Bootstrapped Unicorn Atlassian Is Acquiring Capital Efficient Startups

According to a recent MarketsAndMarkets report, the global enterprise collaboration software market is estimated to grow 11% annually over the next five years to 59.86 billion by 2023 from $34.57 billion in 2018. Billion Dollar Unicorn Atlassian (Nasdaq: TEAM) is a leading service provider in this market which delivered a stellar quarterly performance recently.

Atlassian’s Financials

Atlassian’s second-quarter revenues grew 39% over the year to $299 million, compared with the market’s forecast of $288.3 million. It reported an adjusted EPS of $0.25, which was also significantly better than the Street’s estimated $0.21 for the quarter. This was the fourth consecutive quarter that Atlassian surpassed market expectations.

By segment, revenues from subscription services grew 56% to $152.5 million, ahead of the Street’s estimated $150 million. Revenues from the maintenance segment grew 21% to $97.16 million. Perpetual License revenues reported a 20% growth to $25.8 million. Other revenues grew 58% to $23.45 million.

This was the first calendar year that Atlassian clocked in revenues of more than a billion dollars. It had recorded revenues of $873.95 million in the last fiscal. Its flagship product Jira Software surpassed 65,000 customers and ended the quarter with more than 138,000 total customers.

For the current quarter, Atlassian expects revenues of $303-$305 million and a non-IFRS EPS of $0.18. It expects to end the year with revenues of $1.195-$1.199 billion and non-IFRS EPS of $0.81-$0.82. The Street was looking for revenues of $300.7 million and an EPS of $0.17 for the quarter.

Atlassian’s Acquisitions

Atlassian appears to recognize the market potential in acquiring smaller startups to get to the next level. Earlier last year, it had announced the $295 million acquisition of OpsGenie. Virginia-based OpsGenie’s platform helped companies better plan for and respond to software and website service disruptions by quickly routing alerts to the appropriate IT teams. Prior to the acquisition, OpsGenie was privately held and, according to CrunchBase, had raised $10 million from Battery Ventures at an undisclosed valuation in 2016. This is a very interesting case in point vis-a-vis my recent article, Bootstrapping to Exit, where I point out that capital-efficient startups are appealing for larger companies to acquire.

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