. Marketing programs consist of advertising,
promotional events, corporate communications, brand building and product marketing activities such as online lead
generation. Sales programs consist of activities and teams focused on supporting our solution partners and
resellers, tracking channel sales activity, supporting and servicing our customers by helping them optimize their
51
experience and expand the use of our products across their organizations and helping product evaluators learn how
they can use our tools most effectively.
General and Administrative
General and administrative expenses consist primarily of compensation expense for our employees, including
stock-based compensation, for finance, legal, human resources and information technology personnel, consulting
and contractor costs, certain IT program expenses, other corporate expenses and facilities and related overhead
costs, and restructuring charges.
Income Taxes
Provision for income taxes consists primarily of income taxes related to federal, state, and foreign jurisdictions
where we conduct business.
Net Loss
We incurred a net loss in fiscal year 2023, primarily attributable to growing our team, specifically focusing on
adding research and development personnel to drive continued product innovation, as well as investments in
infrastructure to support our Cloud offerings, additional tax expenses due to the recognition of reserves for uncertain
tax positions, and restructuring charges associated with the rebalancing of resources and lease consolidation.
During fiscal years 2022 and 2021, the net loss was primarily attributable to marking to fair value of the
exchangeable senior notes (the “Notes”) and related capped call transactions (the “Capped Calls”) and settlements
of the Notes and Capped Calls.
Critical Accounting Estimates
Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of
these consolidated financial statements requires us to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, as well as the reported revenues and expenses during the reporting periods.
These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in
these estimates could occur in the future. We base our estimates on historical experience and on various other
factors that we believe are reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
Changes in estimates are reflected in reported results for the period in which they become known. Actual results
may differ from these estimates under different assumptions or conditions and such differences could be material.
While our significant accounting policies are more fully described in Note 2, “Summary of Significant
Accounting Policies” to the notes to our consolidated financial statements, the following accounting policies involve
a greater degree of judgment and complexity. Accordingly, these are the accounting policies that we believe are the
most critical to aid in fully understanding and evaluating our financial condition and results of operations.
Revenue Recognition
Our contracts with customers often include promises to transfer multiple products and services to a customer.
Determining whether products and services are considered distinct performance obligations may require judgment.
We allocate the transaction price for each contract to each performance obligation based on the relative
standalone selling price (“SSP”) for each performance obligation. We use judgment in determining the SSP for
products and services. We typically determine an SSP range for our products and services, which is reassessed on
a periodic basis or when facts and circumstances change. For all performance obligations other than perpetual and
term licenses, we are able to determine SSP based on the observable prices of products or services sold separately
in comparable circumstances to similar customers. In instances where performance obligations do not have
observable standalone sales, we utilize available information that may include market conditions, pricing strategies,
the economic life of the software, and other observable inputs to estimate the price we would charge if the products
and services were sold separately.
Our products are generally sold with a right of return, we may provide other credits or incentives, and, in
certain instances, we estimate customer usage of our services, which are accounted for as variable consideration
when determining the amount of revenue to recognize. Returns and credits are estimated at contract inception and
updated at the end of each reporting period if additional information becomes available. Variable consideration was
not material for the periods presented.
52
Strategic Investments
Investments in privately held equity securities without readily determinable fair values in which we do not own
a controlling interest or have significant influence over are measured using the measurement alternative. In applying
the measurement alternative, the carrying value of the investment is measured at cost, less impairment, if any, plus
or minus changes resulting from observable price changes from orderly transactions for identical or similar
investments of the same issuer in the period of occurrence. In determining the estimated fair value of our strategic
investments in privately held companies, we use the most recent data available to us. Valuations of privately held
securities are inherently complex due to the lack of readily available market data and require the use of judgment.
The determination of whether an orderly transaction is for an identical or similar investment requires significant
judgment. In our evaluation, we consider factors such as differences in the rights and preferences of the
investments and the extent to which those differences would affect the fair values of those investments.
We assess our privately held debt and equity securities’ strategic investment portfolio quarterly for
impairment. Our impairment analysis encompasses an assessment of both qualitative and quantitative analyses of
key factors including the investee’s financial metrics, market acceptance of the investee’s product or technology,
general market conditions and liquidity considerations. If the investment is considered to be impaired, we record the
investment at fair value by recognizing an impairment through the consolidated statements of operations and
establishing a new carrying value for the investment.
Valuation of Minority Interest in Equity Method Investment
In July 2022, we completed a non-cash sale of our controlling interest in Vertical First Trust (“VFT”) to a third-
party buyer. VFT was established for the construction project associated with the Company’s new global
headquarters in Sydney, Australia. We retained a minority equity interest of 13% in the form of ordinary shares and
have significant influence in VFT. VFT was deconsolidated at the time of the sale, and we accounted for our
retained equity interest as an equity method investment in our consolidated financial statements.
We used our best estimates and assumptions to accurately determine the fair value of our retained equity
interest in VFT. The estimation is primarily due to the judgmental nature of the inputs to the valuation model used to
measure fair value and the sensitivity to the significant underlying assumptions. Our estimates are inherently
uncertain. We used a discounted cash flow model to calculate the fair value of our retained equity interest. The
significant inputs to the valuation included observable market inputs, including capitalization rate, discount rate, and
other management inputs, including the underlying building practical completion date. These assumptions are
forward-looking and could be affected by future economic and market conditions and construction progress.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate an
asset’s carrying value may not be recoverable. When the projected undiscounted cash flows estimated to be
generated by those assets are less than their carrying amounts, the assets are adjusted to their estimated fair value
and an impairment loss is recorded as a component of operating income (expense).
Judgment is required to estimate the amount and timing of future cash flows and the relative risk of achieving
those cash flows. Assumptions and estimates about future values can be subjective. They can be affected by a
variety of factors, including external factors such as industry and economic trends, and internal factors such as
changes in our business strategy.
Income Tax
We account for income taxes using the asset and liability method. We recognize deferred tax assets and
liabilities for the future tax consequences attributable to (i) temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases and (ii) operating loss and tax credit
carryforwards. Deferred tax assets are recognized subject to management’s judgment that realization is more likely
than not applicable to the periods in which we expect the temporary difference will reverse. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are
more likely than not expected to be realized. Future realization of deferred tax assets ultimately depends on the
existence of sufficient taxable income within the carryback or carryforward periods available under the applicable
tax law. We regularly review the deferred tax assets for recoverability based on historical taxable income, projected
53
future taxable income, the expected timing of the reversals of existing temporary differences and tax planning
strategies. Our judgment regarding future profitability may change due to many factors, including future market
conditions and the ability to successfully execute our business plans and tax planning strategies. Should there be a
change in the ability to recover deferred tax assets, our income tax provision would increase or decrease in the
period in which the assessment is changed.
In the multiple tax jurisdictions in which we operate, our tax returns are subject to routine audit by the Internal
Revenue Service, Australian Taxation Office (“ATO”), and other taxation authorities. These audits at times may
produce alternative views regarding certain tax positions taken in the year(s) of review. As a result, we record
uncertain tax positions, which require recognition at the time when it is deemed more likely than not that the position
in question will be upheld. Although management believes that the judgment and estimates involved are reasonable
and that the necessary provisions have been recorded, changes in circumstances or unexpected events could
adversely affect our financial position, results of operations, and cash flows.
The Tax Cuts and Jobs Act (the “TCJA”), enacted on December 22, 2017, eliminates the option to deduct
research and development expenditures, instead requiring taxpayers to capitalize and amortize such expenditures
over five or fifteen years beginning in fiscal year 2023. If not deferred, modified, or repealed, this provision may
materially increase future cash taxes.
New Accounting Pronouncements Pending Adoption
The impact of recently issued accounting standards is set forth in Note 2, “Summary of Significant Accounting
Policies,” of the notes to our consolidated financial statements.
54
Results of Operations
The following table sets forth our results of operations for the periods indicated (in thousands, except for
percentages of total revenues):
Fiscal Year Ended June 30,
2023
2022
2021
Revenues:
Subscription
Maintenance
Other
Total revenues
Cost of revenues
Gross profit
Operating expenses:
Research and development
Marketing and sales
General and administrative
Total operating expenses
Operating income (loss)
Other income (expense), net
Interest income
Interest expense
Loss before provision for income
taxes
Provision for income taxes
$ 2,922,576
83 % $ 2,096,706
75 % $ 1,324,064
63 %
399,738
212,333
11
6
495,077
211,099
18
7
522,971
242,097
25
12
3,534,647
100
2,802,882
100
2,089,132
100
633,765
2,900,882
1,869,881
769,861
606,362
3,246,104
18
82
53
22
17
92
(345,222)
(10)
14,501
49,732
(30,147)
(311,136)
(175,625)
—
1
(1)
(10)
(4)
452,914
2,349,968
1,291,877
535,815
452,193
2,279,885
70,083
16
84
46
19
16
81
3
331,850
1,757,282
932,994
371,644
311,238
1,615,876
141,406
16
84
45
18
14
77
7
(501,839)
(19)
(570,393)
(28)
2,284
(41,466)
(470,938)
(48,572)
—
(1)
(17)
(2)
7,158
(92,586)
(514,415)
(64,564)
—
(4)
(25)
(3)
Net loss
$
(486,761)
(14) % $
(519,510)
(19) % $
(578,979)
(28) %
Fiscal Years Ended June 30, 2023 and 2022
Revenues
(in thousands, except percentage data)
Subscription
Maintenance
Other
Total revenues
Fiscal Year Ended June 30,
2023
2,922,576 $
2022
2,096,706 $
$
399,738
212,333
495,077
211,099
825,870
(95,339)
1,234
$
3,534,647 $
2,802,882 $
731,765
$ Change
% Change
39 %
(19)
1
26 %
Total revenues increased $731.8 million, or 26%, in fiscal year 2023 compared to fiscal year 2022. Growth in
total revenues was primarily attributable to increased demand for our products from both new and existing
customers. Of total revenues recognized in fiscal year 2023, over 90% was attributable to sales to customer
accounts existing on or before June 30, 2022. Our number of total customers increased to 262,337 at June 30,
2023 from 242,623 at June 30, 2022.
Subscription revenues increased $825.9 million, or 39%, in fiscal year 2023 compared to fiscal year 2022.
The increase in subscription revenues was primarily attributable to additional subscriptions from our existing
customer base, and customers migrating to cloud-based subscription services and term-based licenses for our Data
Center products.
Maintenance revenues decreased $95.3 million, or 19%, in fiscal year 2023 compared to fiscal year 2022. We
no longer offer upgrades to perpetual licenses beginning February 2022, and plan to end maintenance and support
for these products in February 2024.
55
38 %
46
(24)
13
26
25 %
27
27
26
Other revenues increased $1.2 million, or 1%, in fiscal year 2023 compared to fiscal year 2022. The increase
in other revenues was primarily attributable to an increase of $29.8 million in revenue from sales of third-party apps
through our Atlassian Marketplace and other revenue, offset by a decrease of $28.6 million in perpetual license
revenues as we discontinued selling new perpetual licenses for our products beginning February 2021.
Total revenues by deployment options were as follows:
(in thousands, except percentage data)
Cloud
Data Center
Server
Marketplace and services
Total revenues
$ Change
% Change
Fiscal Year Ended June 30,
2023
2,085,498 $
2022
1,515,424 $
$
819,251
400,519
229,379
560,319
525,028
202,111
570,074
258,932
(124,509)
27,268
$
3,534,647 $
2,802,882 $
731,765
Total revenues by geography were as follows:
(in thousands, except percentage data)
Americas
EMEA
Asia Pacific
Total revenues
Cost of Revenues
Fiscal Year Ended June 30,
2023
1,765,166 $
2022
1,408,868 $
$
1,366,739
1,077,338
402,742
316,676
356,298
289,401
86,066
$
3,534,647 $
2,802,882 $
731,765
$ Change
% Change
(in thousands, except percentage data)
Cost of revenues
Gross margin
Fiscal Year Ended June 30,
$
2023
633,765 $
82 %
2022
452,914 $
84 %
$ Change
% Change
180,851
40 %
Cost of revenues increased $180.9 million, or 40%, in fiscal year 2023 compared to fiscal year 2022. The
overall increase was primarily attributable to an increase of $81.0 million in compensation expense for employees
(which includes an increase of $32.3 million in stock-based compensation), and an increase of $56.1 million in
hosting fees paid to third-party providers. In addition, we recorded restructuring charges of $9.2 million in fiscal year
2023, which were primarily comprised of $7.9 million of impairment charges for leases and leasehold improvements.
Operating Expenses
Research and development
(in thousands, except percentage data)
Research and development
2023
1,869,881 $
2022
1,291,877 $
$
$ Change
% Change
578,004
45 %
Fiscal Year Ended June 30,
Research and development expenses increased $578.0 million, or 45%, in fiscal year 2023 compared to fiscal
year 2022. The overall increase was primarily a result of an increase of $456.8 million in compensation expenses
for employees (which includes an increase of $269.5 million in stock-based compensation). In addition, we recorded
restructuring charges of $43.1 million in fiscal year 2023, which were comprised of $29.0 million of impairment
charges for leases and leasehold improvements, and $14.1 million of severance and other termination benefits.
Marketing and sales
(in thousands, except percentage data)
2023
2022
$ Change
% Change
Marketing and sales
$
769,861 $
535,815 $
234,046
44 %
Fiscal Year Ended June 30,
56
Marketing and sales expenses increased $234.0 million, or 44%, for fiscal year 2023 compared to fiscal year
2022. The overall increase was primarily attributable to an increase of $148.9 million in compensation expenses for
employees (which includes an increase of $53.7 million in stock-based compensation), and an increase of $19.4
million in professional services. In addition, we recorded restructuring charges of $23.9 million in fiscal year ended
June 30, 2023, which were comprised of $15.0 million of impairment charges for leases and leasehold
improvements, and $8.9 million of severance and other termination benefits.
General and administrative
(in thousands, except percentage data)
2023
2022
$ Change
% Change
General and administrative
$
606,362 $
452,193 $
154,169
34 %
Fiscal Year Ended June 30,
General and administrative expenses increased $154.2 million, or 34%, in fiscal year 2023 compared to fiscal
year 2022. The overall increase was primarily attributable to an increase of $124.3 million in compensation
expenses for employees (which includes an increase of $57.6 million in stock-based compensation). In addition, we
recorded restructuring charges of $20.7 million in fiscal year 2023, which were comprised of $11.3 million of
severance and other termination benefits, and $9.4 million of impairment charges for leases and leasehold
improvements.
Other income (expense), net
(in thousands, except percentage data)
2023
Other income (expense), net
$
14,501 $
2022
(501,839) $
$ Change
% Change
516,340
**
Fiscal Year Ended June 30,
Other income (expense), net increased $516.3 million in fiscal year 2023 compared to fiscal year 2022. The
increase was primarily attributable to a decrease of $424.5 million in other expense from the mark to fair value of
the the Notes and Capped Calls and charges related to the full settlements of Notes and Capped Calls during fiscal
year 2022, a decrease of $68.2 million in mark-to-market adjusted losses related to our publicly held equity
securities, and an increase of $45.2 million from a non-cash sale of a controlling interest of a subsidiary recorded
during fiscal year 2023.
Interest expense
(in thousands, except percentage data)
2023
2022
$ Change
% Change
Interest expense
$
(30,147) $
(41,466) $
11,319
(27) %
Fiscal Year Ended June 30,
Interest expense decreased $11.3 million, or 27%, in fiscal year 2023 compared to fiscal year 2022. The
overall decrease was primarily attributable to $26.6 million in lower amortization of debt discount and issuance cost
due to settlements of the Notes, offset by an increase in interest expense of $15.3 million from our Term Loan
Facility (as defined below) as a result of increased interest rates.
Provision for income taxes
(in thousands, except percentage data)
Provision for income taxes
Effective tax rate
**
Not meaningful
Fiscal Year Ended June 30,
2023
(175,625) $
$
2022
$ Change
% Change
(48,572) $
(127,053)
**
**
**
We reported an income tax provision of $175.6 million on pretax loss of $311.1 million for fiscal year 2023, as
compared to an income tax provision of $48.6 million on pretax loss of $470.9 million for fiscal year 2022. The
income tax provision for fiscal year 2023 reflects an increase in tax provision primarily attributable to the recognition
of a reserve for uncertain tax positions and overall growth in foreign jurisdictions associated with an increase in
profit and non-deductible stock-based compensation. Since fiscal year 2020, we have been in unilateral advanced
pricing agreement (“APA”) negotiations with the ATO relating to our transfer pricing arrangements between Australia
and the U.S. During fiscal year 2023, we discussed with the ATO, for the first time, a framework to finalize our
transfer pricing arrangements for the proposed APA period (tax years ended June 30, 2019 to June 30, 2025).
57
Given the stage of discussions with the ATO during fiscal year 2023, we recorded a reserve for uncertain tax
positions of $110.7 million based upon applying the recognition and measurement thresholds of Accounting
Standards Codification Topic 740 Income Taxes (“ASC 740”). Although our recorded tax reserves are the best
estimate of our liabilities, differences may occur in the future, depending on final resolution of the APA negotiations.
The negotiations are expected to be finalized within the next 12 months.
Our effective tax rate substantially differed from the U.S. statutory income tax rate of 21.0% primarily
attributable to the recognition of a reserve for uncertain tax positions, different tax rates in foreign jurisdictions such
as Australia, non-deductible stock-based compensation in certain foreign jurisdictions, and full valuation allowances
in the U.S. and Australia. See Note 19, “Income Tax,” to the notes to our consolidated financial statements for
additional information.
We regularly assess the need for a valuation allowance against our deferred tax assets. Our assessment is
based on all positive and negative evidence related to the realizability of such deferred tax assets. Based on
available objective evidence as of June 30, 2023, we will continue to maintain a full valuation allowance on our U.S.
federal, U.S. state, and Australian deferred tax assets as it is more likely than not that these deferred tax assets will
not be realized. We intend to maintain the full valuation allowance until sufficient positive evidence exists to support
the reversal of, or decrease in, the valuation allowance.
Our future effective annual tax rate may be materially impacted by the expense or benefit from tax amounts
associated with our foreign earnings that are taxed at rates different from the federal statutory rate, changes in
valuation allowances, level of profit before tax, accounting for uncertain tax positions, business combinations, and
changes in our valuation allowances to the extent sufficient positive evidence becomes available, closure of statute
of limitations or settlement of tax audits, and changes in tax laws, including impacts of the TCJA. The TCJA,
enacted on December 22, 2017, eliminates the option to deduct research and development expenditures, instead
requiring taxpayers to capitalize and amortize such expenditures over five or fifteen years beginning in fiscal year
2023. If not deferred, modified or repealed, this provision may materially increase future cash taxes.
A significant amount of our earnings is generated by our Australian subsidiaries. Our future effective tax rates
may be adversely affected to the extent earnings are lower than anticipated in countries where we have lower
statutory tax rates. See Note 19, “Income Tax,” to the notes to our consolidated financial statements for additional
information. Changes in our global operations could result in changes to our effective tax rates, future cash flows,
and overall profitability of our operations.
Fiscal Years Ended June 30, 2022 and 2021
Revenues
(in thousands, except percentage data)
Subscription
2022
2,096,706 $
2021
1,324,064 $
$
Fiscal Year Ended June 30,
Maintenance
Other
Total revenues
495,077
211,099
522,971
242,097
$
2,802,882 $
2,089,132 $
713,750
$ Change
% Change
772,642
(27,894)
(30,998)
58 %
(5)
(13)
34
Total revenues increased $713.8 million, or 34%, in fiscal year 2022 compared to fiscal year 2021. Growth in
total revenues was primarily attributable to increased demand for our products from both new and existing
customers and accelerated short-term demand for on-premises products as a result of customers purchasing ahead
of both the discontinuation of new perpetual license sales and price changes for on-premises products during the
third quarter of fiscal year 2022. Of total revenues recognized in fiscal year 2022, over 90% was attributable to sales
to customer accounts existing on or before June 30, 2021. Our number of total customers increased to 242,623 at
June 30, 2022 from 204,754 at June 30, 2021.
Subscription revenues increased $772.6 million, or 58%, in fiscal year 2022 compared to fiscal year 2021.
The increase in subscription revenues was primarily attributable to additional subscriptions from our existing
customer base and accelerated short-term demand for data center products as a result of customers purchasing
ahead of price changes during the third quarter of fiscal year 2022.
Maintenance revenues decreased $27.9 million, or 5%, in fiscal year 2022 compared to fiscal year 2021. We
no longer offer upgrades to perpetual licenses beginning February 2022, and we plan to end maintenance and
support for these products in February 2024.
58
57 %
67
(14)
14
34
37 %
30
35
34
Other revenues decreased $31.0 million, or 13%, in fiscal year 2022 compared to fiscal year 2021. The
decrease in other revenues was primarily attributable to a decrease of $54.9 million in perpetual license revenues
as we discontinued selling new perpetual licenses for our products beginning February 2021, offset by an increase
of $20.2 million in revenue from sales of third-party apps through our Atlassian Marketplace.
Total revenues by deployment options were as follows:
Fiscal Year Ended June 30,
(in thousands, except percentage data)
Cloud
Data Center
Server
Marketplace and services
Total revenues
2021
$ Change
% Change
2022
1,515,424 $
$
560,319
525,028
202,111
967,832 $
336,273
607,778
177,249
547,592
224,046
(82,750)
24,862
$
2,802,882 $
2,089,132 $
713,750
Total revenues by geography were as follows:
(in thousands, except percentage data)
Americas
EMEA
Asia Pacific
Total revenues
Cost of Revenues
Fiscal Year Ended June 30,
2022
1,408,868 $
2021
1,028,481 $
$
1,077,338
316,676
826,445
234,206
380,387
250,893
82,470
$
2,802,882 $
2,089,132 $
713,750
$ Change
% Change
(in thousands, except percentage data)
Cost of revenues
Gross margin
Fiscal Year Ended June 30,
$
2022
452,914 $
84 %
2021
331,850 $
84 %
$ Change
% Change
121,064
36 %
Cost of revenues increased $121.1 million, or 36%, in fiscal year 2022 compared to fiscal year 2021. The
overall increase was primarily attributable to an increase of $66.8 million in compensation expense for employees
(which includes an increase of $11.5 million in share-based payment expense), an increase of $35.0 million in
hosting fees paid to third-party providers and an increase of $12.2 million in merchant fees.
Operating Expenses
Research and development
(in thousands, except percentage data)
Research and development
2022
1,291,877 $
$
2021
$ Change
% Change
932,994 $
358,883
38 %
Fiscal Year Ended June 30,
Research and development expenses increased $358.9 million, or 38%, in fiscal year 2022 compared to fiscal
year 2021. The overall increase was primarily a result of an increase of $326.6 million in compensation expenses
for employees (which includes an increase of $108.7 million in share-based payment expenses).
Marketing and sales
(in thousands, except percentage data)
2022
2021
$ Change
% Change
Marketing and sales
$
535,815 $
371,644 $
164,171
44 %
Fiscal Year Ended June 30,
Marketing and sales expenses increased $164.2 million, or 44%, for fiscal year 2022, compared to fiscal year
2021. Marketing and sales expenses increased primarily due to an increase of $107.8 million in compensation
expenses for employees (which includes an increase of $31.5 million in share-based payment expenses), an
59
increase of $19.3 million in online product advertisement expenses, an increase of $8.6 million in marketing events
expenses, and an increase of $7.4 million in professional services.
General and administrative
(in thousands, except percentage data)
2022
2021
$ Change
% Change
General and administrative
$
452,193 $
311,238 $
140,955
45 %
Fiscal Year Ended June 30,
General and administrative expenses increased $141.0 million, or 45%, in fiscal year 2022 compared to fiscal
year 2021. The increase was primarily attributable to $108.2 million in compensation expenses for employees
(which includes an increase of $32.4 million in share-based payment expenses) and an increase of $18.6 million in
professional services.
Other expense, net
(in thousands, except percentage data)
Other expense, net
2022
(501,839) $
2021
(570,393) $
$
$ Change
% Change
68,554
(12) %
Fiscal Year Ended June 30,
Other expense, net decreased $68.6 million in fiscal year 2022, compared to fiscal year 2021. The decrease
was primarily due to a decrease of $294.1 million from the mark to fair value of the Exchange and Capped Call
Derivatives. This was offset by an increase of $102.2 million of charges related to the full settlement of the Notes,
and mark to fair value related to our marketable equity securities of $113.9 million during fiscal year 2022.
Interest expense
(in thousands, except percentage data)
2022
2021
$ Change
% Change
Interest expense
$
(41,466) $
(92,586) $
51,120
(55) %
Fiscal Year Ended June 30,
Interest expense decreased $51.1 million in fiscal year 2022 compared to fiscal year 2021. The decrease was
primarily due to a decrease of $59.5 million in amortization of debt discount and issuance cost due to full
settlements of the Notes during fiscal year 2022, offset by the interest expense of $11.6 million from our Term Loan
Facility.
Provision for income taxes
(in thousands, except percentage data)
2022
2021
$ Change
% Change
Fiscal Year Ended June 30,
Provision for income taxes
Effective tax rate
**
Not meaningful
$
(48,572) $
(64,564) $
15,992
**
**
**
We reported an income tax provision of $48.6 million on pretax loss of $470.9 million for fiscal year 2022, as
compared to an income tax provision of $64.6 million on pretax loss of 514.4 million for fiscal year 2021. Our
effective tax rate substantially differed from the U.S. statutory income tax rate of 21.0% primarily due to different tax
rates in foreign jurisdictions such as Australia, and the recognition of significant permanent differences during fiscal
years 2022 and 2021. Significant permanent differences included non-deductible charges related to the Notes,
nondeductible stock-based compensation and research and development incentives. Our assessment of the
recoverability of Australian and U.S. deferred tax assets will not change until there is sufficient evidence to support
their realizability. Our assessment of the realizability of our Australian and U.S. deferred tax assets is based on all
available positive and negative evidence. Such evidence includes, but is not limited to, recent cumulative earnings
or losses, expectations of future taxable income by taxing jurisdiction, and the carry-forward periods available for
the utilization of deferred tax assets.
See Note 19, “Income Tax,” to the notes to our consolidated financial statements for additional information.
Changes in our global operations or local tax laws could result in changes to our effective tax rates, future cash
flows and overall profitability of our operations.
Liquidity and Capital Resources
60
As of June 30, 2023, we had cash and cash equivalents totaling $2.1 billion, short-term investments totaling
$10.0 million and trade receivables totaling $477.7 million. Since our inception, we have primarily financed our
operations through cash flows generated by operations and corporate debt.
Our cash flows from operating activities, investing activities, and financing activities for fiscal years 2023,
2022 and 2021 were as follows:
(in thousands)
Fiscal Year Ended June 30,
2023
2022
2021
Net cash provided by operating activities
$
868,111 $
821,044 $
Net cash provided by (used in) investing activities
(1,258)
36,516
789,960
259,262
Net cash used in financing activities
(148,421)
(399,280)
(1,603,433)
Effect of foreign exchange rate changes on cash, cash equivalents
and restricted cash
Net increase (decrease) in cash, cash equivalents, and restricted
cash
(1,805)
(9,233)
5,408
$
716,627 $
449,047 $
(548,803)
Cash provided by operating activities has historically been affected by the amount of net loss adjusted for
non-cash expense items such as expense associated with stock-based awards, impairment charges for leases and
leasehold improvements, depreciation and amortization, gain on non-cash sale of controlling interest of a subsidiary
and non-coupon impact related to the Notes and Capped Calls, the timing of employee-related costs such as bonus
payments, collections from our customers, which is our largest source of operating cash flows, income tax payment
and changes in other working capital accounts.
Accounts impacting working capital consist of accounts receivables, prepaid expenses and other current
assets, accounts payables, current provisions, and current deferred revenue. Our working capital may be impacted
by various factors in future periods, such as billings to customers for subscriptions, licenses and maintenance
services and the subsequent collection of those billings or the amount and timing of certain expenditures.
Net cash provided by operating activities increased by $47.1 million for fiscal year 2023, compared to fiscal
year 2022. The net increase was primarily attributable to an increase in cash received from customers, offset by an
increase in cash paid to suppliers and employees and cash used to pay income taxes.
Net cash provided by investing activities decreased by $37.8 million for fiscal year 2023, compared to fiscal
year 2022. The net decrease was primarily attributable to a decrease of $185.6 million from proceeds from sales of
marketable securities and strategic investments, offset by a decrease of $92.2 million from purchases of strategic
investments, a decrease of $44.9 million from purchases of property and equipment, and a decrease of $13.6
million from business combinations, net of cash acquired.
Net cash used in financing activities decreased by $250.9 million for fiscal year 2023, compared to fiscal year
2022. The net cash used in financing activities was primarily attributable to repurchases of Class A Common Stock
of $150.0 million during fiscal year 2023. The net cash used in financing activities during fiscal year 2022 was
primarily attributable to the full settlement of the Notes for an aggregate consideration of $1.5 billion, offset by the
proceeds from the Term Loan Facility of $1.0 billion and settlement of the Capped Call of $135.5 million.
Material Cash Requirements
Debt
In October 2020, Atlassian US, Inc. entered into a credit agreement establishing a $1 billion senior unsecured
delayed-draw term loan facility (the “Term Loan Facility”) and a $500 million senior unsecured revolving credit facility
(the “Revolving Credit Facility,” and together with the Term Loan Facility, the “Credit Facility”). We have fully drawn
the Term Loan Facility, and we have full access to the $500 million under the Revolving Credit Facility. The Credit
Facility matures in October 2025 and as of July, 1 2023 and onward bears interest, at our option, at a base rate plus
a margin up to 0.50% or Secured Overnight Financing Rate plus a credit spread adjustment of 0.10% plus a spread
of 0.875% to 1.50%, in each case with such margin being determined by our consolidated leverage ratio. The
Revolving Credit Facility may be borrowed, repaid, and re-borrowed until its maturity, and we have the option to
request an increase of $250 million in certain circumstances. The Credit Facility may be repaid at our discretion
without penalty. Commencing on October 31, 2023, we are obligated to repay the outstanding principal amount of
the Term Loan in installments on a quarterly basis in an amount equal to 1.25% of the Term Loan Facility borrowing
amount until the maturity of the Credit Facility.
61
Share Repurchase Program
In January 2023, the Board of Directors authorized a program to repurchase up to $1.0 billion of our
outstanding Class A Common Stock (the “Share Repurchase Program”). The Share Repurchase Program does not
have a fixed expiration date, may be suspended or discontinued at any time, and does not obligate us to repurchase
any specific dollar amount or to acquire any specific number of shares. During fiscal year 2023, we repurchased
approximately 1.0 million shares of our Class A Common Stock for approximately $154.2 million at an average price
per share of $157.49. All repurchases were made in open market transactions. As of June 30, 2023, we were
authorized to purchase the remaining $845.8 million of our Class A Common Stock under the Share Repurchase
Program. Refer to Note 18, “Stockholder’s Equity,” to our consolidated financial statements for additional
information.
Contractual Obligations
Our principal commitments consist of contractual commitments for cloud services platform and other
infrastructure services, and obligations under leases for office space including obligations for leases that have not
yet commenced. Refer to Note 11, “Leases,” Note 12, “Debt,” Note 13, “Commitments and Contingencies,” and
Note 18, “Stockholder’s Equity,” to our consolidated financial statements for additional information.
Other Future Obligations
We believe that our existing cash and cash equivalents, together with cash generated from operations, and
borrowing capacity from the Credit Facility will be sufficient to meet our anticipated cash needs for at least the next
12 months. Our other future cash requirements will depend on many factors including our growth rate, the timing
and extent of spend on research and development efforts, employee headcount, marketing and sales activities,
payments to tax authorities, acquisitions of additional businesses and technologies, the introduction of new software
and services offerings, enhancements to our existing software and services offerings and the continued market
acceptance of our products.
As of June 30, 2023, the Company is not party to any off-balance sheet arrangements that have or are
reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity,
capital expenditures, or capital resources.
Non-GAAP Financial Measures
In addition to the measures presented in our consolidated financial statements, we regularly review other
measures that are not presented in accordance with GAAP, defined as non-GAAP financial measures by the SEC,
to evaluate our business, measure our performance, identify trends, prepare financial forecasts and make strategic
decisions. The key measures we consider are non-GAAP gross profit, non-GAAP operating income, non-GAAP
operating margin, non-GAAP net income, non-GAAP net income per diluted share and free cash flow (collectively,
the “Non-GAAP Financial Measures”). These Non-GAAP Financial Measures, which may be different from similarly
titled non-GAAP measures used by other companies, provide supplemental information regarding our operating
performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or that
occur relatively infrequently and/or that management considers to be unrelated to our core operations. Management
believes that tracking and presenting these Non-GAAP Financial Measures provides management, our board of
directors, investors and the analyst community with the ability to better evaluate matters such as: our ongoing core
operations, including comparisons between periods and against other companies in our industry; our ability to
generate cash to service our debt and fund our operations; and the underlying business trends that are affecting our
performance.
Our Non-GAAP Financial Measures include:
•
•
•
•
Non-GAAP gross profit. Excludes expenses related to stock-based compensation, amortization of acquired
intangible assets and restructuring charges.
Non-GAAP operating income and non-GAAP operating margin. Excludes expenses related to stock-based
compensation, amortization of acquired intangible assets, and restructuring charges.
Non-GAAP net income and non-GAAP net income per diluted share. Excludes expenses related to stock-
based compensation, amortization of acquired intangible assets, restructuring charges, non-coupon impact
related to the Notes and Capped Calls, gain on a non-cash sale of a controlling interest of a subsidiary and
the related income tax effects on these items, and a non-recurring income tax adjustment.
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.
62
We understand that although these Non-GAAP Financial Measures are frequently used by investors and
the analyst community in their evaluation of our financial performance, these measures have limitations as
analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as
reported under GAAP. We compensate for such limitations by reconciling these Non-GAAP Financial Measures to
the most comparable GAAP financial measures.
The following table presents a reconciliation of our Non-GAAP Financial Measures to the most comparable
GAAP financial measure for fiscal years 2023, 2022 and 2021 (in thousands, except percentage and per share
data):
Gross profit
GAAP gross profit
Plus: Stock-based compensation
Plus: Amortization of acquired intangible assets
Plus: Restructuring charges (1)
Non-GAAP gross profit
Operating income
GAAP operating income (loss)
Plus: Stock-based compensation
Plus: Amortization of acquired intangible assets
Plus: Restructuring charges (1)
Non-GAAP operating income
Operating margin
GAAP operating margin
Plus: Stock-based compensation
Plus: Amortization of acquired intangible assets
Plus: Restructuring charges (1)
Non-GAAP operating margin
Net income
GAAP net loss
Plus: Stock-based compensation
Plus: Amortization of acquired intangible assets
Plus: Restructuring charges (1)
Plus: Non-coupon impact related to exchangeable senior notes
and capped calls
Less: Gain on a non-cash sale of a controlling interest of a
subsidiary
Less: Income tax adjustments
Non-GAAP net income
Net income per share
GAAP net loss per share - diluted
Plus: Stock-based compensation
Plus: Amortization of acquired intangible assets
Plus: Restructuring charges (1)
Plus: Non-coupon impact related to exchangeable senior notes
and capped calls
Less: Gain on a non-cash sale of a controlling interest of a
subsidiary
Less: Income tax adjustments
63
Fiscal Year Ended June 30,
2023
2022
2021
$
2,900,882 $
2,349,968 $
1,757,282
63,625
22,853
9,192
31,358
22,694
—
19,879
22,394
—
$
2,996,552 $
2,404,020 $
1,799,555
$
(345,222) $
70,083 $
937,812
33,127
96,894
524,803
32,398
—
141,406
340,817
31,754
—
$
722,611 $
627,284 $
513,977
(10) %
26 %
1 %
3 %
20 %
3 %
18 %
1 %
— %
22 %
7 %
16 %
2 %
— %
25 %
$
(486,761) $
(519,510) $
(578,979)
937,812
33,127
96,894
524,803
32,398
—
340,817
31,754
—
—
450,829
700,847
(45,158)
—
—
(43,659)
(105,064)
(95,021)
492,255 $
383,456 $
399,418
(1.90) $
(2.05) $
(2.32)
$
$
3.66
0.13
0.38
—
2.05
0.13
—
1.78
(0.18)
(0.17)
—
(0.41)
1.35
0.13
—
2.80
—
(0.38)
Non-GAAP net income per share - diluted
$
1.92 $
1.50 $
1.58
Weighted-average diluted shares outstanding
Weighted-average shares used in computing diluted GAAP net loss
per share
Plus: Dilution from dilutive securities (2)
256,307
554
253,312
2,345
249,679
3,673
Weighted-average shares used in computing diluted non-GAAP net
income per share
256,861
255,657
253,352
Free cash flow
GAAP net cash provided by operating activities
Less: Capital expenditures
Free cash flow
$
$
868,111 $
821,044 $
789,960
(25,652)
(70,583)
(31,520)
842,459 $
750,461 $
758,440
(1) Restructuring charges include stock-based compensation expense related to the rebalancing of resources for fiscal
year 2023.
(2) The effects of these dilutive securities were not included in the GAAP calculation of diluted net loss per share for fiscal
years 2023, 2022 and 2021 because the effect would have been anti-dilutive.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Foreign Currency Exchange Risk
We operate globally and are exposed to foreign exchange risk arising from exposure to various currencies in
the ordinary course of business. Our exposures primarily consist of the Australian dollar, Indian rupee, Euro, British
pound, Japanese yen, Philippine peso, Canadian dollar, Polish zloty and New Zealand dollar. Foreign exchange risk
arises from commercial transactions and recognized financial assets and liabilities denominated in a currency other
than the U.S. dollar. Our financial risk management policy is reviewed annually by our Audit Committee and requires
us to monitor our foreign exchange exposure on a regular basis.
The substantial majority of our sales contracts are denominated in U.S. dollars, and our operating expenses
are generally denominated in the local currencies of the countries where our operations are located. We therefore
benefit from a strengthening of the U.S. dollar and are adversely affected by the weakening of the U.S. dollar.
We have a cash flow hedging program in place and enter into derivative transactions to manage certain
foreign currency exchange risks that arise in our ordinary business operations. We recognize all derivative
instruments as either assets or liabilities on our consolidated statements of financial position and measure them at
fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the
derivative and whether it is designated and qualifies for hedge accounting.
We enter into master netting agreements with select financial institutions to reduce our credit risk, and we
trade with several counterparties to reduce our concentration risk with any single counterparty. We do not have
significant exposure to counterparty credit risk at this time. We do not require nor are we required to post collateral
of any kind related to our foreign currency derivatives.
Foreign currency exchange rate exposure
We hedge material foreign currency denominated monetary assets and liabilities using balance sheet hedges.
The fluctuations in the fair market value of balance sheet hedges due to foreign currency rates generally offset
those of the hedged items, resulting in no material effect on profit. Consequently, we are primarily exposed to
significant foreign currency exchange rate fluctuations with regard to the spot component of derivatives held within a
designated cash flow hedge relationship affecting other comprehensive income.
Foreign currency sensitivity
A sensitivity analysis performed on our hedging portfolio as of June 30, 2023 and 2022 indicated that a
hypothetical 10% strengthening or weakening of the U.S. dollar against the Australian dollar applicable to our
business would decrease or increase the fair value of our foreign currency contracts by $52.2 million and $38.2
million, respectively.
64
Interest Rate Risk
We are exposed to interest rate risk arising from our variable interest rate Credit Facility. Our financial risk
management policy is reviewed annually by our Audit Committee and requires us to monitor its interest rate
exposure on a regular basis.
We have a hedging program in place and enter into derivative transactions to manage the variable interest
rate risks related to our Term Loan Facility. We enter into master netting agreements with financial institutions to
execute our hedging program. Our master netting agreements are with select financial institutions to reduce our
credit risk, and we trade with several counterparties to reduce our concentration risk with any single counterparty.
We do not have significant exposure to counterparty credit risk at this time. We do not require nor are we required to
post collateral of any kind related to our interest rate derivatives.
We enter into interest rate swaps with the objective to hedge the variability of cash flows in the interest
payments associated with our variable-rate Term Loan Facility. The interest rate swaps involve the receipt of
variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of
the agreements without exchange of the underlying notional amount. The interest rate swaps are designated as
cash flow hedges and measured at fair value.
A sensitivity analysis performed on interest rate swaps as of June 30, 2023 and 2022 indicated that a
hypothetical 100 basis point increase in interest rates would increase the market value of our interest rate swap by
$12.2 million and $17.6 million, respectively, and a hypothetical 100 basis point decrease in interest rates would
decrease the market value of our interest rate swap by $12.7 million and $18.8 million, respectively. This estimate is
based on a sensitivity model that measures market value changes when changes in interest rates occur.
In addition, our cash equivalents and investment portfolio are subject to market risk due to changes in interest
rates. Fixed rate securities may have their market value adversely impacted due to a rise in interest rates. As of
June 30, 2023, we had cash and cash equivalents totaling $2.1 billion and short-term investments totaling $10.0
million. A sensitivity analysis performed on our portfolio as of June 30, 2023 and 2022 indicated that a hypothetical
100 basis point increase or decrease in interest rates did not have a material impact to market value of our
investments. This estimate is based on a sensitivity model that measures market value changes when changes in
interest rates occur.
Equity Price Risk
We are also exposed to equity price risk in connection with our equity investments. Our publicly traded equity
securities investments are susceptible to market price risk from uncertainties about future values of the investment
securities. As of June 30, 2023 and 2022, our publicly traded equity securities investments were fair valued at $19.4
million and $30.8 million, respectively. A hypothetical 10% increase or decrease in the respective share prices of our
publicly traded equity securities investments as of June 30, 2023 and 2022 would increase or decrease the fair
value by $1.9 million and $3.1 million, respectively.
65
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
ATLASSIAN CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm (PCAOB ID 42)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholder’s Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
67
70
71
72
73
74
76
66
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Atlassian Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Atlassian Corporation (the Company) as of
June 30, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders’
equity and cash flows for each of the three years in the period ended June 30, 2023, and the related notes
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at June 30, 2023 and 2022,
and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2023, in
conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2023, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 framework) and our report dated August 18, 2023 expressed an unqualified
opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of the critical audit matter does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.
67
Description of the
Matter
Revenue Recognition
As described in Note 2 to the consolidated financial statements, the Company reports
revenues in three categories: (i) subscriptions, (ii) maintenance, and (iii) other. The
Company’s contracts often include promises to transfer multiple products and services
to a customer. To account for these contracts, the Company allocates the transaction
price for each performance obligation based on their relative standalone selling prices
and generally recognizes revenue upon the transfer of control.
Auditing the Company’s recognition of revenue was challenging due to the effort
required to analyze the accounting treatment for contracts with multiple performance
obligations. This involved assessing the impact of terms and conditions of new and
amended contracts and of new product or service offerings, the determination of
relative standalone selling prices, and the timing of recognition of revenue.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating
effectiveness of the Company's internal controls over the relevant terms and conditions
of its contracts, the appropriate accounting for those terms and conditions under ASC
606, including the identification of performance obligations, determination of the
relative standalone selling price
the
determination of the timing of recognition of revenue. This included testing relevant
controls over the information systems that are important to the initiation, billing and
recording of revenue transactions.
for each performance obligation, and
Among other procedures to evaluate management’s identification of the performance
obligations, we read executed contracts for a sample of sales transactions to
understand the contract, identified the promised goods and services in the contract
and identified the performance obligations. To test management’s determination of
relative standalone selling price for each performance obligation, we performed audit
procedures, among others, to assess the appropriateness of the methodology applied,
tested mathematical accuracy of the underlying data and calculations, and tested
sample selections to corroborate the data underlying the Company’s calculations. We
also evaluated whether the Company appropriately applied its revenue recognition
policy to a sample of sales transactions to determine whether revenue was recognized
in the correct amount and period. Finally, we assessed the related disclosures in the
consolidated financial statements.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2012.
San Francisco, California
August 18, 2023
68
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Atlassian Corporation
Opinion on Internal Control Over Financial Reporting
We have audited Atlassian Corporation’s internal control over financial reporting as of June 30, 2023, based on
criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Atlassian
Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as
of June 30, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s 2023 consolidated financial statements, and our report dated August 18, 2023
expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s annual report on internal control over financial reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ Ernst & Young LLP
San Francisco, California
August 18, 2023
69
ATLASSIAN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share data)
June 30,
2023
2022
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable, net
Assets held for sale
Prepaid expenses and other current assets
Total current assets
Non-current assets:
Property and equipment, net
Operating lease right-of-use assets
Strategic investments
Intangible assets, net
Goodwill
Deferred tax assets
Other non-current assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Deferred revenue, current portion
Operating lease liabilities, current portion
Term loan facility, current portion
Total current liabilities
Non-current liabilities:
Deferred revenue, net of current portion
Operating lease liabilities, net of current portion
Term loan facility, net of current portion
Deferred tax liabilities
Other non-current liabilities
Total liabilities
Commitments and contingencies (Note 13)
Stockholders’ equity
$
$
$
2,102,550 $
10,000
477,678
—
146,136
2,736,364
81,402
184,195
225,538
69,072
727,211
9,945
73,052
4,106,779 $
159,293 $
423,131
1,362,736
44,930
37,500
2,027,590
182,743
237,835
962,093
10,669
31,177
3,452,107
1,385,265
73,294
308,127
60,265
70,002
1,896,953
100,662
277,276
159,064
100,840
722,838
10,335
58,862
3,326,830
81,220
406,139
1,066,059
40,638
—
1,594,056
116,621
274,434
999,419
312
14,616
2,999,458
Class A Common Stock, $0.00001 par value; 750,000,000 shares
authorized, 152,442,673 and 144,891,749 issued and outstanding at
June 30, 2023 and 2022, respectively
Class B Common Stock, 0.00001 par value; 230,000,000 shares
authorized, 105,124,103 and 110,035,649 issued and outstanding at
June 30, 2023 and 2022, respectively
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
2
1
1
3,130,631
34,002
(2,509,964)
654,672
4,106,779 $
1
2,182,536
13,864
(1,869,030)
327,372
3,326,830
The above consolidated financial statements should be read in conjunction with the accompanying notes.
70
ATLASSIAN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Revenues:
Subscription
Maintenance
Other
Total revenues
Cost of revenues (1) (2)
Gross profit
Operating expenses:
Research and development (1) (2)
Marketing and sales (1) (2)
General and administrative (1)
Total operating expenses
Operating income (loss)
Other income (expense), net
Interest income
Interest expense
Loss before provision for income taxes
Provision for income taxes
Net loss
Net loss per share attributable to Class A and Class B
common stockholders:
Fiscal Year Ended June 30,
2022
2021
2023
$
2,922,576 $
2,096,706 $
1,324,064
399,738
212,333
495,077
211,099
522,971
242,097
3,534,647
2,802,882
2,089,132
633,765
452,914
331,850
2,900,882
2,349,968
1,757,282
1,869,881
769,861
606,362
1,291,877
535,815
452,193
932,994
371,644
311,238
3,246,104
2,279,885
1,615,876
(345,222)
70,083
141,406
14,501
49,732
(501,839)
(570,393)
2,284
7,158
(30,147)
(41,466)
(92,586)
(311,136)
(470,938)
(514,415)
(175,625)
(48,572)
(64,564)
$
(486,761) $
(519,510) $
(578,979)
Basic
Diluted
$
$
(1.90) $
(1.90) $
(2.05) $
(2.05) $
(2.32)
(2.32)
Weighted-average shares used in computing net loss per
share attributable to Class A and Class B common
stockholders:
Basic
Diluted
256,307
256,307
253,312
253,312
249,679
249,679
(1)
Amounts include share-based payment expense, as follows:
Cost of revenues
Research and development
Marketing and sales
General and administrative
$
63,913 $
31,358 $
604,301
131,739
148,134
328,978
76,209
88,258
19,879
220,294
44,754
55,890
(2)
Amounts include amortization of acquired intangible assets, as follows:
Cost of revenues
Research and development
Marketing and sales
$
22,853 $
374
9,900
22,694 $
374
9,330
22,394
168
9,192
The above consolidated financial statements should be read in conjunction with the accompanying notes.
71
ATLASSIAN CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
Net loss
Other comprehensive income (loss), net of reclassification
adjustments:
Fiscal Year Ended June 30,
2023
(486,761) $
2022
(519,510) $
2021
(578,979)
$
Foreign currency translation adjustment
(5,283)
(15,604)
4,840
Net change in unrealized gains (losses) on marketable and
privately held debt securities
Net gain (loss) on cash flow hedging derivative instruments
Other comprehensive income (loss), before tax
Income tax effect
Other comprehensive income (loss), net of tax
1,753
23,668
20,138
—
20,138
(3,458)
27,438
8,376
134
8,510
(6,844)
(16,008)
(18,012)
921
(17,091)
Total comprehensive loss, net of tax
$
(466,623) $
(511,000) $
(596,070)
The above consolidated financial statements should be read in conjunction with the accompanying notes.
72
ATLASSIAN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Common Stock
Class A
Class B
Shares
Amount
Shares
Amount
Additional paid
in capital
Accumulated
other
comprehensive
income
Accumulated
Deficit
Total
stockholders’
equity
119,762 $
1 $
1,314,737 $
22,445 $
(770,541) $
566,643
137,038 $
1
114,610 $
Balance at June 30, 2020
Common stock issued
Conversion from Class B Common Stock to Class A
Common Stock
Stock-based compensation
Common stock issued related to business
combination
Other comprehensive loss, net of tax
Net loss
Balance at June 30, 2021
Common stock issued
Conversion from Class B Common Stock to Class A
Common Stock
Stock-based compensation
Other comprehensive income, net of tax
Net loss
Balance at June 30, 2022
Common stock issued
Conversion from Class B Common Stock to Class A
Common Stock
Stock-based compensation
Repurchases of Class A Common Stock
Other comprehensive income, net of tax
Net loss
Balance at June 30, 2023
127,686 $
4,200
5,152
—
—
—
—
1
—
—
—
—
—
—
3,208
4,574
—
—
—
144,820 $
3,684
4,912
—
(979)
—
—
—
—
—
—
—
1
1
—
—
—
—
—
—
—
1,163
(5,152)
—
—
—
—
—
—
(4,574)
—
—
—
—
—
—
1
—
—
—
—
—
110,036 $
—
1 $
—
(4,912)
—
—
—
—
—
—
—
—
—
—
—
341,003
523
—
—
—
—
—
—
(17,091)
—
—
—
—
—
—
(578,979)
1,163
—
341,003
523
(17,091)
(578,979)
1,657,426 $
5,354 $
(1,349,520) $
313,262
32
—
525,078
—
—
2,182,536 $
8
—
948,087
—
—
—
—
—
—
8,510
—
13,864 $
—
—
—
—
20,138
—
—
—
—
—
(519,510)
(1,869,030) $
—
—
—
(154,173)
—
(486,761)
32
—
525,078
8,510
(519,510)
327,372
9
—
948,087
(154,173)
20,138
(486,761)
152,437 $
2
105,124 $
1 $
3,130,631 $
34,002 $
(2,509,964) $
654,672
The above consolidated financial statements should be read in conjunction with the accompanying notes.
73
ATLASSIAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Fiscal Year Ended June 30,
2022
2021
2023
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:
$
(486,761) $
(519,510) $
(578,979)
Depreciation and amortization
Stock-based compensation
Impairment charges for leases and leasehold improvements
Deferred income taxes
Gain on a non-cash sale of a controlling interest of a subsidiary
Net loss on exchange derivative and capped call transactions
Amortization of debt discount and issuance cost
Net loss (gain) on strategic investments
Net foreign currency loss (gain)
Other
Changes in operating assets and liabilities:
Accounts receivable, net
Prepaid expenses and other assets
Accounts payable
Accrued expenses and other liabilities
Deferred revenue
Net cash provided by operating activities
Cash flows from investing activities:
Business combinations, net of cash acquired
Purchases of intangible assets
Purchases of property and equipment
Purchases of strategic investments
Purchases of marketable securities and other investments
Proceeds from maturities of marketable securities
Proceeds from sales of marketable securities and strategic investments
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from term loan facility
Payment of issuance costs for debt
Repayment of exchangeable senior notes
Proceeds from settlement of capped call transactions
Repurchases of Class A Common Stock
Proceeds from other financing arrangements
Net cash used in financing activities
60,923
948,087
61,098
10,613
(45,158)
—
471
19,407
51,739
524,803
—
(2,002)
—
424,482
27,051
72,663
(10,613)
(12,065)
1,488
646
(169,526)
(134,764)
(38,230)
(21,927)
78,902
74,611
362,799
868,111
31,741
93,250
284,937
821,044
55,950
340,817
7,526
(8,860)
—
616,446
86,572
(48,080)
7,595
1,381
(61,256)
(10,054)
10,441
76,090
294,371
789,960
(5,775)
(19,411)
(91,769)
(160)
(4,018)
(25,652)
(70,583)
(19,450)
(111,668)
(1,800)
(31,520)
(10,250)
(24,800)
(21,003)
(109,181)
73,950
629
(1,258)
76,937
186,262
36,516
454,996
48,786
259,262
—
—
—
—
1,000,000
—
—
(4,445)
(1,548,686)
(1,803,244)
135,497
203,093
(150,006)
1,585
—
13,909
—
1,163
(148,421)
(399,280)
(1,603,433)
Effect of foreign exchange rate changes on cash and cash equivalents
(1,805)
(9,233)
5,408
Net increase (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of period
Net decrease (increase) in cash and cash equivalents included in assets held
for sale
Cash, cash equivalents, and restricted cash at end of period
716,627
1,386,686
449,047
931,023
(548,803)
1,489,143
602
6,616
(9,317)
$
2,103,915 $
1,386,686 $
931,023
Reconciliation of cash, cash equivalents, and restricted cash within the
consolidated balance sheets to the amounts shown in the consolidated
statements of cash flows above:
Cash and cash equivalents
Restricted cash included in other non-current assets
Total cash, cash equivalents, and restricted cash
74
$
2,102,550 $
1,385,265 $
919,227
1,365
1,421
11,796
$
2,103,915 $
1,386,686 $
931,023
Supplemental disclosures of cash flow information:
Income taxes paid, net of refunds
Interest paid, net
Non-cash investing and financing activities:
$
102,156 $
66,648 $
28,493
13,310
50,272
6,498
Purchase of property and equipment included in accrued expenses and
other current liabilities
Repurchases of Class A Common Stock included in accrued expenses
and other current liabilities
Transfers from property and equipment to assets held for sale
844
10,740
2,440
4,167
—
—
—
—
35,123
The above consolidated financial statements should be read in conjunction with the accompanying notes.
75
ATLASSIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Atlassian Corporation, a Delaware corporation, designs, develops, licenses, and maintains software and
provisions software hosting services to help teams organize, discuss, and complete their work. Our primary
products include Jira Software and Jira Work Management for planning and project management, Confluence for
content creation and sharing, Trello for capturing and adding structure to fluid, fast-forming work for teams, Jira
Service Management for team service, management, and support applications, Jira Align for enterprise agile
planning, and Bitbucket for code sharing and management. The Company is the successor parent entity to
Atlassian Corporation Plc, which was a public company limited by shares, incorporated under the laws of England
and Wales.
The Company’s fiscal year ends on June 30 of each year. References to fiscal year 2023, for example, refer
to the fiscal year ended June 30, 2023.
On September 30, 2022, Atlassian Corporation Plc completed a redomestication, which was approved by the
shareholders of Atlassian Corporation Plc, resulting in Atlassian Corporation becoming our publicly traded parent
company (the “U.S. Domestication”). Atlassian Corporation Plc’s stockholders and the High Court of Justice of
England and Wales approved the scheme of arrangement effecting the U.S. Domestication. Effective after the close
of market trading on September 30, 2022, all issued and outstanding ordinary shares of Atlassian Corporation Plc
were exchanged on a one-for-one basis for newly issued shares of corresponding common stock of Atlassian
Corporation, and all issued and outstanding equity awards of Atlassian Corporation Plc were assumed by Atlassian
Corporation and were converted into rights to acquire Atlassian Corporation shares of Class A Common Stock on
the same terms. The Class A Common Stock of Atlassian Corporation began trading on October 3, 2022 (the first
trading day following the U.S. Domestication), and the Company’s trading symbol on The Nasdaq Global Select
Market remained unchanged as “TEAM.”
2. Summary of Significant Accounting Policies
Basis of Preparation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”). These principles are established primarily by the Financial Accounting
Standards Board (“FASB”).
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly
owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to
make certain estimates and assumptions in the Company’s consolidated financial statements. These estimates are
based on information available as of the date of the consolidated financial statements. On a regular basis,
management evaluates these estimates and assumptions. Such management estimates and assumptions include,
but are not limited to, the standalone selling price (“SSP”) of performance obligations for revenue contracts with
multiple performance obligations; useful lives and impairment of long-lived assets, valuation of intangible assets, fair
value measurement of financial instruments and income taxes. Actual results could differ materially from these
estimates.
Segment
The Company operates as a single operating segment. An operating segment is defined as a component of
an entity for which discrete financial information is available and whose results of operations are regularly reviewed
by the chief operating decision maker (“CODM”). The Company’s CODMs are its Co-Chief Executive Officers, who
review its results of operations to make decisions about allocating resources and assessing performance based on
consolidated financial information. Accordingly, the Company has determined it operates as a single operating and
reportable segment.
76
Foreign Currency
The Company’s consolidated financial statements are presented using the U.S. dollar, which is its reporting
currency. The functional currency for certain of the Company’s foreign subsidiaries is the U.S. dollar, while others
use local currencies. The Company translates the foreign functional currency financial statements to U.S. dollars for
those entities that do not have the U.S. dollar as their functional currency using the exchange rates at the balance
sheet date for assets and liabilities, the period average exchange rates for revenues and expenses, and the
historical exchange rates for equity transactions. The effects of foreign currency translation adjustments are
recorded in accumulated other comprehensive income in the consolidated statements of comprehensive loss.
Foreign currency transaction gains and losses are included in other income (expense), net on the consolidated
statements of operations.
Revenue from Contracts with Customers
Policies, Estimates and Judgments
Revenues are generally recognized upon the transfer of control of promised products or services provided to
customers, reflecting the amount of consideration the Company expects to receive for those products or services.
The Company enters into contracts that can include various combinations of products and services, which are
generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized
net of sales and other similar taxes collected from customers, which are subsequently remitted to governmental
authorities.
Revenues are recognized upon the application of the following steps:
1.
2.
3.
4.
5.
Identification of the contract or contracts with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when, or as, the performance obligation is satisfied.
The timing of revenue recognition may differ from the timing of billing our customers. The Company receives
payments from customers based on a billing schedule as established in its contracts. Contract assets are
recognized when performance is completed in advance of billings. Deferred revenue is recorded when billings are in
advance of performance under the contract. The Company’s revenue arrangements include standard warranty
provisions that the products and services will perform and operate in all material respects with the applicable
published specifications, the financial impacts of which have historically been and are expected to continue to be
insignificant. The Company’s contracts do not include a significant financing component.
Customer contracts often include promises to transfer multiple products and services to a customer.
Determining whether products and services are considered distinct performance obligations that should be
accounted for separately versus together may require judgment.
The Company allocates the transaction price for each customer contract to each performance obligation
based on the relative SSP for each distinct performance obligation. Judgment is required in determining the SSP for
each distinct performance obligation. The Company typically determines an SSP range for its products and
services, which is reassessed on a periodic basis or when facts and circumstances change. In most cases, the
Company is able to determine SSP based on the observable prices of products or services sold separately in
comparable circumstances to similar customers. In instances where performance obligations do not have
observable standalone sales, the Company utilizes available information that may include market conditions, pricing
strategies, the economic life of the software, and other observable inputs to estimate the price that it would charge if
the products and services were sold separately.
Products are generally sold with a right of return and may include other credits or incentives, and, in certain
instances, the Company may estimate customer usage of its services, which are accounted for as variable
consideration when determining the amount of revenue to recognize. Returns and credits are estimated at contract
inception and updated at the end of each reporting period if additional information becomes available. Variable
consideration was not material for the periods presented.
77
Recognition of Revenue
Revenue recognized from contracts with customers is disaggregated into categories that depict how the
nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The Company
reports revenues in three categories: (i) subscription, (ii) maintenance, and (iii) other. In addition, revenue is
presented by geographic region and deployment option in Note 14, “Revenue.”
Subscription Revenues
Subscription revenues consist primarily of fees earned from subscription-based arrangements for providing
customers the right to use the Company’s software in a cloud-based-infrastructure that the Company provides. The
Company also sells on-premises term license agreements for its data center products, which are software licensed
for a specified period, and includes support and maintenance service that is bundled with the license for the term of
the license period. Subscription revenues are driven primarily by the number and size of active licenses, the type of
product and the price of the licenses. Subscription-based arrangements generally have a contractual term of one to
twelve months, with a majority being one month. For cloud-based services, subscription revenue is recognized
ratably as services are delivered, commencing with the date the service is made available to customers. For on-
premises term license, and the support, the Company recognizes revenue upfront for the portion that relates to the
delivery of the term license and the support and related revenue is recognized ratably as the services are delivered
over the term of the arrangement. The revenue recognition policy is consistent for subscription sales generated
directly with customers and sales generated indirectly through solution partners and resellers.
Maintenance Revenues
Maintenance revenues represent fees earned from providing customers with unspecified future updates,
upgrades and enhancements and technical product support for perpetual license products on an if-and-when-
available basis. Maintenance revenue is recognized ratably over the term of the support period.
Other Revenues
Other revenues primarily include perpetual license revenue and fees received for sales of third-party apps in
the Atlassian Marketplace. Technical account management, consulting and training services are also included in
other revenues. Perpetual license revenues represent fees earned from the license of software to customers for use
on the customer’s premises other than data center products. Software is licensed on a perpetual basis. Perpetual
license revenues consist of the revenues recognized from sales of licenses to customers. The Company no longer
sells perpetual licenses or upgrades for our Server offerings. The Company typically recognized revenue on the
license portion of perpetual license arrangements once the customer obtained control of the license, which is
generally upon delivery of the license. Revenue from the sale of third-party apps via Atlassian Marketplace is
recognized on the date of product delivery given that all of our obligations have been met at that time and on a net
basis the Company functions as the agent in the relationship. Revenue from technical account management is
recognized over the time period that the customer has access to the service. Revenue from consulting and training
is recognized over time as the services are performed.
Deferred Contract Acquisition Costs
Deferred contract acquisition costs are costs incurred to obtain a contract, if such costs are recoverable, and
consist primarily of sales commissions and related payroll taxes. Incremental costs of obtaining a contract are
earned on new and expansion contracts which are capitalized and amortized over the average period of benefit the
Company estimates to be four years, which is typically greater than the term of the initial customer contract and
reflects the average period of benefit, including anticipated renewals. The Company does not pay sales
commissions upon contract renewal.
The Company determines the period of benefit for commissions paid for the acquisition of the initial customer
contract by taking into consideration the initial estimated customer life and the technological life of our unified
communications platform and related significant features. The Company includes the deferred contract costs in
prepaid expense and other current assets and other non-current assets on the consolidated balance sheets and
amortization of deferred contract acquisition costs in marketing and sales expense in the consolidated statements of
operations.
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Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of highly liquid investments with an original maturity of three months or
less at the date of purchase. Cash equivalents also include amounts due from third-party credit card processors as
they are both short-term and highly liquid in nature and are typically converted to cash within three days of the sales
transaction. Cash and cash equivalents are stated at fair value.
As of June 30, 2023 and 2022, the Company had restricted cash of $1.4 million, primarily used for the benefit
of employees through a deferred compensation plan, and was not available for use in its operations. Restricted
cash is included in other non-current assets in the consolidated balance sheets.
Accounts Receivable, net
The Company records trade accounts receivable at the invoice value, and such receivables are non-interest
bearing. The Company considers receivables past due based on the contractual payment terms. The Company
makes estimates of expected credit and collectability trends based on an assessment of various factors including
historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic
environment that may affect our ability to collect from customers. The allowance for credit losses and write offs were
not material for each of the periods as of June 30, 2023, 2022 and 2021.
Fair Value Measurements
Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability
in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants at the measurement date. The fair value hierarchy prioritizes the quality and reliability of the information
used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that
is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories of
inputs:
•
•
•
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 - Observable inputs (other than Level 1 prices) such as quoted prices for similar assets or liabilities,
quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities;
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the
fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value
is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as
instruments for which the determination of fair value requires significant management judgment or
examination.
Marketable Securities
The Company classifies all marketable debt securities that have original stated maturities of greater than
three months as marketable securities on its consolidated balance sheets. The Company determines the
appropriate classification of its investments in marketable debt securities at the time of purchase and reevaluates
such designation at each balance sheet date. The Company has classified and accounted for its marketable debt
securities as available-for-sale (“AFS”). After consideration of its risk versus reward objectives, as well as its liquidity
requirements, the Company may sell these debt securities prior to their stated maturities. The Company considers
all of our marketable securities as funds available for use in current operations, including those with maturity dates
beyond one year, and therefore classifies these securities as current assets on the consolidated balance sheets.
The Company evaluates AFS securities with unrealized loss positions for credit loss by assessing whether the
decline in fair value below the amortized cost basis has resulted from a credit loss or other factors, whether the
Company expects to recover the entire amortized cost basis of the security, its intent to sell and whether it is more
likely than not that the Company will be required to sell the securities before the recovery of their amortized cost
basis. The Company carries these securities at fair value, and reports the unrealized gains and losses, net of taxes,
as a component of accumulated other comprehensive income except for the changes in allowance for expected
credit losses, which are recorded in other income (expense), net. Realized gains and losses are determined based
on the specific identification method and are reported in other income (expense), net on the consolidated
statements of operations.
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Strategic Investments
The Company holds strategic investments in privately held debt and equity securities, as well as publicly held
equity securities in which the Company does not have a controlling interest.
Investments in privately held debt securities are classified as AFS securities. Investments in publicly held
equity securities are recorded at fair value with changes in the fair value of the investments recorded in other
income (expense), net in the consolidated statements of operations.
Investments in privately held equity securities without readily determinable fair values in which the Company
does not own a controlling interest or have significant influence over are measured in accordance with the
measurement alternative. In applying the measurement alternative, the carrying value of the investment is
measured at cost, less impairment, if any, plus or minus changes resulting from observable price changes from
orderly transactions for the identical or a similar investment of the same issuer in the period of occurrence. Changes
to the carrying value of these investments are recorded through other income (expense), net on the consolidated
statements of operations.
In determining adjustments to the carrying value of its strategic investments in privately held companies, the
Company uses the most recent data available to the Company. Valuations of privately held securities are inherently
complex and the determination of whether an orderly transaction is for an identical or similar investment requires
judgment. In its evaluation, the Company considers factors such as differences in the rights and preferences of the
investments and the extent to which those differences would affect the fair values of those investments. The
Company’s impairment analysis encompasses an assessment of both qualitative and quantitative factors including
the investee’s financial metrics, market acceptance of the investee’s product or technology, general market
conditions and liquidity considerations.
Equity Method Investments
Privately held equity securities in which the Company does not have a controlling financial interest but does
exercise significant influence over the investment are accounted for under the equity method. The Company records
a proportionate share of the investment’s earnings or losses, and impairment, if any, as a component of other
income (expense), net in the consolidated statements of operations. These investments are included in strategic
investments in the consolidated balance sheets.
For entities that meet the definition of a variable interest entity (“VIE”), the Company consolidates those
entities when the Company is the primary beneficiary of the entity. The Company is determined to be the primary
beneficiary when it possesses both the unilateral power to direct activities that most significantly impact the
economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could
potentially be significant to the VIE. The Company continually evaluates whether it qualifies as the primary
beneficiary and reconsiders its determination of whether an entity is a VIE upon reconsideration events. As of
June 30, 2023, the Company has one investment in an unconsolidated VIE for which it exercises significant
influence over their operations and accordingly accounts for it as an equity method investment.
Exchangeable Senior Notes
In 2018, the Company, through its subsidiary Atlassian US, Inc., issued exchangeable senior notes due May
1, 2023 (the “Notes”), which were classified as financial liabilities at amortized cost and measured using the
effective interest rate (“EIR”) method. Amortized cost was calculated by taking into account any discount and
issuance cost that were an integral part of the EIR. The EIR amortization was included as interest expense in the
consolidated statements of operations. In connection with the issuance of the Notes, the Company entered into
privately negotiated capped call transactions (the “Capped Calls”) with certain financial institutions. The Capped Call
transactions were scheduled to expire in May 2023 and were required to be settled in cash. As of June 30, 2022 the
Notes and Capped Calls had been fully settled and are no longer outstanding. Refer to Note 12, “Debt” for further
details of the transaction.
Derivative Financial Instruments
The Company enters into foreign exchange forward contracts with the objective to mitigate certain currency
risks associated with cost of revenues and operating expenses denominated in foreign currencies. These foreign
exchange forward contracts are designated as cash flow hedges. The Company also enters into foreign exchange
forward contracts to hedge a portion of certain foreign currency denominated as monetary assets and liabilities to
reduce the risk that such foreign currency will be adversely affected by changes in exchange rates. The Company
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uses interest rate swaps to hedge the variability of cash flows in the interest payments associated with its variable-
rate debt due to changes in the Secured Overnight Financing Rate (“SOFR”) based floating interest rate. The
interest rate swaps are designated as cash flow hedges and involve interest obligations for U.S. dollar-denominated
amounts. The Company does not enter into derivative instrument transactions for trading or speculative purposes.
Hedging derivative instruments are recognized as either assets or liabilities and are measured at fair value.
For derivative instruments designated as cash flow hedges, the gains (losses) on the derivatives are initially
reported as a component of other comprehensive income and are subsequently recognized in earnings when the
hedged exposure is recognized in earnings. For derivative instruments that are not designated as hedges, gains
(losses) from changes in fair values are primarily recognized in other income (expense), net. The Company enters
into master netting agreements with financial institutions to execute its hedging program. The master netting
agreements are with select financial institutions to reduce the Company’s credit risk, as well as to reduce its
concentration of risk with any single counterparty.
The Company had other derivatives, such as the embedded exchange feature of the Notes and Capped
Calls. Please see Note 12, “Debt” for details. The Notes and Capped Calls were measured at fair value at each
reporting date, and gains (losses) from changes in fair values were recognized in other income (expense), net in the
consolidated statements of operations. The Company used the Black-Scholes option pricing models to estimate the
fair value of the exchange feature of the Notes. Certain inputs used in the model such as stock price volatility
requires judgment. The fair value of the Capped Calls was obtained from counterparty banks.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using
the straight-line method to allocate the cost over the estimated useful lives. The estimated useful lives for each
asset class are as follows:
Equipment
Computer hardware and computer-related software
Furniture and fittings
Leasehold improvements
Leases
3 years
3 years
5 years
Shorter of the remaining lease term or 7 years
The Company determines if an arrangement is a lease at inception. The Company’s lease agreements
generally contain lease and non-lease components. Payments under the Company’s lease arrangements are
primarily fixed. Non-lease components primarily include payments for maintenance and utilities. The Company
combines fixed payments for non-lease components with lease payments and account for them together as a single
lease component which increases the amount of its lease assets and liabilities.
Certain lease agreements contain variable payments, which are expensed as incurred and not included in the
lease assets and liabilities. These amounts include payments affected by the Consumer Price Index and payments
for maintenance and utilities.
Lease assets and liabilities are recognized at the present value of the future lease payments at the lease
commencement date. The interest rate used to determine the present value of the future lease payments is the
Company’s incremental borrowing rate, because the interest rate implicit in the Company’s leases is not readily
determinable. The Company’s incremental borrowing rate is estimated to approximate the interest rate on a
collateralized basis with similar terms and payments, and in economic environments where the leased asset is
located. The Company’s lease terms include periods under options to extend or terminate the lease when it is
reasonably certain that the Company will exercise that option. The Company generally uses the base, non-
cancelable, lease term when determining the lease assets and liabilities. The Company reassesses the lease term if
and when a significant event or change in circumstances occurs. Lease assets also include any prepaid lease
payments and lease incentives. Operating lease expense (excluding variable lease costs) is recognized on a
straight-line basis over the lease term.
The Company applies the short-term lease recognition exemption for short-term leases, which are leases with
a lease term of 12 months or less. Payments associated with short-term leases are recognized on a straight-line
basis over the lease term.
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The Company did not have any finance lease arrangements for fiscal years 2023, 2022, and 2021.
Assets Held for Sale
The Company classifies assets as held for sale when all of the following are met: (i) management has
committed to a plan to sell the assets; (ii) the assets are available for immediate sale in their present condition; (iii)
an active program to locate a buyer has been initiated; (iv) it is probable that a sale will occur within one year; (v)
the assets are being actively marketed for sale at a price that is reasonable in relation to their current fair value; and
(vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. If all held for sale
criteria are met, the assets are reclassified and presented separately in the consolidated balance sheets as assets
held for sale at the lower of the carrying value or the fair value, less cost to sell, and no longer depreciated or
amortized. The Company completed a sale of assets that had previously been classified as held for sale in July
2022. Please refer to Note 7, “Assets Held for Sale”, for further details.
Business Combinations
The Company allocates the purchase price of acquired companies to the tangible and intangible assets
acquired and liabilities assumed, based on their estimated fair values. The excess of the purchase price over the
fair values of these identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are
recognized separately from the business combination and are expensed as incurred.
The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible
assets acquired and liabilities assumed at the acquisition date. Assumptions used to estimate the fair value of the
intangible assets include, but are not limited to, revenue growth rates, technology migration curves, customer
attrition rates and discount rates. These estimates are inherently uncertain and unpredictable and, as a result,
actual results may differ from estimates.
During the measurement period, which may not be later than one year from the acquisition date, the
Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities
assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final
determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent
adjustments are recorded to the consolidated statements of operations.
Intangible Assets
The Company acquires intangible assets separately or in connection with business combinations. Intangible
assets are measured at cost initially. Intangible assets with finite lives are amortized over their estimated useful life
using the straight-line method. The amortization expense on intangible assets is recognized in the consolidated
statements of operations in the expense category consistent with the function of the intangible asset.
The estimated useful lives for each intangible asset class are as follows:
Patents, trademarks and other rights
Customer relationships
Acquired developed technology
Impairment of Long-Lived Assets
5 - 12 years
5 - 10 years
4 - 6 years
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate an
asset’s carrying value may not be recoverable. When the projected undiscounted cash flows estimated to be
generated by those assets are less than their carrying amounts, the assets are adjusted to their estimated fair value
and an impairment loss is recorded as a component of operating income (expense).
Goodwill
Goodwill is the excess of the aggregate of the consideration transferred over the identifiable assets acquired
and liabilities assumed.
Goodwill is tested for impairment at least annually during the fourth quarter of the Company’s fiscal year and
more often if and when circumstances indicate that the carrying value may be impaired. The Company’s reporting
unit is at the operating segment level. The Company performs its goodwill impairment test at the level of its
operating segment, as there are no levels below the operating segment level for which discrete financial information
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is prepared and regularly reviewed by the Company’s CODMs. A qualitative assessment is performed to determine
whether it is more likely than not that the fair value of its operating segment is less than it’s carrying amount. If the
operating segment does not pass the qualitative assessment, the carrying amount of the operating segment,
including goodwill, is compared to fair value and goodwill is considered impaired if the carrying value exceeds its fair
value. Any excess is recognized as an impairment loss in current period earnings.
Stock-based Compensation
The Company recognizes compensation expense related to all stock-based awards, including restricted stock
units (“RSU”), and restricted stock awards issued to the Company’s employees in exchange for their service, based
on the estimated fair value of the awards on the grant date. The fair value of each RSU or restricted stock award is
based on the fair value of the Company’s Class A Common Stock on the date of grant.
The Company recognizes costs related to stock-based awards, net of estimated forfeitures, over the awards’
requisite service period on a straight-line basis. The Company estimates forfeitures based on historical experience.
The respective expenses are recognized as employee benefits and classified in the consolidated statements of
operations according to the activities that the employees perform.
In connection with certain business combinations, the Company also issues replacement awards in exchange
for awards held by employees of the acquiree. The Company recognizes the portion of the acquiree award that is
attributable to pre-combination service as purchase consideration. The portion of the replacement award attributable
to post-combination service is recognized as compensation expense over the awards’ requisite service period and
classified in the consolidated statements of operations according to the activities that the employees perform. Refer
to Note 17, “Stockholders Equity” for more information.
Defined Contribution Plan
The Company offers various defined contribution plans for our U.S. and non-U.S. employees. The Company
matches a portion of employee contributions each pay period, subject to maximum aggregate matching amounts, or
contributes based on local legislative rates for eligible employees. Total defined contribution plan expense was
$78.2 million, $58.7 million, and $41.5 million for fiscal years 2023, 2022, and 2021, respectively.
Advertising Costs
Advertising costs are expensed as incurred as a component of marketing and sales expense in the
consolidated statements of operations. Advertising expense was $89.5 million, $90.3 million and $71.0 million for
fiscal years 2023, 2022, and 2021, respectively.
Research and Development
Research and development costs are expensed as incurred and consists of the employee, software, and
hardware costs incurred for the development of new products, enhancements and updates of existing products and
quality assurance activities. The costs incurred for the development of the Company’s cloud-based platform and
internal use software are evaluated for capitalization during the development phase. Capitalized software
development costs on the Company’s consolidated balance sheet were not material for the periods presented.
Concentration of Credit Risk and Significant Customers
Financial instruments potentially exposing the Company to credit risk consist primarily of cash, cash
equivalents, accounts receivable, derivative contracts and investments. The Company holds cash at financial
institutions that management believes are high credit, quality financial institutions and invests in investment grade
securities rated A- and above and debt securities. The Company’s derivative contracts expose it to credit risk to the
extent that the counterparties may be unable to meet the terms of the arrangement. The Company enters into
master netting agreements with select financial institutions to reduce its credit risk and trades with several
counterparties to reduce its concentration risk with any single counterparty. The Company does not have significant
exposure to counterparty credit risk at this time. In addition, the Company does not require nor is required to post
collateral of any kind related to any foreign currency derivatives.
Credit risk arising from accounts receivable is mitigated to a certain extent due to our large number of
customers and their dispersion across various industries and geographies. The Company’s customer base is highly
diversified, thereby limiting credit risk. The Company manages credit risk with customers by closely monitoring its
receivables and contract assets. The Company continuously monitors outstanding receivables locally to assess
whether there is objective evidence that outstanding accounts receivables and contract assets are credit-impaired.
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As of June 30, 2023 and June 30, 2022, no customer represented more than 10% of the total accounts receivable
balance. For fiscal years ended June 30, 2023, 2022, and 2021, no customer represented more than 10% of the
total revenues.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method,
deferred income tax assets and liabilities represent temporary differences between the carrying amounts of assets
and liabilities in the consolidated financial statements and their corresponding tax basis used in the computation of
taxable income. The Company measures deferred tax assets and liabilities using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are expected to be reversed. The
Company recognizes the effect on deferred tax assets and liabilities of a change in tax rates within the provision for
income taxes as expense and income in the period that includes the enactment date. The Company accounts for
the tax impact of including Global Intangible Low-Taxed Income (GILTI) in U.S. taxable income as a period cost. A
valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be
realized.
Changes in deferred tax assets or liabilities are recognized as a component of benefit from (provision for)
income taxes in the consolidated statements of operations, except where they relate to items that are recognized in
other comprehensive income or directly in equity, in which case the related deferred tax is also recognized in other
comprehensive income or equity, respectively. Where deferred tax arises from the initial accounting for a business
combination, the tax effect is included in the accounting for the business combination.
Deferred tax assets are regularly evaluated for future realization and reduced by a valuation allowance to an
amount for which realization is more likely than not. In making such a determination, the Company considers all
available positive and negative evidence, including future reversals of existing temporary differences, projected
future taxable income, tax planning strategies, carry back potential if permitted under the tax law, and results of
recent operations. Significant management judgment is required to determine the amount of deferred tax assets that
can be recognized, based upon the likely timing and the amount of future taxable income, together with future tax-
planning strategies. Assumptions about the generation of future taxable income depend on management’s
estimates of future cash flows, future business expectations, capital expenditures, dividends, and other capital
management transactions. Management judgment is also required in relation to the application of income tax
legislation, which involves complexity and an element of uncertainty. In the event there is a change in the
Company’s assessment of its ability to recover deferred tax assets, the income tax provision would be adjusted
accordingly, resulting in a corresponding adjustment to the consolidated statements of operations.
Uncertain tax positions are recorded in accordance with Accounting Standards Codification Topic 740 Income
Taxes (“ASC 740”), Income Taxes. ASC 740 specifies a two-step process in which (1) the Company determines
whether it’s more likely than not that tax positions will be sustained on the basis of the technical merits of the
position, and (2) for those positions that meet the more-likely-than-not recognition threshold, the Company
recognizes the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with
the related tax authority. The Company considers many factors when evaluating uncertain tax positions, which
involve significant judgement and may require periodic reassessment. The Company recognizes interest and
penalties related to unrecognized tax benefits as a component of income tax expense. For details of taxation,
please refer to Note 19, “Income Taxes.”
New Accounting Standards Not Yet Adopted in Fiscal Year 2023
In June 2022, the FASB issued Accounting Standards Update (“ASU”) No. 2022-03, "Fair Value Measurement
of Equity Securities Subject to Contractual Sale Restrictions." The ASU amends ASC 820: Fair value measurement,
to clarify that a contractual sales restriction is not considered in measuring an equity security at fair value and to
introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are
measured at fair value. The amendments in this ASU are effective for the Company in fiscal years beginning after
December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for both interim and
annual financial statements that have not yet been issued or made available for issuance. The Company is still
evaluating the impact of this pronouncement on the consolidated financial statements.
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Recently Adopted Accounting Pronouncements
In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations: Accounting for Contract
Assets and Contract Liabilities from Contracts with Customers (Topic 805)”. The amendments in this ASU require
that an acquirer recognizes and measures contract assets and contract liabilities acquired in a business
combination in accordance with Topic 606. This ASU is effective for fiscal years beginning after December 15, 2022,
including interim periods within those fiscal years and should be applied prospectively to business combinations
occurring on or after the effective date of the amendments. Early adoption is permitted. The Company adopted this
standard during the fourth quarter of fiscal year 2023. The adoption of this new standard did not have a material
impact on the Company’s consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, “Debt–Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging–Contracts in Entity’s Own Equity (Subtopic 815-40)” to simplify the
accounting for convertible instruments and contracts on an entity’s own equity. The Company adopted this standard
effective July 1, 2022 using a modified retrospective method. The adoption of this new standard did not have a
material impact on the Company’s consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the
Effects of Reference Rate Reform on Financial Reporting.” This ASU is elective and provides relief to all entities,
subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference
London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of
reference rate reform. Optional expedients are provided for contract modification accounting under topics such as
debt, leases, and derivatives. The optional amendments were to be effective for all entities as of any date from the
beginning of an interim period that includes or is subsequent to March 12, 2020 through December 31, 2022. In
December 2022, the FASB issued ASU No. 2022-06, “Deferral of the Sunset Date of Topic 848,” which deferred the
sunset date of Topic 848 from December 31, 2022 to December 31, 2024 to align with the amended cessation date
of LIBOR which was delayed to June 30, 2023. The Company adopted this ASU during the fourth quarter of fiscal
year 2023 and elected to apply the practical expedient which allows us to account for the modification of the Credit
Facility as if the modification was not substantial. The Company has also elected the practical expedient to assume
that the forecasted transaction in a cash flow hedge is probable of occurring and the practical expedient to continue
to apply hedge accounting without dedesignating the interest rate swap. The adoption of this accounting standard
did not have a material impact on the Company’s consolidated financial statements.
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3. Conversion from IFRS to GAAP
As part of the U.S. Domestication, the Company has retrospectively converted its Consolidated Financial
Statements from International Financial Reporting Standards (“IFRS”) to GAAP. Refer to Note 1, “Description of
Business” for additional details.
The significant differences between IFRS and GAAP as they relate to these financial statements are as
follows:
(a) Stock-based Compensation
Under IFRS, prior to the adoption of GAAP, the Company adhered to the accelerated method of expense
recognition for stock-based compensation subject to graded vesting. The application of this accounting method
results in more of the grant’s stock-based compensation expense being recognized in the earlier years of the grant.
Under GAAP, the Company accounts for stock-based awards using the straight-line expense method,
recognizing the expense ratably over the service period which is generally four years. This change in the timing of
the expense recognition is the primary driver for the GAAP transition differences.
(b) Leases
Under IFRS, prior to the adoption of GAAP, the Company, as lessee, applied the single lease model that is
similar to the accounting for a finance lease under GAAP. The expense recognition presented a higher portion of the
total expense earlier in the term as a combination of straight-line depreciation of the right-of-use asset and the
effective interest rate method applied to the lease liability results in a decreasing rate of interest expense recognition
throughout the lease term.
Under GAAP, there is dual classification lease accounting model for lessees: finance leases and operating
leases. The Company, as lessee, classified all its leases as operating leases and recognizes a single lease
expense, including both a right-of-use asset depreciation component and an interest expense component, on a
straight-line basis throughout the lease term.
(c) Strategic Investments
The Company invests in equity securities of public and private companies in which the Company does not
have a controlling interest or significant influence. Under IFRS, the movement in the valuation of these investments
had been recorded in other comprehensive income. Under GAAP, the Company records any impairment of these
equity investments, as well as any changes in value resulting from observable price changes as a result of orderly
transactions for identical or similar investments of the same issuer, in the consolidated statements of operations.
This change in classification is the primary driver of the GAAP transition differences.
(d) Exchangeable Senior Notes
In 2018, Atlassian US, Inc. issued $1 billion in aggregate principal amount of the exchangeable senior notes
(the “Notes”) due on May 1, 2023. The Notes were senior, unsecured obligations of the Company, and were
scheduled to mature on May 1, 2023, unless earlier exchanged, redeemed or repurchased. The Notes were fully
redeemed by the Company in fiscal year 2022.
The exchange feature of the Notes required bifurcation from the Notes and was accounted for as a derivative
liability. The fair value of the Notes’ embedded exchange derivative at the time of issuance was $177.9 million and
was recorded as original debt discount for purposes of accounting for the debt component of the Notes. This
discount was amortized as interest expense using the effective interest rate method over the term of the Notes.
Under IFRS, the Company determined the effective interest rate using estimated cash flows, based on the
anticipated timing on cash inflows and outflows. Under GAAP, the Company has calculated the effective interest
rate using contractual cash flows, focusing on the flow of funds as determined by contractual arrangements. This
change in calculation of the effective interest rate is the primary driver of the GAAP transition differences.
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(e) Income Taxes
Prior to the adoption of GAAP, the Company accounted for income taxes pursuant to International Accounting
Standard 12 Income Taxes (“IAS 12”), International Financial Reporting Interpretations Committee 23 Uncertainty
over Income Tax Treatments (“IFRIC 23”) and International Accounting Standard 34 Interim Reporting. Upon the
adoption of GAAP, the Company now accounts for income taxes pursuant to ASC 740 as noted below:
i. Deferred Tax
Deferred tax has been adjusted to remove any backwards tracing components that are permitted under IAS
12 and prohibited under ASC 740. Specifically, backwards tracing is prohibited with regard to adjustments to the
beginning of the year balance of a valuation allowance because of a change in judgement about the realizability of
related deferred tax assets in future years.
Deferred tax liabilities and assets for investments in subsidiaries, partnerships, corporate ventures, and other
entities have been assessed based on the criteria in ASC 740 rather than IAS 12. Where applicable, the Company
has adopted the exception criteria in establishing whether a deferred tax asset or liability is required to be
recognized. The Company acknowledges that a deferred tax asset or liability will be recognized for any investments
that are not subject to the exception criteria.
Under IFRS, when assessing the recognition of deferred taxes on outside basis differences between the
carrying amount of an investment for financial reporting purposes and the underlying tax basis in that investment,
the Company had adopted the exceptions in IAS 12 such that no deferred tax assets or liabilities had been recorded
on outside basis differences that exist for any controlled subsidiaries.
Under GAAP, the Company is required to recognize deferred taxes attributable to outside basis interests in
equity accounted investments in addition to fiscally transparent entities such as partnerships and trusts. On that
basis, the Company has recorded deferred taxes for the U.S. group’s interest in foreign and domestic fiscally
transparent entities, and it is expected to recognize deferred taxes in respect of any equity accounted associate
investments that it does not control.
ii. Valuation Allowance
The realizability of deferred tax assets was considered under GAAP and the determination to maintain a full
valuation allowance in the United States and Australia was made. This is a substantially similar result under IFRS.
For footnote presentation purposes, all deferred tax assets, liabilities, and valuation allowances are now reported on
gross basis rather than a net basis.
iii. Uncertain Tax Positions
The Company recognizes and measures any uncertain tax positions in accordance with ASC 740 rather than
IFRIC 23. Accordingly, the Company recognizes, and measures uncertain tax positions based on a two-step
process outlined in the Income Tax section of Critical Accounting Policies.
iv. Stock-Based Compensation
Under IFRS, the measurement of the stock-based compensation deferred tax asset is based on an estimate
of the future tax deduction based on the current stock price at each reporting period. When the expected tax
benefits from equity awards exceed the recorded cumulative recognized expense multiplied by the tax rate, the tax
benefit up to the amount of the tax effect of the cumulative book compensation expense is recorded in the
consolidated statement of operations; the excess is recorded in equity. When the expected tax benefit is less than
the tax effect of the cumulative amount of recognized expense, the entire tax benefit is recorded in the consolidated
statement of operations.
Under GAAP, the Company measures the stock-based compensation deferred tax asset based on the amount
of compensation cost recognized for financial statement purposes. Changes in stock price do not result in a
remeasurement of the related deferred tax asset. Upon settlement or expiration, excess tax benefits and tax
deficiencies are recognized within the provisions for income taxes.
v. Other Pre-tax Changes
The tax effects resulting from other accounting changes to pre-tax income, including leases, strategic
investments, and notes, are included in the tax provision under GAAP.
87
4. Fair Value Measurements
The following table presents the Company’s financial assets and liabilities measured at fair value on a
recurring basis as of June 30, 2023, by level within the fair value hierarchy (in thousands):
Assets measured at fair value
Cash and cash equivalents:
Money market funds
Marketable securities:
Certificates of deposit and time deposits
Derivative financial instruments
Strategic investments:
Publicly traded equity securities
Total assets measured at fair value
Liabilities measured at fair value
Derivative financial instruments
Total liabilities measured at fair value
Level 1
Level 2
Total
$
1,338,509 $
— $
1,338,509
—
—
10,000
64,210
10,000
64,210
19,365
—
19,365
$
1,357,874 $
74,210 $
1,432,084
$
$
— $
— $
10,114 $
10,114 $
10,114
10,114
The following table presents the Company’s financial assets and liabilities measured at fair value on a
recurring basis as of June 30, 2022, by level within the fair value hierarchy (in thousands):
Assets measured at fair value
Cash and cash equivalents:
Money market funds
Marketable securities:
U.S. treasury securities
Certificates of deposit and time deposits
Derivative financial instruments
Strategic investments:
Publicly traded equity securities
Total assets measured at fair value
Liabilities measured at fair value
Derivative financial instruments
Total liabilities measured at fair value
Level 1
Level 2
Total
$
555,247 $
— $
555,247
—
—
—
70,294
3,000
44,052
30,801
—
$
586,048 $
117,346 $
70,294
3,000
44,052
30,801
703,394
$
$
— $
— $
24,100 $
24,100 $
24,100
24,100
Due to the short-term nature of accounts receivables, net, contract assets, accounts payable, accrued
expenses, and other current liabilities, their carrying amount is assumed to approximate their fair value.
Determination of Fair Value
The Company uses quoted prices in active markets for identical assets to determine the fair value of the
Company’s Level 1 investments. The fair value of the Company’s Level 2 investments is determined based on
quoted market prices or alternative market observable inputs.
Strategic Investments Measured and Recorded at Fair Value on a Non-Recurring Basis
The Company’s investments in privately held companies are not included in the tables above and are
discussed in Note 5, “Investments.” The carrying value of the Company’s privately held equity securities are
88
adjusted on a non-recurring basis upon observable price changes in orderly transactions for identical or similar
investments of the same issuer, or impairment (referred to as the measurement alternative). Privately held equity
securities that have been remeasured during the period based on observable price changes in orderly transactions
are classified within Level 2 or Level 3 in the fair value hierarchy because the Company estimates the value based
on valuation methods which may include a combination of the observable transaction price at the transaction date
and other unobservable inputs including volatility, rights and preferences of the investments, and obligations of the
securities the Company holds. The fair value of privately held equity securities that have been remeasured due to
impairment are classified within Level 3. The Company’s privately held debt and equity securities amounted to
$140.1 million and $128.3 million as of June 30, 2023 and June 30, 2022, respectively.
5. Investments
Marketable Securities
The Company’s investments of marketable securities as of June 30, 2023, consisted of the following (in
thousands):
Certificates of deposit and time deposits
Total marketable securities
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
$
$
10,000 $
10,000 $
— $
— $
— $
— $
10,000
10,000
As of June 30, 2023, the Company had $10.0 million of investments which were classified as marketable debt
securities on the Company’s consolidated balance sheets.
The Company’s investments of marketable securities as of June 30, 2022, consisted of the following (in
thousands):
U.S. treasury securities
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
$
70,947 $
— $
(653) $
70,294
Certificates of deposit and time deposits
3,000
—
—
3,000
Total marketable securities
$
73,947 $
— $
(653) $
73,294
The table below summarizes the Company’s marketable securities by remaining contractual maturity based
on their effective maturity dates (in thousands):
Due in one year or less
June 30, 2023
June 30, 2022
$
10,000 $
73,294
The Company regularly reviews the changes to the rating of its marketable securities by rating agencies and
monitors the surrounding economic conditions to assess the risk of expected credit losses. As of June 30, 2023, no
unrealized losses were recorded, and as of June 30, 2022, the unrealized losses and the related risk of expected
credit losses were not material.
Strategic Investments
Carrying value of privately held debt securities
The Company’s investments of privately held debt securities as of June 30, 2023, consisted of the following
(in thousands):
Privately held debt securities
$
Amortized Cost
Unrealized Gains Unrealized Losses
— $
(3,350) $
Fair Value
5,450
8,800 $
The Company’s investments of privately held debt securities as of June 30, 2022, consisted of the following
(in thousands):
89
Privately held debt securities
$
Amortized Cost
Unrealized Gains Unrealized Losses
— $
(4,218) $
Fair Value
1,268
5,486 $
Carrying value of publicly traded and privately held equity securities
The carrying value is measured as the total initial cost plus the cumulative net gain (loss). Publicly traded
equity securities are recorded at fair value and privately held equity securities are measured using the measurement
alternative. The carrying values for publicly traded and privately held equity securities as of June 30, 2023 are
summarized below (in thousands):
Initial total cost
Cumulative net gain (loss)
Carrying value
Publicly traded
equity securities
Privately held
equity securities
Total
$
$
10,270 $
9,095
19,365 $
135,050 $
(398) $
134,652 $
145,320
8,697
154,017
Privately held equity securities cumulative net loss is comprised of downward adjustments and impairment of
$5.9 million and upward adjustments of $5.5 million as of June 30, 2023. As of June 30, 2023 publicly traded equity
securities were classified as prepaid expenses and other current assets on the consolidated balance sheets.
The carrying values for publicly traded and privately held equity securities as of June 30, 2022 are
summarized below (in thousands):
Initial total cost
Cumulative net gain
Carrying value
Publicly traded
equity securities
Privately held
equity securities
Total
$
$
10,270 $
20,531
30,801 $
120,300 $
6,695 $
126,995 $
130,570
27,226
157,796
Privately held equity securities cumulative net gain is comprised of upward adjustments of $6.7 million as of
June 30, 2022.
Gains and Losses on Strategic Investments
The components of gains and losses on strategic investments were as follows (in thousands):
Unrealized gains (losses) recognized on publicly traded
equity securities
Unrealized gains recognized on privately held equity
securities
Unrealized losses recognized on privately held equity
securities including impairment
Unrealized losses on privately held debt securities
Unrealized gains (losses), net
Realized gains recognized on publicly traded equity
securities
Realized losses on debt securities
Gains (losses) on strategic investments, net
Unrealized gains (losses) recognized during the reporting
period on privately held equity securities still held at the
reporting date
Fiscal Year Ended June 30,
2023
2022
2021
$
(11,437) $
(79,608) $
34,290
307
6,945
(7,642)
(350)
—
—
—
(250)
—
$
(19,122) $
(72,663) $
34,040
—
(285)
—
—
14,040
—
(19,407) $
(72,663) $
48,080
(6,986) $
6,945 $
(250)
$
$
Unrealized gains recognized on privately held equity securities includes upward adjustments from equity
securities accounted for under the measurement alternative while unrealized losses recognized on privately held
equity securities includes downward adjustments and impairment.
90
Realized gains on sales of securities, net reflects the difference between the sale proceeds and the carrying
value of the security at the beginning of the period or the purchase date, if later.
Equity Method Investment
On July 20, 2022, the Company completed a non-cash sale of its controlling interest of Vertical First Trust
(“VFT”) to a third-party buyer. Please refer to Note 7, “Assets held for sale,” for additional details. The Company
retained a minority equity interest of 13% in the form of ordinary units and has significant influence in VFT. The
Company’s interest in VFT is accounted for using the equity method in the consolidated financial statements.
As of the date of sale, the Company used a discounted cash flow model to calculate the fair value of its
retained equity interest. The fair value of the retained interest was $88.9 million, and is classified as a Level 3
investment in the fair value hierarchy. The inputs to the valuation included observable inputs, including capitalization
rate, discount rate, and other management inputs, including the underlying building practical completion date. The
maximum exposure to loss related to the Company’s investment in VFT equals the Company’s capital investment.
The following table sets forth the carrying amounts of the equity method investment and the movements
during fiscal year 2023 (in thousands):
Balance as of July 20, 2022
Effect of change in exchange rates
Balance as of June 30, 2023
Equity Method Investment
88,853
(3,417)
85,436
$
$
The carrying amount of the Company’s investment in VFT was reported within strategic investments in the
consolidated balance sheets. The Company’s share in the profits and losses of VFT was not material during fiscal
year 2023.
6. Derivative Contracts
The Company has derivative instruments that are used for hedging activities as discussed below.
The following table sets forth the notional amounts of the Company’s hedging derivative instruments as of
June 30, 2023 (in thousands, except for average interest rate):
Forward contracts
Interest rate swaps:
Notional amount
Notional Amounts of Derivative Instruments
Notional Amount by Term to Maturity
Over 12
Under 12
months
months
Total
Classification by Notional Amount
Cash Flow
Hedge
Non Hedge
Total
$ 849,811 $ 35,181 $ 884,992 $ 532,059 $ 352,933 $ 884,992
$
— $ 650,000 $ 650,000 $ 650,000 $
— $ 650,000
Average interest rate
0.81 %
0.81 %
0.81 %
0.81 %
The following table sets forth the notional amounts of the Company’s hedging derivative instruments as of
June 30, 2022 (in thousands, except for average interest rate):
Forward contracts
Interest rate swaps:
Notional amount
Notional Amounts of Derivative Instruments
Notional Amount by Term to Maturity
Over 12
Under 12
months
months
Total
Classification by Notional Amount
Cash Flow
Hedge
Non Hedge
Total
$ 612,523 $ 37,015 $ 649,538 $ 401,534 $ 248,004 $ 649,538
$
— $ 650,000 $ 650,000 $ 650,000 $
— $ 650,000
Average interest rate
0.81 %
0.81 %
0.81 %
0.81 %
91
The fair value of the Company’s derivative instruments were as follows (in thousands):
Balance Sheet Location
2023
2022
As of June 30,
Derivative assets
Derivatives designated as hedging instruments:
Foreign exchange forward contracts
Interest rate swaps
Interest rate swaps
Prepaid expenses and other
current assets
Prepaid expenses and other
current assets
Other non-current assets
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts
Prepaid expenses and other
current assets
Total derivative assets
Derivative liabilities
$
3,177 $
—
28,926
28,215
3,892
$
64,210 $
13,296
30,367
389
44,052
Derivatives designated as hedging instruments:
Foreign exchange forward contracts
Foreign exchange forward contracts
Accrued expenses and
other current liabilities
Other non-current liabilities
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts
Total derivative liabilities
Accrued expenses and
other current liabilities
$
$
9,657 $
209
18,208
812
248
10,114 $
5,080
24,100
The pre-tax effects of derivatives designated as cash flow hedging instruments on the consolidated financial
statements were as follows (in thousands):
Beginning balance of accumulated gains (losses) in
accumulated other comprehensive income
Gross unrealized gains recognized in other comprehensive
income
Net (gains) losses reclassified from cash flow hedge in
accumulated other comprehensive income into profit or loss:
Recognized in cost of revenues
Recognized in research and development
Recognized in marketing and sales
Recognized in general and administrative
Recognized in interest
Fiscal Year Ended June 30,
2022
2021
2023
$
24,502 $
(2,936) $
13,072
17,952
11,421
19,069
1,831
16,890
1,337
5,563
(19,905)
525
10,513
220
1,606
3,153
(1,326)
(28,490)
(400)
(4,861)
—
Ending balance of accumulated gains (losses) in accumulated
other comprehensive income
$
48,170 $
24,502 $
(2,936)
92
7. Assets Held For Sale
During the fourth quarter of fiscal year 2021, the Company committed to a plan to sell its controlling interest of
its subsidiary, VFT, which was established for the construction project associated with the Company’s new global
headquarters in Sydney, Australia (the “Australian HQ Property”). In July 2021, the Company entered into a term
sheet with a third-party buyer to effect the sale. The term sheet provided a framework for the buyer to invest in and
develop the Australian HQ Property. In March 2022, the Company entered into a series of agreements with the
buyer, including an Agreement for Lease (the “AFL”). On July 20, 2022, the Company completed a non-cash sale of
its controlling interest of VFT to the buyer and recognized a gain of $45.2 million from the sale in other income
(expense), net, in the consolidated statements of operations during fiscal year 2023, representing the difference
between the fair value of the Company’s retained investment and the derecognized VFT assets and liabilities upon
loss of control. Please refer to Note 5, “Investments” for additional details.
The major assets classified as held for sale as of June 30, 2023 and 2022 were as follows (in thousands):
Cash and cash equivalents
Property and equipment, net
8. Property and Equipment
As of June 30,
2023
2022
$
$
— $
— $
2,701
57,482
Property and equipment, net consisted of the following (in thousands):
As of June 30,
2023
2022
Equipment
Computer Hardware and Software
Furniture and Fittings
Leasehold Improvements and Other
Property and equipment, gross
$
9,298 $
29,801
24,773
123,125
186,997
Less: accumulated depreciation and impairment
Property and equipment, net
$
(105,595)
81,402 $
9,140
18,324
25,157
124,758
177,379
(76,717)
100,662
Depreciation expense was $27.8 million, $19.3 million and $24.2 million for fiscal years 2023, 2022, and
2021, respectively.
During fiscal year 2023, the Company recorded an $8.4 million impairment charge for leasehold
improvements as a result of our restructuring efforts. Refer to Note 15, “Restructuring,” for additional information.
During fiscal year 2021, the Company recorded a $4.1 million impairment charge for property and equipment
related to the early termination of a real estate lease.
9. Goodwill and Intangible Assets
Goodwill
Goodwill represents the excess of the purchase price in a business combination over the fair value of net
tangible and intangible assets acquired. Goodwill amounts are not amortized, but rather are tested for impairment at
least annually during the fourth quarter, or when indicators of impairment exist.
93
Goodwill consisted of the following (in thousands):
Balance as of June 30, 2021
Additions
Effect of change in exchange rates
Balance as of June 30, 2022
Additions
Effect of change in exchange rates
Balance as of June 30, 2023
Goodwill
715,929
9,361
(2,452)
722,838
3,300
1,073
727,211
$
$
During fiscal years 2023 and 2022 the Company completed acquisitions primarily to expand our product and
service offerings. The transactions were accounted for as business combinations and were not significant to our
consolidated financial statements.
Intangible Assets
Intangible assets consisted of the following (in thousands):
As of June 30,
2023
2022
Acquired Developed Technology
$
235,818 $
Patents, Trademarks, and Other Rights
Customer Relationships
Intangible assets, gross
Less: accumulated amortization
Intangible assets, net
33,393
129,502
398,713
$
(329,641)
69,072 $
234,618
33,393
129,502
397,513
(296,673)
100,840
Weighted-Average
Remaining Useful
Lives
(Years)
2
5
5
Amortization expense for intangible assets were approximately $33.1 million, $32.4 million and $31.8 million
for fiscal years 2023, 2022, and 2021, respectively.
The following table presents the estimated future amortization expense related to intangible assets held as of
June 30, 2023 (in thousands):
Fiscal Years:
2024
2025
2026
2027
Thereafter
Total future amortization expense
$
$
26,229
15,208
12,670
7,839
7,126
69,072
94
10. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
Accrued expenses
Employee benefits
Tax liabilities
Customer deposits
Derivative liabilities
Liabilities held for sale
Other payables
As of June 30,
2023
2022
$
107,479 $
191,801
88,748
11,784
9,905
—
13,414
123,381
197,701
26,367
9,718
23,288
17,564
8,120
Total accrued expenses and other liabilities
$
423,131 $
406,139
11. Leases
The Company rents office space and equipment under non-cancelable operating leases with various
expiration dates through fiscal year 2034. Certain lease agreements include varying terms, escalation clauses and
renewal rights. The Company does not assume renewals in its determination of the lease term unless the renewals
are deemed to be reasonably certain at lease commencement. The Company’s lease agreements generally do not
contain any material residual value guarantees or material restrictive covenants.
The components of lease costs and other information related to leases were as follows (in thousands):
Operating lease costs
Variable lease costs
Total lease costs
Fiscal Year Ended June 30,
2023
50,134
13,094
$
2022
49,647
12,077
$
63,228
$
61,724
$
2021
43,199
13,604
56,803
$
$
Weighted average remaining lease term (in years)
Weighted average discount rate
7
2.5 %
8
2.4 %
7
2.5 %
Supplemental cash flow information related to operating leases were as follows (in thousands):
Cash payments for operating leases
Right-of-use assets obtained in exchange for new operating
lease liabilities
$
$
Fiscal Year Ended June 30,
2023
2022
2021
41,493 $
49,142 $
44,874
3,580 $
105,961 $
27,042
F-95
Future lease payments under non-cancelable operating leases with initial lease terms in excess of one year
included in the Company’s lease liabilities as of June 30, 2023 were as follows (in thousands):
Fiscal years:
2024
2025
2026
2027
2028
Thereafter
Total future operating lease payments
Less: imputed interest
Total lease liability balance (1)
Operating Lease Payments
$
$
51,479
49,078
42,306
37,534
38,601
90,870
309,868
(27,103)
282,765
(1) Lease liabilities include those operating leases that we plan to sublease as a part of our facilities consolidation restructuring
efforts. For additional information, see Note 15, “Restructuring.”
During fiscal year 2023, in addition to operating lease costs disclosed above, we recorded an impairment
charge of $52.7 million in aggregate for operating lease right-of-use assets as part of our lease consolidation efforts.
Refer to Note 15, “Restructuring,” for additional information.
During fiscal year 2021, in addition to operating lease costs disclosed above, we recorded an impairment
charge of $3.9 million related to the early termination of a real estate lease.
The Company entered into the AFL for the Australian HQ Property in March 2022. Following completion of the
development of the Australian HQ Property, the AFL requires the Company to enter into a lease agreement for the
planned headquarters office space. The lease is expected to commence in fiscal year 2027 and will continue for
fifteen years, with the Company’s option to extend the term for up to two additional ten-year periods. Future lease
payments are approximately $919.3 million as of June 30, 2023, for the initial term of fifteen years. Please refer to
Note 5, “Investments,” and Note 7, “Assets held for sale,” for details of the transaction.
12. Debt
Exchangeable Senior Notes
In 2018, Atlassian US, Inc., issued $1 billion in aggregate principal amount of the Notes. The Notes were
senior, unsecured obligations of the Company, and were scheduled to mature on May 1, 2023, unless earlier
exchanged by investors, or redeemed or repurchased by the Company. In connection with the issuance of the
Notes, the Company entered into privately negotiated Capped Calls with certain financial institutions. The aggregate
cost of the Capped Calls was $87.7 million. The Capped Call were scheduled to expire in May 2023 and were
required to be settled in cash.
The exchange feature of the Notes required bifurcation from the Notes and was accounted for as a derivative
liability. The Capped Calls were accounted for as derivative assets. The Notes embedded exchange derivative
liability and Capped Call assets were carried on the consolidated balance sheets at their estimated fair values and
were adjusted at the end of each reporting period, with unrealized gain or loss reflected in the consolidated
statements of operations.
The current or non-current classification of the embedded exchange derivative liability and the Capped Calls
asset corresponded with the classification of the Notes on the consolidated balance sheets. The classification was
evaluated at each balance sheet date.
The Notes and Capped Calls were fully settled in fiscal year 2022. There was no balance outstanding related
to the Notes as of June 30, 2023 and 2022. A total of $424.5 million and $616.4 million of net loss on exchange
derivative and Capped Call were recognized during fiscal years 2022 and 2021, respectively.
Credit Facility
96
In October 2020, Atlassian US, Inc. entered into a credit agreement (the “Credit Agreement”) establishing a
$1 billion senior unsecured delayed-draw term loan facility (the “Term Loan Facility”) and a $500 million senior
unsecured revolving credit facility (the “Revolving Credit Facility,” and together with the Term Loan Facility, the
“Credit Facility”). The Company used the net proceeds of the Credit Facility for general corporate purposes,
including repayment of the then existing indebtedness. Prior to July 1, 2023, amounts outstanding under the Credit
Facility bore interest, at the Company’s option, at a base rate plus a margin up to 0.50% or LIBOR rate plus a
spread of 0.875% to 1.50%, in each case with such margin being determined by the Company’s consolidated
leverage ratio. On June 2, 2023 the Company entered into the LIBOR Transition Amendment to the Credit
Agreement (the “LIBOR Amendment”). The LIBOR Amendment replaced LIBOR with SOFR as the reference rate
used to calculate interest payments for borrowing under the Credit Facility commencing on July 1, 2023. The
interest due applies to borrowing, at the Company’s option, at a base rate plus a margin up to 0.50% or SOFR rate,
plus a credit spread adjustment of 0.10% plus a spread of 0.875% to 1.50%, in each case with such margin being
determined by the Company’s consolidated leverage ratio. The Revolving Credit Facility may be borrowed, repaid,
and re-borrowed until its maturity, and the Company has the option to request an increase of $250 million in certain
circumstances.
The Credit Facility matures in October 2025 and the Company may prepay the Credit Facility at its discretion
without penalty. Commencing on October 31, 2023, the Company is obligated to repay the outstanding principal
amount of the Term Loan Facility in installments on a quarterly basis in an amount equal to 1.25% of the Term Loan
Facility borrowing amount until the maturity of the Term Loan Facility.
The Company incurred debt issuance costs of $4.4 million in connection with entering into the Credit Facility.
The debt issuance costs were amortized over the terms of the Term Loan Facility and Revolving Credit Facility. As
of June 30, 2023, $1.0 billion has been drawn under the Term Loan Facility. The Company is also obligated to pay a
commitment fee on the undrawn amounts of the Revolving Credit Facility at an annual rate ranging from 0.075% to
0.20%, determined by the Company’s consolidated leverage ratio.
The Credit Facility requires compliance with various financial and non-financial covenants, including
affirmative and negative covenants. The financial covenants include a maximum consolidated leverage ratio of 3.5x,
which ratio increases to 4.5x during the period of four fiscal quarters immediately following a material acquisition. As
of June 30, 2023, the Company was in compliance with all related covenants.
On September 30, 2022, prior to the consummation of the U.S. Domestication, Atlassian Corporation Plc
entered into Amendment No. 1 to the Credit Agreement (the “First Amendment”). The First Amendment sets forth
the requirements for the assumption of the obligations of Atlassian Corporation Plc by Atlassian Corporation under
the Credit Agreement and provides that the financial statements required to be delivered under the Credit
Agreement, as amended, will be prepared in accordance with GAAP and financial definitions under the Credit
Agreement, as amended, will be interpreted in accordance with GAAP.
13. Commitments and Contingencies
Noncancellable Purchase Obligations
The Company has contractual commitments for services with third-parties related to its cloud services platform
and other infrastructure services. These commitments are non-cancellable and expire within one to five years.
There were no material contractual commitments that were entered into during fiscal year 2023 that were outside
the ordinary course of business.
The following table sets forth contractual commitments as of June 30, 2023 and 2022 (in thousands):
Contractual purchase obligations
Obligations for leases that have not yet commenced
Total purchase obligation
Fiscal Year Ended June 30,
2023
2022
$
$
1,788,740 $
919,333
152,935
956,118
2,708,073 $
1,109,053
Maturities of purchase obligations as of June 30, 2023 were as follows (in thousands):
97
Fiscal Year:
2024
2025
2026
2027
2028
Thereafter
Total commitments
Other contractual
commitments
Leases not
commenced
Total
$
364,326 $
406,108
458,234
419,572
140,500
—
— $
—
—
34,434
47,290
837,609
364,326
406,108
458,234
454,006
187,790
837,609
$
1,788,740 $
919,333 $
2,708,073
Please refer to Note 11, “Leases,” for discussion of a lease commitment that the Company has entered but the
lease has not yet commenced.
Legal Proceedings
On February 3, 2023, a putative securities class action (the “Putative Class Action”) was filed in the U.S.
District Court for the Northern District of California, captioned City of Hollywood Firefighters’ Pension Fund vs.
Atlassian Corporation, Case No. 3:23-cv-00519, naming the Company and certain of its officers as defendants. The
lawsuit is purportedly brought on behalf of purchasers of the Company’s securities between August 5, 2022 and
November 3, 2022 (the “Class Period”). The complaint alleges claims under Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder,
based on allegedly false and misleading statements about the Company’s business and prospects during the Class
Period. The lawsuit seeks unspecified damages. On May 15, 2023, the Court appointed City of Hollywood
Firefighters’ Pension Fund and Oklahoma Firefighters Pension and Retirement System as co-lead plaintiffs (the
“Plaintiffs”) in the Putative Class Action and approved their selection of lead counsel. The Plaintiffs filed an amended
complaint on July 14, 2023, which alleges the same claims against the same defendants for the same Class Period
as the original complaint. The defendants’ motion to dismiss the amended complaint is due by September 8, 2023.
The defendants intend to deny the allegations of wrongdoing and vigorously defend against the claims in this
lawsuit.
In March and April 2023, two stockholder derivative lawsuits were filed in the U.S. District Court for the District
of Delaware against the members of the Company’s board of directors and certain of its officers, captioned Silva v.
Cannon-Brookes, Case No. 1:23-cv-00283; and Keane v. Cannon-Brookes, Case No. 1:23-cv-00399. The
Company is named as a nominal defendant. These stockholder derivative lawsuits are based largely on the same
allegations as the Putative Class Action, including allegations relating to the Company’s disclosures during the
Class Period as well as, in certain instances, alleged insider trading. The lawsuits purport to assert claims for,
among other things, breach of fiduciary duty, corporate waste, unjust enrichment, and violations of 10(b) of the
Exchange Act, and Rule 10b-5 promulgated thereunder. The complaint seeks unspecified damages and other relief
on the Company’s behalf. The court has consolidated these cases and stayed them pending resolution of any
motion to dismiss in the Putative Class Action. In August 2023, a third stockholder derivative lawsuit was filed in the
U.S. District Court for the District of Delaware asserting substantially the same claims as the previously filed
derivative lawsuits discussed above, captioned Azzawi v. Cannon-Brookes, et al., Case No. 1:23-cv-00884. The
defendants intend to seek to have this case consolidated and stayed with the previously filed stockholder derivative
lawsuits.
In addition to the matters discussed above, from time to time, the Company is party to litigation and other legal
proceedings in the ordinary course of business. While the Company does not believe the ultimate resolution of
pending legal matters is likely to have a material adverse effect on the Company’s financial position, the results of
any litigation or other legal proceedings are uncertain and as such the resolution of such legal proceedings, either
individually or in the aggregate, could have a material adverse effect on its business, results of operations, financial
condition or cash flows. The Company accrues for loss contingencies when it is both probable that it will incur the
loss and when it can reasonably estimate the amount of the loss or range of loss. For the periods presented, the
Company has not recorded any liabilities as a result of the litigation or other legal proceedings in its consolidated
financial statements.
Indemnification Provisions
98
The Company’s agreements include provisions indemnifying customers against intellectual property and other
third-party claims. In addition, the Company has entered into indemnification agreements with its directors,
executive officers and certain other officers that will require the Company to, among other things, indemnify these
individuals for certain liabilities that may arise as a result of their affiliation with the Company. For the periods
presented, the Company has not incurred any costs as a result of such indemnification obligations and has not
recorded any liabilities related to such obligations in the consolidated financial statements.
14. Revenue
Remaining Performance Obligations
Transaction price allocated to the remaining performance obligations represents contracted revenue that has
not yet been recognized, which includes deferred revenue and unbilled amounts that will be recognized as revenue
in future periods. Transaction price allocated to the remaining performance obligations is influenced by several
factors, including the timing of renewals, the timing of delivery of software licenses, average contract terms, and
foreign currency exchange rates. Unbilled portions of the remaining performance obligations are subject to future
economic risks including bankruptcies, regulatory changes and other market factors.
As of June 30, 2023, approximately $1.8 billion of revenue is expected to be recognized from transaction
price allocated to remaining performance obligations. The Company expects to recognize revenue on approximately
82% of these remaining performance obligations over the next 12 months with the balance recognized thereafter.
Disaggregated Revenue
The Company’s revenues by geographic region based on end-users who purchased the Company’s products
or services are as follows (in thousands):
Americas
United States
Other Americas
Total Americas
EMEA
Asia Pacific
Total revenues
Fiscal Year Ended June 30,
2023
2022
2021
$
1,537,328 $
1,230,801 $
227,838
178,067
901,389
127,092
$
1,765,166 $
1,408,868 $
1,028,481
1,366,739
1,077,338
402,742
316,676
826,445
234,206
$
3,534,647 $
2,802,882 $
2,089,132
The Company provides different deployment options for its product offerings. Cloud offerings provide
customers the right to use the Company’s software in a cloud-based infrastructure that the Company provides. Data
Center offerings are on-premises term license agreements for the Company’s Data Center products, which are
software licensed for a specified period, and includes support and maintenance service that is bundled with the
license for the term of the license period. Server offerings include the license of software on a perpetual basis to
customers for use on the customer’s premises and support and maintenance service of unspecified future updates,
upgrades and enhancements and technical product support. Marketplace and services offerings mainly include fees
received for sales of third-party apps in the Atlassian Marketplace and services like premier support, technical
account management, consulting and training. Premier support consists of subscription-based arrangements for a
higher level of support across different deployment options, and revenues from this offering are included in
Subscription revenues within our Consolidated Statements of Operations. For fiscal years 2023, 2022 and 2021,
premier support revenues were $17.8 million, $21.1 million and $20.0 million respectively.
99
We no longer sell perpetual licenses for our Server offerings. Since February 2022, we no longer sell
upgrades to Server offerings and plan to end maintenance and support for these Server offerings in February 2024.
The revenues from Server offerings during fiscal year 2023 consists of revenue from maintenance service.
The Company’s revenues by deployment options are as follows (in thousands):
Cloud
Data Center
Server
Marketplace and services
Total revenues
Deferred Revenue
Fiscal Year Ended June 30,
2023
2,085,498 $
2022
1,515,424 $
$
819,251
400,519
229,379
560,319
525,028
202,111
2021
967,832
336,273
607,778
177,249
$
3,534,647 $
2,802,882 $
2,089,132
The Company records deferred revenues when cash payments are received or due in advance of the
Company satisfying its performance obligations, including amounts which are refundable. The changes in the
balances of contract balances are as follows (in thousands):
Balance, beginning of period
Additions
Revenue
Balance, end of period
Fiscal Year Ended June 30,
2023
2022
$
$
1,182,680 $
3,897,446
897,595
3,087,967
(3,534,647)
(2,802,882)
1,545,479 $
1,182,680
The additions in the deferred revenue balance are primarily cash payments received or due in advance of
satisfying the Company’s performance obligations.
For fiscal years 2023 and 2022, approximately 30% and 29% of revenue recognized was from the deferred
revenue balances at the beginning of each fiscal year, respectively.
Deferred Contract Acquisition Costs
The changes in the balances of deferred contract acquisition costs are as follows (in thousands):
Balance, beginning of period
Additions
Amortization expense
Balance, end of period
Deferred contract acquisition costs included in:
Prepaid expenses and other current assets
Other non-current assets
Total
Fiscal Year Ended June 30,
2023
2022
$
$
$
$
27,141 $
40,060
(13,597)
53,604 $
18,027 $
35,577
53,604 $
9,011
24,302
(6,172)
27,141
8,806
18,335
27,141
The Company periodically reviews these deferred contract acquisition costs to determine whether events or
changes in circumstances have occurred that could impact the period of benefit. There were no impairment losses
recorded during the periods presented.
15. Restructuring
On March 6, 2023, the Company initiated a rebalancing of resources resulting in the elimination of certain
roles impacting about 500 full-time employees, or approximately 5% of the Company’s then-current workforce.
100
These actions are part of the Company’s initiatives to accelerate progress against its highest priorities. These
actions include continuing to invest in strategic areas of the business, and aligning talent to best meet customer
needs and business priorities. As a result, the Company recorded severance and other termination benefits,
including severance, notice period payments, employee transition payments and other benefits of $25.3 million, and
stock-based compensation of $10.3 million for the impacted employees during fiscal year 2023. The execution of
these actions, including cash payment of the severance and other termination benefits related liabilities, was
substantially completed as of June 30, 2023.
In addition, the Company is consolidating its leases, including planned subleasing of several office spaces, to
optimize its real estate footprint. As a result, the Company recorded impairment charges for the related operating
lease right-of-use assets and leasehold improvements of $61.1 million during fiscal year 2023. The fair values of the
impaired assets were estimated using discounted cash flow models (income approach) based on market participant
assumptions with Level 3 fair value inputs. The assumptions used in estimating fair value include the expected
downtime prior to the commencement of future subleases, projected sublease income over the remaining lease
periods, and discount rates that reflect the level of risk associated with receiving future cash flows. The Company
continues to evaluate its real estate needs and may incur additional charges in the future.
A summary of our restructuring charges for fiscal year 2023 by major activity type is as follows (in thousands):
Severance and
Other Termination
Benefits
Stock-based
Compensation
Lease
Consolidation
Total
Cost of revenue
Research and development
Marketing and sales
General and administrative
Total
$
$
1,011 $
288 $
7,893 $
8,279
7,069
8,961
5,866
1,815
2,306
29,004
14,984
9,418
25,320 $
10,275 $
61,299 $
9,192
43,149
23,868
20,685
96,894
The following table is a summary of the changes in the liabilities, included within accrued expenses and other
current liabilities on the consolidated balance sheets, related to the restructuring charges (in thousands):
Charges
Payments
Non-cash items
Liability as of June 30, 2023
$
16. Geographic Information
Severance and Other
Termination Benefits
$
25,320 $
Stock-based
Compensation
Lease
Consolidation
Total
(22,481)
(633)
2,206 $
10,275 $
61,299 $
—
(201)
(10,275)
(61,098)
— $
— $
96,894
(22,682)
(72,006)
2,206
The Company’s long-lived assets by geographic regions are as follows (in thousands):
United States
Australia
All other countries
Total long-lived assets
As of June 30,
2023
2022
$
$
213,567 $
295,577
37,891
14,139
67,241
15,120
265,597 $
377,938
Long-lived assets for this purpose consist of property and equipment and operating lease right-of-use assets.
17. Stockholders’ Equity
Common Stock
As discussed in Note 1, “Description of Business,” the Company completed the U.S. Domestication after the
close of market trading on September 30, 2022. At that time all issued and outstanding ordinary shares of Atlassian
Corporation Plc were exchanged on a one-for-one basis for newly issued shares of corresponding common stock of
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Atlassian Corporation, and all issued and outstanding equity awards of Atlassian Corporation Plc were assumed by
Atlassian Corporation and were converted into rights to acquire Atlassian Corporation shares of Class A Common
Stock on the same terms.
As of June 30, 2023, the Company’s common stock consists of Class A Common Stock and Class B Common
Stock, each of which has a par value of $0.00001. Each share of Class B Common Stock will convert automatically
into one share of Class A Common Stock in the following circumstances: (1) upon the written consent of the holders
of at least 66.66% of the total number of outstanding shares of Class B Common Stock; (2) if the aggregate number
of shares of Class B Common Stock then outstanding comprises less than ten percent (10%) of the total number of
shares of Class A Common Stock and Class B Common Stock then outstanding; and (3) upon any transfer to a
person that is not a permitted transferee described in the Company’s amended and restated certificate of
incorporation.
Any dividend declared by the Company shall be paid on the Class A Common Stock and the Class B Common
Stock pari passu as if they were all stock of the same class. Additionally, upon the liquidation, dissolution, or winding
up of the Company, whether voluntary or involuntary, holders of Class A Common Stock and Class B Common
Stock will be entitled to receive ratably on a per share basis all assets of the Company available for distribution to its
stockholders, unless disparate or different treatment of the shares of each such class is approved by the affirmative
vote of the holders of a majority of the outstanding shares of Class A Common Stock and by the affirmative vote of
the holders of a majority of the outstanding shares of Class B Common Stock, each voting separately as a class.
Each share of Class A Common Stock is entitled to one vote. Each share of Class B Common Stock is entitled
to 10 votes.
Preferred Stock
The Company’s board of directors has the authority to issue up to 10 million shares of preferred stock in one or
more series. The Company’s board of directors may designate the rights, preferences, privileges and restrictions of
the preferred stock, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation
preferences, the right to elect directors to and increase or decrease the number of shares of any series. As of
June 30, 2023 and 2022, no shares of preferred stock were outstanding.
Stock-based Compensation
Upon the completion of the U.S. Domestication, the Company assumed the following plans: the Atlassian
Corporation Plc 2015 Share Incentive Plan (the “2015 Plan”); and the 2015 Employee Share Purchase Plan (the
“ESPP” and, together with the 2015 Plan, the “Incentive Plans”). In connection with its assumption of the Incentive
Plans, the Company amended and restated the 2015 Plan as the Atlassian Corporation Amended and Restated
2015 Share Incentive Plan, and the ESPP as the Atlassian Corporation Amended and Restated 2015 Employee
Share Purchase Plan, in each case to reflect the assumption and changes in applicable law and to provide that the
securities to be issuable in connection with equity awards will be shares of the Company’s Class A Common Stock
instead of Atlassian Corporation Plc Class A ordinary shares.
In addition, Atlassian Corporation assumed each restricted share unit award covering Atlassian Corporation
Plc Class A ordinary shares that was outstanding under an equity incentive plan and amended such restricted share
unit award to reflect the assumption by Atlassian Corporation and to provide for the securities issuable in connection
with the exercise or settlement of the award to be shares of Atlassian Corporation’s Class A Common Stock.
At June 30, 2023, the Company had 30,935,067 shares of its common stock available for future issuance
under the 2015 Plan, which plan provides for the issuance of incentive and non-statutory share options, share
appreciation rights, restricted stock awards, RSUs, unrestricted stock awards, cash-based awards, performance
stock awards, performance-based awards to covered employees, and dividend equivalent rights to qualified
employees, directors and consultants. The Company currently does not have common stock outstanding or open
offering periods under the ESPP.
RSU grants generally vest over four years with 25% vesting on the one year anniversary of the date of grant
and 1/12th of the remaining RSUs vest over the remaining three years, on a quarterly basis thereafter. Effective from
April 2021, new RSU grants to existing employees vest evenly over four years on a quarterly basis. Performance-
based RSUs have non-market performance vesting conditions. Individuals must continue to provide services to the
Company in order to vest.
102
Stock-based compensation is measured based on the grant date fair value of the awards and recognized in
the consolidated statements of operations on a straight-line basis over the period during which the employee is
required to perform services in exchange for the award.
A summary of RSU activity for fiscal year 2023 is as follows (in thousands except share and per share data):
Number of
Shares
Weighted
Average Grant
Date Fair Value
Aggregate
Intrinsic Value
Balance as of June 30, 2022
6,023,997 $
257.62 $
1,128,897
Granted
Vested
Forfeited or cancelled
Balance as of June 30, 2023
8,315,466
(3,604,960)
(1,171,585)
221.87
236.90 $
617,018
239.09
9,562,918 $
235.16 $
1,604,753
The weighted-average grant date fair value of RSUs granted in fiscal years 2022 and 2021 was $332.43 and
$192.62, respectively. The total intrinsic value of the RSUs vested in fiscal years 2022 and 2021 was $925.8 million
and $734.6 million, respectively. The income tax benefit recognized related to awards vested in fiscal years 2023,
2022 and 2021 was $156.5 million, $242.8 million, and $194.3 million, respectively. As of June 30, 2023, total
compensation cost not yet recognized in the consolidated financial statements related to employee and director
RSU awards was $1.7 billion, which is expected to be recognized over a weighted-average period of 1.8 years.
During fiscal year 2023, the Company did not grant shares of restricted stock. During fiscal year 2022, the
Company granted 8,821 shares of restricted stock. As of June 30, 2023 and 2022, there were 6,131 and 72,484
shares of restricted stock outstanding, respectively. These outstanding shares of restricted stock are subject to
forfeiture or repurchase at the original exercise price during the repurchase period following employee termination,
as applicable. The total aggregate intrinsic value of outstanding shares of restricted stock were $1.0 million and
$13.6 million as of June 30, 2023 and 2022, respectively.
Of the total stock-based compensation expense, costs recognized for awards granted to non-employees were
immaterial for all periods presented.
Share Repurchase Program
In January 2023, the Board of Directors authorized a program to repurchase up to $1.0 billion of the
Company’s outstanding Class A Common Stock (the “Share Repurchase Program”). The Share Repurchase
Program does not have a fixed expiration date, may be suspended or discontinued at any time, and does not
obligate the Company to repurchase any specific dollar amount or to acquire any specific number of shares. The
Company may repurchase shares of Class A Common Stock from time to time through open market purchases, in
privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify
under Rule 10b5-1 under the Exchange Act, in accordance with applicable securities laws and other restrictions.
The timing, manner, price, and amount of any repurchases will be determined by the Company at its discretion and
will depend on a variety of factors, including business, economic and market conditions, prevailing stock prices,
corporate and regulatory requirements, and other considerations.
During fiscal year 2023, the Company repurchased and subsequently retired approximately 1.0 million shares
of its Class A Common Stock for approximately $154.2 million at an average price per share of $157.49. All
repurchases were made in open market transactions. As of June 30, 2023, the Company was authorized to
purchase a remaining $845.8 million of its Class A Common Stock under the Share Repurchase Program.
18. Net Loss Per Share
The Company computes net loss per share of Class A and Class B Common Stock using the two-class
method. As the liquidation and dividend rights for both Class A and Class B Common Stock are identical, the net
loss is allocated on a proportionate basis to the weighted-average number of shares of common stock outstanding
for the period. Basic net loss per share attributable to Class A and Class B stockholders is computed by dividing the
net loss by the weighted-average number of Class A and Class B Common Stock outstanding during the period.
For the calculation of diluted net loss per share, net loss for basic EPS is adjusted by the effect of dilutive
securities, including awards under the Company’s equity compensation plans. The dilutive potential shares of
common stock are computed using the treasury stock method or the as-if converted method, as applicable. Since
103
the Company is in a loss position for all periods reported, basic and diluted net loss per share are the same for all
periods as the inclusion of potential dilutive shares would have been anti-dilutive.
The following tables present the calculation of basic and diluted net loss per share attributable to common
stockholders (in thousands, except per share data):
Numerator:
Net Loss
Denominator:
Weighted-average shares
outstanding, basic and diluted
Net loss per share, basic and
diluted
Fiscal Year Ended June 30,
2023
2022
2021
Class A
Class B
Class A
Class B
Class A
Class B
$ (283,907) $ (202,854) $ (290,290) $ (229,220) $ (308,953) $ (270,026)
149,493
106,814
141,545
111,767
133,233
116,446
$
(1.90) $
(1.90) $
(2.05) $
(2.05) $
(2.32) $
(2.32)
The potential weighted average dilutive securities that were not included in the dilutive earnings per share
calculation because the effect would be anti-dilutive are as follows (shares in thousands):
Class A Common Stock options
Class A Common Stock RSU awards
Class A Common Stock restricted stock awards
Total potentially dilutive securities
19. Income Taxes
Fiscal Year Ended June 30,
2023
2022
2021
—
7,426
17
7,443
1
3,736
82
3,819
63
3,480
178
3,721
The components of loss before provision for income taxes by U.S. and foreign jurisdictions consist of the
following (in thousands):
Domestic
Foreign
Total
Fiscal Year Ended June 30,
2023
2022
2021
$
$
(25,250) $
(480,982) $
(603,257)
(285,886)
10,044
88,842
(311,136) $
(470,938) $
(514,415)
The provision for income taxes consists of the following (in thousands):
Fiscal Year Ended June 30,
2023
2022
2021
Current:
Federal
State
Foreign
Total
Deferred:
Federal
State
Foreign
Total
$
4,327 $
280 $
1,045
162,072
167,444
1,467
(1,066)
7,780
8,181
570
51,040
51,890
(44)
(1,641)
(1,633)
(3,318)
Total provision for income taxes
$
175,625 $
48,572 $
104
155
367
73,017
73,539
(777)
(1,053)
(7,145)
(8,975)
64,564
The effective income tax rate differs from the federal statutory income tax rate applied to the loss before
income taxes due to the following (in thousands):
Tax at federal statutory rate
State, net of the federal benefit
Effects of non-U.S. operations
Tax credits
Stock-based compensation
Non-deductible executive compensation
Non-deductible charges relating to the Notes
Intellectual property transfer
Australian R&D deductions forgone in lieu of R&D credit
Foreign taxes
Basis difference in investments
Change in reserves
Change in valuation allowance
Other
Provision for income taxes
Effective Tax Rate (%)
Fiscal Year Ended June 30,
2023
(65,339)
$
$
13,042
15,163
(99,398)
80,471
6,022
—
—
30,303
2,457
(43,564)
132,528
98,613
5,327
2022
(98,897)
13,363
(6,879)
(107,956)
(41,692)
13,580
89,188
—
32,661
4,491
(36,853)
14,179
172,033
1,354
2021
(108,027)
$
9,144
5,436
(73,280)
(69,276)
6,552
131,769
5,460
22,404
1,052
(13,789)
10,091
136,284
744
$
175,625
$
48,572
$
64,564
(56) %
(10) %
(13) %
Significant components of the Company's deferred tax assets and deferred tax liabilities are shown below (in
thousands). Where necessary, a valuation allowance has been recognized to offset our deferred tax assets by the
amount of any tax benefits that are not expected to be realized.
105
Deferred tax assets:
Property and equipment
Net operating loss carryforwards
Credit carryforwards
Operating lease liabilities
Basis differences in investments
Stock-based compensation
Provisions, accruals and prepayments
Deferred revenue
Capitalized research and development
IRC 163(j) carryforward
Intangible assets
Total deferred tax assets
Less valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Unrealized foreign currency exchange losses
Unrealized investment gains
Operating right of use assets
Other, net
Total deferred tax liabilities
Net deferred tax assets (liabilities)
As of June 30,
2023
2022
$
5,528 $
857,944
183,520
64,774
8,531
1,013,750
154,487
74,269
1,690,440
1,601,047
7,246
36,255
208,541
28,330
84
641
(33,095)
38,763
146,044
—
27,032
(3,210)
3,083,303 $
3,027,618
(3,019,080)
64,223 $
(2,941,191)
86,427
3,087 $
11,684
48,119
2,057
64,947 $
(724) $
1,338
9,373
69,166
(3,473)
76,404
10,023
$
$
$
$
$
The Company recorded a valuation allowance of $3.0 billion, $2.9 billion and $2.8 billion as of June 30, 2023,
2022, and 2021, respectively, primarily relating to the basis difference of the US investment in a wholly owned
partnership, U.S. and Australian net operating loss and credit carryforwards, and the deferred revenue deferred tax
assets. The change in valuation allowance as of June 30, 2023, 2022 and 2021, was primarily related to an
increase in the basis difference of the US investment in a wholly owned partnership and an increase in the deferred
revenue deferred tax assets and certain credit carryforwards, offset by the utilization of U.S. federal and state net
operating losses. The Company regularly assesses the realizability of its deferred tax assets and establishes a
valuation allowance if it is more likely than not that some or all of its deferred tax assets will not be realized. The
Company evaluates and weighs all positive and negative evidence such as historic results, future reversals of
deferred tax liabilities, projected future taxable income, as well as prudent and feasible tax planning strategies. The
assessment requires significant judgement and is performed in each of the applicable jurisdictions. The Company
intends to maintain a full valuation allowance on its federal deferred tax assets in the U.S. and Australia until there is
sufficient positive evidence to support their reversal.
As of June 30, 2023, the Company had U.S. federal, state, and foreign net operating loss carryforwards of
$886.0 million tax effected. Of the $788.3 million tax effected U.S. federal net operating loss carryforwards, $788.0
million may be carried forward indefinitely, and the remaining $0.3 million will begin to expire in 2032. The state net
operating loss carryforwards of $94.5 million tax effected begin to expire in 2024. As of June 30, 2023, the Company
also had research and development federal and state tax credits of $191.4 million. The federal tax credit
carryforwards will expire beginning in 2035 if not utilized. The state tax credit carryforwards do not expire except for
the State research and development credits of Texas which begins to expire in June 2038. Utilization of the
Company’s US net operating loss and tax credit carryforwards may be subject to annual limitation due to the
ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual
limitation could result in the expiration of the net operating loss and tax credit carryforwards before utilization. As of
June 30, 2023, the Company also had Indian AMT credits of $3.7 million that will begin to expire in 2036 and Polish
106
R&D credits of $5.3 million, which will begin to expire in 2027, but which may also be used to satisfy payroll tax
liabilities in the future.
The Inflation Reduction Act of 2022 (the “IRA”) was enacted on August 16, 2022 and includes various
corporate tax provisions, including a new Corporate Alternative Minimum Tax (“Corporate AMT”) on applicable
corporations with adjusted financial statement income exceeding $1 billion, on average, over the last three years.
The Corporate AMT is effective for tax years beginning after December 31, 2022. As of June 30, 2023, the newly
enacted IRA tax provisions are not material to the Company.
U.S. income tax has not been recognized on the excess of the amount for financial reporting over the tax
basis of investment in foreign subsidiaries that is indefinitely reinvested outside the United States. Un-remitted
earnings become taxable upon repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary.
The amount of such unremitted earnings is approximately $458.8 million as of June 30, 2023, and the
corresponding unrecognized deferred tax liability is not material.
The Company recognizes the tax benefit of an uncertain tax position only if it concludes it is more likely than
not that the position is sustainable upon examination by the taxing authority, based on the technical merits. The tax
benefit recognized is measured as the largest amount of benefit which is greater than 50 percent likely to be
realized upon settlement with the taxing authority. A reconciliation of the beginning and ending balance of total
thousands):
unrecognized
benefits
follows
tax
(in
as
is
Beginning of the period
Tax positions taken in prior period:
Gross increases
Gross decreases
Tax positions taken in current period:
Gross increases
Settlements
Lapse of statute of limitations
Currency translation effect
End of period
Fiscal Year Ended June 30,
2023
2022
2021
$
53,483 $
37,944 $
26,841
112,781
(198)
15,171
(57,004)
(32)
(1,899)
1,031
—
147
(56)
14,542
11,044
—
(34)
—
—
(32)
—
$
122,302 $
53,483 $
37,944
As of June 30, 2023, 2022 and 2021, the Company had gross unrecognized tax benefits of approximately
$113.2 million, $2.5 million, and $1.9 million, respectively, that would impact the effective tax rate if recognized.
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, Australia, and
in various other international jurisdictions. Tax years 2012 and forward generally remain open for examination for
federal and state tax purposes. Tax years 2017 and forward generally remain open for examination for foreign tax
purposes. To the extent utilized in future years’ tax returns, net operating loss carryforwards as of June 30, 2023
and 2022 will remain subject to examination until the respective tax year is closed.
There are differing interpretations of tax laws and regulations, and as a result, disputes may arise with tax
authorities involving issues of the timing and amount of deductions and allocations of income among various tax
jurisdictions. The Company believes that adequate amounts have been reserved for any adjustments that may
ultimately result from these examinations. Although the timing of the resolution, settlement, and closure of any audit
is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly
change in the next 12 months.
Since fiscal year 2020, the Company has been in unilateral advanced pricing agreement (“APA”) negotiations
with the Australian Taxation Office relating to the Company’s transfer pricing arrangements between Australia and
the U.S. During fiscal year 2023, a framework was agreed upon to finalize the Company’s transfer pricing
arrangements for the proposed APA period (tax years ended June 30, 2019 to June 30, 2025). It is reasonably
possible that uncertain tax benefits could decrease by up to $53.7 million in the next twelve months due to
anticipated resolutions with ATO of APA negotiations. While the Company’s recorded tax reserves are the best
estimate of its liabilities, differences may occur in the future, depending on final resolution of the APA negotiations.
107
In addition to the Australian APA, the Company believes it is reasonably possible the balance of unrecognized
tax benefits could change in the next 12 months due to the completion of ongoing income tax audits. The estimated
range of the change is a decrease of $1.5 million to an increase of $9.3 million.
The Company has recognized interest and penalties related to unrecognized tax benefits in the income tax
provision of approximately $5.8 million during fiscal year 2023, and the accrual balances were $5.8 million as of
June 30, 2023. The Company had not recognized any interest and penalties related to unrecognized tax benefits
during fiscal years 2022 and 2021.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our Co-Chief Executive Officers and Chief Financial Officer, after evaluating the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of
June 30, 2023, have concluded that, as of such date, our disclosure controls and procedures were effective to
provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit
under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified by
the SEC’s rules and forms, and (2) accumulated and communicated to our management, including our Co-Chief
Executive Officers and Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our management conducted an
evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
in “Internal Control—Integrated Framework” (2013). Our internal control over financial reporting includes policies
and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external reporting purposes in accordance with GAAP. Based on this evaluation,
management concluded that our internal control over financial reporting was effective as of June 30, 2023. Our
independent registered public accounting firm, Ernst & Young LLP, has issued an audit report with respect to our
internal control over financial reporting, which appears in Part II, Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the
evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the quarter
ended June 30, 2023 that has materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures and internal control over financial
reporting, management recognizes that any controls and procedures, no matter how well designed and operated,
can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of
disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are
resource constraints and that management is required to apply its judgment in evaluating the benefits of possible
controls and procedures relative to their costs.
ITEM 9B. OTHER INFORMATION
On May 30, 2023, Cameron Deatsch, the Company’s Chief Revenue Officer, adopted a Rule 10b5-1 trading
arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of (i) up to 28,087
shares of the Company’s Class A Common Stock, (ii) up to 100% of the shares of the Company’s Class A Common
Stock issued upon the settlement of 51,371 outstanding RSUs, net of shares sold to cover tax withholding
obligations in connection with the vesting and settlement of such RSUs and (iii) up to 80% of the shares of the
108
Company’s Class A Common Stock issued upon the settlement of any future RSUs awarded during the plan period,
net of shares sold to cover tax withholding obligations in connection with the vesting and settlement of such RSUs,
in each case until August 31, 2024.
On May 31, 2023, Heather M. Fernandez, a member of the Company’s board of directors, adopted a Rule
10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to
6,000 shares of the Company’s Class A Common Stock until August 31, 2024.
ITEM 9C. DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference to our Proxy Statement for the 2023 Annual
Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended June 30, 2023.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to our Proxy Statement for the 2023 Annual
Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended June 30, 2023.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this item is incorporated by reference to our Proxy Statement for the 2023 Annual
Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended June 30, 2023.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required by this item is incorporated by reference to our Proxy Statement for the 2023 Annual
Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended June 30, 2023.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference to our Proxy Statement for the 2023 Annual
Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended June 30, 2023.
109
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULE
(a)
The following documents are filed as part of this report:
1. Financial Statements
PART IV
Exhibits
Exhibit
Number
3.1
3.2
See Index to Financial Statements in “Item 8. Financial Statements” to this Annual Report on Form 10-K.
2. Financial Statement Schedules
Schedules not listed above have been omitted because they are not required, not applicable, or the required information is
otherwise included.
3. Exhibits
The exhibits listed below are filed as part of this Annual Report on Form 10-K or are incorporated herein by reference, in each
case as indicated below.
Description
Incorporated by Reference
Provided
Herewith
Form
SEC File
No.
Exhibit
Filing Date
Amended and Restated Certificate of Incorporation of Atlassian Corporation,
adopted as of September 27, 2022.
Amended and Restated Bylaws of Atlassian Corporation, adopted as of September
30, 2022.
4.1
Specimen Class A Common Stock Certificate.
4.2
Registration Agreement, dated July 2, 2010, by and among Atlassian Corporation and
certain of its stockholders.
4.3
Description of Capital Stock.
X
10.1
Credit Agreement dated as of October 28, 2020, by and among the Company, Atlassian,
Inc., Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer,
and the other lenders and parties thereto.
Amendment No. 1 to Credit Agreement, dated as of September 30, 2022, by and among
Atlassian Corporation, Atlassian US, Inc., Bank of America, N.A., as Administrative
Agreement, and the other lenders party thereto.
10.2
110
8-K
8-K
S-8
F-1
6-K
8-K
001-376
51
001-376
51
333-2669
98
333-2078
79
3.1
3.2
4.3
4.2
10/03/20
22
10/03/20
22
10/04/20
22
11/09/20
15
001-3765
1
10.1
10/29/20
20
001-3765
1
10.1
10/03/20
22
LIBOR Transition Amendment to Credit Agreement, dated as of June 2, 2023, by and
among Atlassian Corporation, Atlassian US, Inc., Bank of America, N.A., as
Administrative Agreement, and the other lenders party thereto.
10.3
X
10.4 # Form of Indemnification Agreement.
10.5 # Form of Executive Officer Offer Letter.
10.6 # Atlassian Corporation Amended and Restated 2015 Share Incentive Plan.
10.7 # Atlassian Corporation Amended and Restated 2015 Employee Share Purchase Plan.
10.8 # Atlassian Corporation Amended and Restated Executive Severance Plan.
10.9 # Atlassian Corporation Amended and Restated Cash Incentive Bonus Plan.
10.10 # Atlassian Corporation Amended and Restated Non-Employee Director Compensation
Policy.
10.11 # Atlassian Corporation Compensation Recovery Policy.
X
10.12
10.13
Lease, dated March 25, 2015, by and between Atlassian Pty Ltd and Council of the City
of Sydney.
Lease, dated December 22, 2011, by and between Atlassian Pty Ltd and 341 George
St Pty Ltd.
10.14
Lease, dated July 9, 2015, by and between Atlassian Pty Ltd and 341 George St Pty Ltd.
10.15
10.16
10.17 †
¬
Lease, dated June 25, 2021, by and between Atlassian Pty Ltd and 341 George St Pty
Ltd.
Lease, dated November 22, 2017, by and between Atlassian Inc. and 350 Bush Street
Owner, LLC.
Agreement for Lease, dated March 23, 2022, by and among Atlassian Corporation Plc,
Atlassian Pty Ltd, Vertical First Pty Ltd as trustee for the Vertical First Trust, Dexus
Property Services Pty Limited, Dexus Funds Management Limited as responsible entity
for Dexus Property Trust and Dexus Funds Management Limited as responsible entity for
Dexus Operations Trust.
8-K
10-Q
8-K
8-K
8-K
8-K
8-K
F-1
F-1
F-1
20-F
6-K
001-3765
1
001-3765
1
001-3765
1
001-3765
1
001-3765
1
001-3765
1
001-3765
1
333-2078
79
333-2078
79
333-2078
79
001-3765
1
001-3765
1
10.2
10.3
10.3
10.5
10.6
10.7
10.8
10.15
10.16
10.17
10.18
10.1
10/03/20
22
11/04/20
22
10/03/20
22
10/03/20
22
10/03/20
22
10/03/20
22
10/03/20
22
11/09/20
15
11/09/20
15
11/09/20
15
08/13/20
21
11/27/20
17
6-K
001-3765
1
10.1
03/25/20
22
111
20-F
001-3765
1
10.22
08/19/20
22
10-Q
001-3765
1
10.1
02/03/20
23
10.18 † Deed of Amendment, dated April 30, 2022, to Agreement for Lease, dated March 23,
2022, by and among Atlassian Corporation Plc, Atlassian Pty Ltd, Vertical First Pty Ltd as
trustee for the Vertical First Trust, Dexus Property Services Pty Limited, Dexus Funds
Management Limited as responsible entity for Dexus Property Trust and Dexus Funds
Management Limited as responsible entity for Dexus Operations Trust.
10.19
Guarantor Replacement Deed, dated November 8, 2022, to the Agreement for Lease,
dated March 23, 2022, by and among Atlassian Corporation Limited (formerly Atlassian
Corporation Plc), Atlassian Pty Ltd, Atlassian Corporation, Vertical First Pty Ltd as trustee
for the Vertical First Trust, Dexus Property Services Pty Limited, Dexus Funds
Management Limited as responsible entity for Dexus Property Trust and Dexus Funds
Management Limited as responsible entity for Dexus Operations Trust.
21.1
Subsidiaries of the Registrant.
23.1
Consent of Independent Registered Public Accounting Firm.
24.1
Power of Attorney (included on signature page to this Annual Report on Form 10-K).
31.1
31.2
31.3
Certification of Co-Principal Executive Officer Pursuant to Rules 13a-14(a) and
15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Co-Principal Executive Officer Pursuant to Rules 13a-14(a) and
15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 ‡ Certification of Co-Principal Executive Officers and Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document. The instance document does not appear in the
interactive data file because its XBRL tags are embedded within the inline XBRL
document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit
101 filed herewith).
X
X
X
X
X
X
X
X
X
X
X
X
X
X
112
#
†
«
‡
Indicates management contract or compensatory plan, contract or agreement.
Portions of this exhibit have been redacted.
Certain exhibits and schedules to this agreement have been omitted.
The certification attached as Exhibit 32.1 that accompanies this Annual Report on Form 10-K pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, is not deemed “filed” by the registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
____________________________
113
ITEM 16. FORM 10-K SUMMARY
None.
114
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized.
SIGNATURES
ATLASSIAN CORPORATION
/s/ Michael Cannon-Brookes
Name:
Title:
Michael Cannon-Brookes
Co-Chief Executive Officer
/s/ Scott Farquhar
Name:
Title:
Scott Farquhar
Co-Chief Executive Officer
/s/ Joseph Binz
Name:
Title:
Joseph Binz
Chief Financial Officer
(Principal Financial Officer)
Date: August 18, 2023
By:
By:
By:
115
POWER OF ATTORNEY AND SIGNATURES
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints Scott Farquhar, Michael Cannon-Brookes, and Joseph Binz, and each of them, as his or her true and
lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K of Atlassian Corporation,
and any or all amendments, and to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each
or any of them, full power and authority to do and perform each and every act and thing requisite or necessary to be
done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized.
Signature
Title
Date
/s/ Michael Cannon-Brookes
Co-Chief Executive Officer and Director
August 18, 2023
Michael Cannon-Brookes
(Co-Principal Executive Officer)
/s/ Scott Farquhar
Scott Farquhar
/s/ Joseph Binz
Joseph Binz
/s/ Gene Liu
Gene Liu
/s/ Shona L. Brown
Shona L. Brown
/s/ Heather Mirjahangir Fernandez
Heather Mirjahangir Fernandez
/s/ Sasan Goodarzi
Sasan Goodarzi
/s/ Jay Parikh
Jay Parikh
/s/ Enrique Salem
Enrique Salem
/s/ Steven Sordello
Steven Sordello
/s/ Richard P. Wong
Richard P. Wong
/s/ Michelle Zatlyn
Michelle Zatlyn
Co-Chief Executive Officer and Director
August 18, 2023
(Co-Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
August 18, 2023
Corporate Controller
August 18, 2023
(Principal Accounting Officer)
Director and Chair
August 18, 2023
August 18, 2023
August 18, 2023
August 18, 2023
August 18, 2023
August 18, 2023
August 18, 2023
August 18, 2023
Director
Director
Director
Director
Director
Director
Director
116
BOA R D O F DI RECTORS
Shona Brown Chair of the Board
Jay Parikh
Michael Cannon-Brookes
Enrique Salem
Scott Farquhar
Heather M. Fernandez
Sasan Goodarzi
Steven Sordello
Richard P. Wong
Michelle Zatlyn
EXEC U TI VE TEA M
Michael Cannon-Brookes Co-Founder and Co-Chief Executive Officer
Scott Farquhar Co-Founder and Co-Chief Executive Officer
Anu Bharadwaj President
Joe Binz Chief Financial Officer
Cameron Deatsch Chief Revenue Officer
Erika Fisher Chief Administrative Officer and Chief Legal Officer
Rajeev Rajan Chief Technology Officer
Investor Relations IR@atlassian.com
Stock Exchange Nasdaq Global Select under the ticker symbol “TEAM”