Atlassian Corporation (TEAM) Q4 2021 Earnings Report, Transcript and Summary

Good afternoon. Thank you for joining Atlassian’s Earnings Conference Call for the Fourth Quarter of Fiscal Year 2021. As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Atlassian’s website following this call. I will now hand the call over to Martin Lam, Atlassian’s Head of Investor Relations. Sir, please go ahead.

Good afternoon, and welcome to Atlassian’s fourth quarter of fiscal year 2021 earnings call. Thank you for joining us today. On the call today, we have Atlassian’s Co-Founder and Co-CEO, Mike Cannon-Brookes; and our Chief Financial Officer, James Beer.

Thanks for joining the call today everyone from wherever you are in the world. Scott’s out on holiday. So it’ll be just James and I taking your questions today. We’re in lockdown here in Australia. So, you and your loved ones are safe wherever you are. As you’ve already read in our shareholder letter, our Q4 was a ripper of a quarter, as we say. We added over 23,000 net new customers. We generated revenue of $560 million, up 30% year-over-year. Importantly, we grew subscription revenue 50% year-over-year with cloud revenue up 47% year-over-year. And that cloud migration momentum continues to build.

Your first question comes from the line of David Hynes from Canaccord. Your line is now open.

Hey guys, this is Luke on for DJ. Thanks for taking the question. So, I just had a quick one, I guess, product oriented thinking about your ITSM capabilities, that that whole solution set has been considerably bolstered over the last couple of years, starting with Jira Service Desk, and adding incremental functionality with Opsgenie for incident management Mindville for asset management, Confluence, solves knowledge management, it feels like a really full complete solution at this point. We expect the question; do you feel like there are other areas there that would still be logical additions to become part of the platform? Thanks.

Thanks, I can take that one. Look, we are extremely uniquely positioned in ITSM. We see that positioning resonating with customers every single day. As you know, companies are increasingly blending the line between their software revoking their upslope between Dev and IT however you say it, we have a single unified payment glass, as we say, in JSM, and then extending to the whole Atlassian family. I think we’ve been very thoughtful, and consistent in how we’ve grown that from two, three years ago, when we said we were doubling down on the IT space, and then almost every quarter or six months since then, you’ve seen a steady drumbeat of improvements, as we’ve continued to build capabilities and go after the opportunities that existed. We’re still going to keep doing that. And we believe any opportunities in the broader IT space, very deeply. We think we’re the only company that can address those unique requirements. And those companies in the future from 50 person companies all the way up to 500,000 person companies. We’re very unique in our breadth and span there, and you see a turning up in the results. So, I guess I don’t have a concrete answer other than we deeply believe in the opportunity in front of us in that area, and our uniqueness and position and it’s – I think it’s showing in the resonates we’re getting the customers.

Thank you. Your next question comes from the line of Keith Weiss from Morgan Stanley. Your line is now open.

Great quarter guys, and really fantastic in to the fiscal year. It really seems like something has catalyzed or something has shifted over the past two quarters. You talked in the letter about the 70% acceleration in large customers coming over to cloud prior you guys are a little bit more cautious on the pace of that transition. 23,000 customers read and just say ipoping number compared to like the 8000 you did a year ago. Is there something in particular as the macro environment is just like the product strategy jelling the distribution strategy show? Is this something you could point to, for that sort of what seems to be a catalyst or an inflection point in the momentum on the cloud strategy? And just like overall customer additions?

Yes, hi, Keith. That’s perfect. Look, I think we’re in a great position across the board. And we continue to take our long-term thoughts in mind. If you think about the last year, in such a maelstrom, boneheaded moves are really easy to make. And we’ve kept our heads. We’ve been very sensible about how we have made decisions throughout this last 12 months to 18 months, and continue to focus on the long-term and focus on our customers. And so the strength that you’re seeing across the board in so many different areas comes from thousands of really smart, really thoughtful, long-term decisions that we’ve made that are continuing to drive the pace and progress of Atlassian and the value to the customers. I don’t think anything particular has changed in the last few years in that philosophy and strategy, which I always say is more important than individual decisions. And you can certainly point to things like free, which has significantly expanded our funnel and ability to to grow the customer number of various ways, you can point to the continued integration of Trello. And yourself have probably asked a whole series of Trello questions over the last four years. And our answers have been very consistent and very much the same. And that is four years worth of work from the Trello team and the all the paths of Atlassian and bringing that in continue to make it part of the family that continues to pay off as our broader shift in migration to the cloud, which gives us a lot of fantastic capabilities for those customers right, on top of our platform, and all the other things that cloud brings us. So, I don’t have a singular shift. I don’t think there’s any individual thing that’s changed. I think it’s our, 20 years of Atlassian history and making long-term decisions and continue to execute it to a very, very high level again those decisions that is – that that continues.

Thank you. Your next question comes from the line of Rob Oliver from Baird. Your line is now open.

Great, thanks, guys for taking my question. Appreciate it. Mike, I’ve got one for you just I saw the Quarter Grand Award from Appfire in the investor letter. And its strike me one of the things we’re seeing playing out for you guys is like the very methodical investments you’ve made in both the partner network and those who build apps on your platform. Now, you’re up over 700, and just wondered if we can just get an update on your philosophy there is that seems to me to be contributing nicely to the kind of early success you’re having here in enterprise, if I understand that, right. And I might squeeze in one for James at the same time, just to say that, you guys had set up some fairly conservative targets, or at least they seem so to investors around server customers and migration of businesses up through FY 2023 and given the success you guys are having right now, whether there is any thought of sort of reconfiguring those targets. Thanks, guys.

Hey, Rob, look our channel marketplace continued to be extremely important pillars of the business going forward. They bring – always have bring and continue to do so in the cloud unique capabilities to our customers that we can’t bring, right, and we really value them for that they’re in geographies, they’re in industries, they’re in parts of the world that we can’t be. And that continues to be the case in the cloud. Probably you can see that that’s working. Again, in a shareholder letter, we said that our channel partner sales are up over 300% year-on-year when you look at their cloud sales. So, we’ve done a lot of work to help our channel partners understand the cloud. It’s a big strength of Atlassian’s business. And that’s resonating with their customers, that are our shared customers and that’s really working – nothing different than the philosophy that we have to get our customers through this migration journey. And we have to get the channel and our partners through the migration journey. So, we do a lot of assets that driving the cloud migration, but also cloud in general. Obviously, from the point of view of the technology partner in the marketplace, we continue to have great progress with Forge in terms of allowing both our customers and our partners to build and extend Atlassian products, which is always been a hallmark of our philosophy. We’ve always been highly extensible and believe in customers’ ability to extend our products. Forge is a way to do that that meets the cloud, regulatory and compliance requirements that we’ve talked about that are incredibly challenging for SaaS businesses going forward. And we’re really taking an engineering first approach to that. Forge will allows us to solve those problems gives great security and peace of mind to the customers using those extensions and technologies. And we continue to improve, as we’ve mentioned, with more than 500 apps now on the fourth platform, both from third parties and customers and we expect that number to continue to grow. So no doubt in broad philosophy to your question around the partner ecosystem, but we continue to help them, and they continue to help us on the long-term migration journey with .

Well, I’ll jump in for the second part of your question. We’re certainly pleased with the developing momentum that we have along the migrations timeline. Mike mentioned the statistic with regard to our partners increasing their migration sale activity and cloud orientation 300% year-over-year. More broadly, we talked about 2x volume of migrations year-over-year. And then I think another important element of this is that quarter-over-quarter, our larger customers, we saw, so those are – those were the 1000 users plus, we saw them growing migration activities 70% quarter-over-quarter. So, clearly with those facts demonstrating nice momentum. We came into this process, what a little less than a year ago with around 30,000 server customers. So yep, we’re pleased for that momentum, we’ve got plenty of work ahead of us. We have a ramp to execute on. We feel good about our ability to execute on that ramp. But it’s a little early to change our thinking around the overall timetable that we’ve spoken about. And that is that we would expect around half of those customers to be migrating in fiscal 2023 and 2024. And probably that would equate to something of the order of two thirds of the larger customers migrating in that time table. The other thing, I would mention is, we’re pleased to be the early pace of the enterprise additions of our cloud products. And I think that will be another important element in terms of bringing more of these larger cloud – excuse me server customers to be ready to move over to the cloud.

Thank you, sir. Moving on, your next question comes from the line of Tyler Radke from Citi. Your line is now open.

Yes, thanks for the question. You talked about your hiring plan in the letter, and it seemed like on the R&D side, as you’ve historically been focused there, that’s where the bulk majority of your investments are going. I was wondering if you could just kind of talk about both the R&D and sales and marketing side, I guess, on R&D, what are you most focused on? Is it cloud investments? I know, you have kind of talked about introducing some new products in the collaborative work management space. And then on the Salesforce side, just how much important is there in hiring sales reps to make these cloud transition to be enterprise customers where things are more complex? Thank you.

Hey, Tyler, I can take that one. Look, we’ve continued to say that the people are really important to us. We’ve been made quite clear in the shareholder letter, as we did a year ago, we’re going to continue to take opportunities on the front foot that we have continued to build our team again, a year ago, we said we’d be adding over 1000 Atlassians, we ended up adding 1,500, which is a fantastic achievement in the year that we’ve had for our talent teams and everybody around the business that has continued to do that, again, more than a third, I think more than a third of our staff at this stage, haven’t stepped into an office, at this point ever.

Thank you. Your next question comes from the line of Gregg Moskowitz from Mizuho. Your line is now open.

Okay, thank you very much. And congratulations on not only a terrific quarter, but what has also been a transformative year for Atlassian. So for, I think one of the most impressive data points in my view was a significant acceleration in cloud revenue 47%, year-over-year versus 35%, the prior quarter. Obviously, cloud is rapidly recognized. But James, if you could speak to what drove this degree of acceleration that would be helpful. And then for Mike, just getting back to large customer cloud migrations up 70% quarter-over-quarter. What if anything, do you think has changed over the past 90 days to get large customers more comfortable with migrating that, again, might drive that sort of increase? Thank you.

Gregg, I can take the first part of your question around the cloud revenue. Really pleased with the underlying performance of the business, I would point three particular drivers. The premium editions that have been in the marketplace for a year or two now are proving to be very much popular with our customers. We continue to see a nice development in the proportion of the total number of customers who are choosing the premium edition. And we’re very much following a strategy we’ve talked about really for a long time now. And that is very consistently adding new functionality, new capability to these additions. And as we do that, there’s a greater and greater approval of our standard cloud customers and indeed others who are migrating over from a behind the firewall product. There’s an increasing attraction to this expanding capabilities of the premium offer. Now, we’re just getting going with the enterprise edition. And I just think that this is another illustration of this long-term strategy to have a full ladder, if you will, really starting with free, then standard, premium, and then Enterprise edition. So that’s an important strategy for us that I feel we’re executing very well on. The second thing I’d point to is just the expansion of the number of users at our current customers. That continues to go very nicely consistent, obviously with the value that our customers are seeing in utilizing our cloud products. And then I think the third thing, I would point to is improving rates around churn. There are a few things going on here that I think are very much illustrative of the long-term strategies that we have been pursuing. What we’re finding is that initially free edition customers who then convert to a paid plan of stickier. We see the same thing for our customers who choose the premium plans. And my expectation would be consistent with Enterprise. We’ll see how that plays out in the next year or two. And then, perhaps not surprisingly, those who are migrating from behind the firewalls, to the cloud, offerings are also stickier. So, you’ve got a few different drivers there. In addition to the fact that for the last year, 18 months or so, we’ve had a variety of specific initiatives, where we have used our understanding of the marketplace and the different dynamics as to usage of the cloud products to be able to identify potential areas where we might see churn, and we’ve been able to work to get in front of those customers, and change their minds. And so that’s been another important driver of the cloud business. One other thing to remember, I would say also, migrations per se, a relatively small impact on the cloud growth rate thus far. And then the other thing to remember is that this time last year, we talked in Q4 of fiscal 2020, about the fact that we had about a $10 million revenue headwind as a result of the lockdowns that were in stewing in many parts of the world in those months. And really, that all was impacting our cloud business. So that’s made the comp in this Q4, fiscal 2021. A little bit easier, as well. But a variety of those drivers that I mentioned, that are really proving to yield a very strong tailwind for our cloud business generally.

Super helpful. Thanks for the year color, James. And then Mike, if you have any quick thoughts on what’s driving some larger customer cloud migrations, that’ll be great as well. Thank you.

Yes, Greg, it’s probably the some of the factors we’ve talked about earlier. For sure, the channel getting more comfortable with cloud is probably one aspect I mentioned that is driving that we see more, obviously, the larger the customers, the more likely they are some sort of partner helping them. So that’s continuing to build momentum, which is good. The second thing I would say is, we continue to work hard, and it’s not particularly in the last quarter, as much as over the last few years, on the Enterprise editions and the capabilities that come with them from access through Premium and Enterprise, as James mentioned, continuing to resonate with customers. And, those will have long-term roadmaps that we have in our public cloud roadmap about what we’re adding to them over time. So customers are not just buying into what we’ve done in the last 12 months. But what we have coming up and our the more that customers see us deliver against that roadmap, when we tell you, here’s the things we’re going to do each quarter for the next year, and then we go do them that builds confidence in that part of the customer base. Well, an older customer base, and particularly in that part of the customer base. And the third thing is just continuing to deliver against some of the performance and scale and governance capabilities that the large enterprise customers require. You saw that in the last year with things like data residency. And we’ll continue to do that more broadly. And if there’s a fourth one, it’s probably our platform capabilities continuing to evolve in the Enterprise direction. So automation capabilities, smart scale, that do resonate with the larger customers, because the bigger you are, the more data you have, the more teams and more users the more sort of smart AI machine learning driven features actually come to help you because we can sit them on that data much more quickly for you. Automation features or things in the platform that we continue to build for the largest customers it’s probably a small part of all that collection of factors which driving that until the success.

Thank you. Your next question comes from the line of James Fish from Piper Sandler. Your line is now open.

Congrats on the quarter and ripper in the quarter is understating it. I guess going back to this idea of free to premium enterprise, I guess can you walk us through a little bit more of the details on the adoption curve of standards of Premium to Enterprise, in any sense to the mix within those buckets at this point and how long it takes to move up the stack on average, or why customers might not be moving up at this point, but could move up over the next 12 months. Thanks, guys.

Yes. One of the things I start by saying is, how the free edition, so really expanded the top of our marketing funnel in an impressive way. We talked in prior quarters about a 3x type factor. And frankly, as each quarter goes by, we continue to refine the experience, if you will that the user has with our free offering, making it easier to invite others in on their team, not requiring someone go through an admin, you will change the trial and so forth, associated with the move up to standard. So we continue to refine the way, the user experiences and gains value from our free offering, but then also is introduced to the additional benefits of the standard paid plan. And so very pleased with how as we study the different monthly cohorts that have started with free, over the last year also, how they are moving increasingly towards the paid plans to the degree that we feel very comfortable with the long-term economics of offering free versions of Jira Software, Confluence and Jira Service Management into the market. And I think that was one of the key initiatives of this last fiscal year, that will serve us well out over many years to come. In terms of premium, yes, we started off 18 months, two years or so ago, with a relatively modest package of incremental functionality versus the standard plan. And not surprisingly, and we expected this, it was a relatively modest take up, that was just getting us out of the gates, if you will. And we have, as I mentioned in one of our earlier comments, really routinely expanded what’s available in that premium offering, and we will continue to do that in the years to come. And we’ve been very pleased with how Jira Software, Jira Service Management and Confluence premium editions have increased their impact on the overall proportion of cloud customers. And then we’re just really getting started with enterprise very early days, but encouraging developments thus far. And again, well, this is one of our key areas of focus R&D development. And I would expect us to continue to build momentum around the Enterprise editions over the next year or two. Mike, what would you add to that?

James, Fish, I think James Beer, did a fantastic job actually answering that question, the only one small element of color I would add, and it may be taken for granted. But I just want to make sure everyone understand, a customer does not need to buy one addition across the board. So one of our advantages, and having a family of products, is the adoption curves of each product can go at the pace of the particular customer, or group department within that customer set of teams, whoever is using that particular product. This is where our ladder is very consciously designed to be customer friendly and customer first. And it’s really starting to resonate. So an example there is you could use Jira Software, Enterprise edition or premium edition in a large company because you have a very mature engineering organization with a lot of capabilities, and adopt Confluence free with a small group of 10 people alongside that, as you start to learn about how Confluence can add to your software team. As that Confluence deployment grows, you probably move into standard and you probably move into premium overtime if it’s a large company and the user base continues to grow. And we have success right with your usage. So a single customer can buy different editions of different products at the same time, depending on their adoption of each of the different areas and opportunities and markets that we have. That’s designed like that on purpose so that customers can grow at their own pace in different areas.

Thank you. Your next question comes from the line of Keith Bachman from BMO. Your line is now open.

Hi, many thanks for taking the question. The first one, I think is for you, Mike I wanted to hear a little bit about platform parody. And what I mean by that is, where do you think you are now in terms of, say the cloud offering, particularly targeting those large enterprise customers that James mentioned, would still be migrating late in the cycle? Where are you in terms of the capabilities on the cloud versus server versus data center? And how might that change over the next year? So in terms of reaching feature parity to already to catalyze the great momentum you’ve already started with?

Hi, Keith great question. Look, we are – firstly, it should be said that are very early in the migration journey. This is, as we’ve said, repeatedly, this is a multi year journey. And we will continue to evolve with our customers as we go through that journey. The capabilities of the cloud, it should be mentioned, firstly, are incredibly unique already. So the cloud has some big differentiations in terms of its capabilities that already give you a choice between the two, the deployment option. And then we continue to build out our enterprise capabilities. You mentioned the very largest customers; you saw that in the last couple of quarters with data residency, and continuing to improve things like FedRAMP, and a lot of other compliance requirements and enterprise requirements. Again, we haven’t public roadmap, we explain to customers where we are at that roadmap and how we’re executing against that, that’s really resonating with those larger customers. So, I think we’re in a really good spot in terms of how we go through that journey. And as we’ve said, it had a relatively modest impact on in Slide 21. And we are early in that journey over time, as we continue to power through that. And those customer migrations are coming from server and data center. It should be said for the largest customers that you mentioned, in data center. Often that journey is not a singular step. So that customer can choose to move, they might have 10,000 users, let’s say on data center, and they choose to move 500 or 1000 of them to the cloud for a particular purpose. Maybe it’s a unique geographic office, maybe it is a large project group, department within the company. That is a behavior that we see often, where they will move 500 to 1000 customers, the users, sorry, to the cloud, to test us. And we like that that lets us demonstrate our capabilities that let just demonstrate our enterprise strengths to that customer. And we are confident that we can give them a great experience, give them a great total cost of ownership equation with their for the cloud offering that will then resonate through the remainder of those users. So that customer becomes a customer, both cloud and data center in our example. And then over time, we would hope that they would move the rest as we demonstrate our capabilities.

Yes, just add on one. Thanks to that, Mike. We’re now seeing the 25% of our seats migrating into the cloud are coming from the data center. And obviously, the data centers where we’ve tended to have our larger customers. And so again, I think as the cloud enterprise editions become more and more capable, I would expect that trend of data center to cloud migrations will only increase in the next two plus years.

Thank you. Moving on, your next question comes from the line of Ari Terjanian from Cleveland Research. Your line is now open.

Hi all thanks for taking the question and congratulations on the great result. So double click on the cloud performance is wondering, if there any pattern is seen any surprises in terms of the type of customer among these larger enterprise teams like growth in America’s only decelerated, 200 basis points? Is it fair to say most of these are the type of customer you’d expect in terms of geography or vertical? Or you’re starting to see some more non-traditional customers start to migrate to cloud as well? Thanks.

Yes, just a thought on that. One of the things we actually chatted a little bit about this a quarter or so ago, is that we’re quite pleased with how we’re seeing more cloud take up within Europe, Middle East Africa region. And that has been a part of the world that has been very, very focused on utilizing behind the firewall type solutions. And so we’re pleased to see European based partners really taking on the opportunity, understanding the value to their customers of our cloud offerings, and then obviously that the customers themselves. So again, relatively early days versus days the Americans were, I would say there has been a longer history of wide scale cloud adoption. And so we’re encouraged by that. And obviously, what will continue to work at that angle.

Thank you. Your next question comes from the line of George Iwanyc from Oppenheimer. Your line is now open.

Thank you for taking my question. Mike, with the context of continuing to be on offense, can you maybe share some color what you’re seeing on the competitive front? Maybe broadly speaking and then specifically, maybe progress with work automation in work management?

Sure. I can talk about that. Look, we continue to be, as we always have philosophically aware of what competitors are doing that we absolutely don’t focus on that. We always try to put customers first, in a big, big way. And it’s very easy to say that, I would say that I seen as a company that actually does that. And we have done for a very long time. The – not really any change in the competitive landscape, I would say is a brief answer over the last quarter, we continue to be really positive about the opportunities we have and where we sit with our customers. Talking broadly about work automation, work management, obviously, it’s a very, very large space continues to be, so we have a number of different offerings, targeting that space with customers, that resonate very strongly for a whole series of different reasons. Trello continues to power along very strongly, very happy with where Trello sits, and how it has continued to grow. Over the last year that team’s done a fantastic job. And that is an exciting area for our business and continues to be so. Inside Point A in terms of innovation and new capabilities, again, Jira Work Management is doing some really excellent work and connecting the Jira family into some of those really exciting areas. It leverages our automation platform, leverages our cloud platform in really good ways to bring the rigor and structure of Jira, which is very needed by a lot of parts of a lot of enterprises into that broader work management arena. So, we’re very excited, obviously, extremely early days with Jira Work Management, it’s only been in the while for three, three to six months at this stage, and continues to be a part of the point AI program, because we’re really collaborating deeply with our customers about how to continue to grow that. All the way across to, I would say, help is a good example of a product that is taking an alternative view to how work management can be done. Help is messaging based service provision tool, a lot of parts of enterprises are actually about one team servicing another team. We think about that in the ITSM context, obviously. But if you look at service driven organizations in a broader sense, we’re going to have to continue to find new ways for teams to service other teams. We let our legal team or an interactive marketing team and help it’s really resonating strongly because the messaging base paradigm is a very new one. So, we have a lot of very unique capabilities in the broader work management space. And I would say my excitement is extremely high about all the different investments that we have.

Just to have on one our thoughts. While obviously the customer accounts that we publish, each quarter does move around from quarter-to-quarter, we’ve always expected that the 23,000 numbers that we posted up in Q4, I think is impressive in terms of illustrating our competitive analysis. Obviously, those 23,000 companies evaluated their alternatives, and chose Atlassian. And so as Mike referred to the Trello is an important part of that. We’ve been emphasizing monetization initiatives there now for 18 months or so, as we’ve discussed in the past. But this customer increase was broad based Jira Software, Jira Service Management, Confluence and so really encouraging and illustrative of I think, where we stand on the competitive playing field.

Thank you. Your next question comes from the line of Fred Havemeyer from Macquarie. Your line is now open.

Thank you, and congratulations on a really strong quarter here. I’d like to ask a bit about some of your integrations and your strategy around that, because some of the products highlights in your letter around, Open DevOps and the importance of integrations really drive home where it is that you’re focusing some of your efforts and product development investment outside of some of the other topics we’ve been discussing today. So, I’d like to ask, do you view integrations within the Jira ecosystem more opportunities to improve retention, or as an opportunity to also expand user capture by adding essentially more workflows that can be addressed within the Jira ecosystem?

Hi Fred, Mike here. Yes. Look, I think that’s an extremely good question. Strategically, I would say we are very pro integration. Let me explain why that is. We’ve talked a bit before about what we call Cambrian SaaS. So there is an explosion of SaaS tools happening out there at the moment. It’s a very verdant period for new solutions for customers, new applications, niche one, big ones, small ones. This is a fantastically interesting period to be in SaaS. We focus on what’s best for our customers. And when you’re doing so, it takes a lot of practicality, pragmatism, a little dose of humility to realize that those customers are going to use a lot of applications that come from other companies for all sorts of reasons. The best thing we can do is be deeply integrated in all of those places. We believe that’s best for the customers. It is then our job to automate workflows to coordinate data. And to do that as best we can across all of those different applications. And that leads to the best outcome for the customer, which leads them to, as you mentioned, be retained or enjoy their Atlassian experience so stay, it also leads them to have an increasingly integrated, which becomes sticky and more valuable to them. Offering set among the different products and applications that we have. One of our biggest competitive advantages is developer ecosystem and our extensibility of products. You see that and as Cambrian SaaS continues to throw up new evolutions of products and variants in different directions. That allows us to flow into those directions through integrations, through acquisitions, through extensibility, automation in lots of different manners as we navigate that that continually evolving world. And so, yes, I think strategically, it’s extremely important that it’s been part of our open philosophy for customers for a long time now. It’s part of Open DevOps, as you saw, as you mentioned, and we know that that resonates with customers, both philosophically in terms of they like that they think it’s a good position for Atlassian to stand, we’ve never been a vendor that said, hey, all your stuff is with us. And you don’t need anybody else. No, we don’t, we don’t believe that. That’s not what we tell customers. That’s not what we talk to them about. So philosophically, that resonates with them. We know from their usage from their satisfaction, that we are then a better vendor for them. So, we see that in the numbers in lots of different places be that analytically usage based or customer satisfaction report based. And then we believe that results in better economics for Atlassian, which is then shows why those integrations are important for shareholders, and the long term future of Atlassian. That’s a philosophy we’ve had for a long time. In fact, we can really show that philosophy in ways that we couldn’t, beforehand because it really becomes apparent. Thinking through my own after the path that I want to also stress, the data integration piece is really important. So, we continue to evolve our data platform as a part of our cloud platform to connect objects – to connect elements across the Atlassian and third party spaces, so that we can give smarter and better answers to customers. And we saw that show up a little bit in the insights features we shipped in Jira Software, that don’t just leverage Jira Software data, they can leverage data from cloud providers, CICD providers, lots of other parts of the DevOps ecosystem, to give you the best answers in Atlassian products and outside Atlassian products. I think that’s a long term strategic piece here as well, is to be able to coordinate and understand data across multiple vendors gives you those automation capabilities, but also gives you insights and unique places that we can get answers to customers.

Just a couple of things to add on to what Mike’s commented on that. One thing that we’ve seen going back to talking about churn a few minutes ago, is that when our marketplace, vendors, partners, are a part of the relationship with the customer when the customer uses an app, our dollar churn declines by around 50% – 50%. So that’s an interesting illustration of the stickiness part of your question. And then in the shareholder letter this quarter, we’ve put quite a bit of materials to talking about the different types of partners and one comment we make is an interesting illustration of how they can these integrations drive user growth. We talked about being able to request access to Confluence now directly from the Slack channel. So it’s just an illustration of the sort of thing that Mike’s been talking about here.

Thank you. Your next question comes from the line of Brent Thill from Jefferies. Your line is now open.

Hey, guys, congrats on a nice finish to the year. My name is I worked with Brent Thill. Wanted to ask a quick question to Mike, first one on the – could you give us some insight into the impressive net new customer ads? And what are these customers landing with? Historically, Jira and Confluence have led that motion. But do you see the new customers can adopting the entire solution suite or is it still certain products and leading the charge? And then one for James, obviously, the fiscal 2022 guidance for subscription revenue growth is low-to-mid 40s, which is ahead of what he said previously of mid 30s. Could you – maybe shed some light into what’s driving this optimism and what level of migrations is kind of embedded into this new guide? Thank you.

Thanks. Look on the new customer number, a few points, I would say first, we did say six and a half thousand of those odd word Trello single user accounts. So the 23,000 is a really impressive number. Even if you take out the six and a half thousand Trello single user customers, you still end up with a very strong quarter for customer ads. As we say, all the time that customer number goes up and down. We don’t focus on it. We focus on the activities inside the business that lead to the best long-term customer acquisition. Inside that James has already mentioned free obviously continuing to drive that and power the sort of the part of the iceberg is below the water, I guess, we don’t talk a lot about free customer – they’re not customers, right. So if they’re using the free offerings, we don’t count them as customers. So as they convert into being customers, they might have actually been using Atlassian applications for a long time. So a part of that is just a general rising tide as freeze being available for 12 months to 18 months now and continues to be so. The biggest strength in the number that gives me confidence, I would say, is the fact that it’s vary across the board. So there’s not a particular area that is excelling here. We see strength across the software, agile and DevOps spaces. We see strength in ITSM and Jira Service Management and health and Confluence and we say strength across the work management, arena, Jira Work Management, Trello help again Confluence, and it’s a very across the board pace and rates that we’re seeing. So there’s not a particular good answer to your question of which sector? In fact, the answer is look, it says or out of lots of long term activities across all the areas and opportunities that we have in front of us in the business. We’re proud of where we are and the execution we’ve done. I’ll throw to James for the second part of your question.

Yes, thanks, Mike. A few thoughts around the guide. So both cloud and data center the two components of subscription revenue, good organic tailwinds, if you will, we have spoken quite a bit about the cloud business in the last hour or so. So wouldn’t repeat all of those points. But similarly, we’ve got a lot of new demand. For data center, we have increasing the demand in terms of user count from current data center customers. We also raise prices on the data center business around five months ago. And so that’s a benefit that will increasingly start to see as the next several months play out. In terms of loyalty discounts, you’ll recall that we have stepped down the size of the discounts that we offer to migrating server customers for both the case where they would migrate to the cloud and to the data center. So that provides something of a rolls if tailwind as well. In terms of the effect of migrations, obviously, that also going to continue to benefit both the cloud and data center businesses in the coming year, I would expect migrations to drive approximately mid single-digit growth on our subscription revenue growth in fiscal 2022 year-over-year. And while obviously not a subscription revenue issue, the server business obviously, we stopped selling new server licenses five months ago. We’ll stop selling server upgrades to current licenses in seven months time or so. And so then, that server business will just naturally decline over time as those customers migrate over either to cloud or to data center.

Thank you. And your last question is from Michael Turrin from Wells Fargo. Your line is now open.

Hey there, thanks. Some even more fantastic than usual phrasing in the letter this time. So kudos there. I wanted to go back to one of the hat-trick core markets and just touch on ITSM, you referenced Jira Service Management. Now you spend more than 30,000 customers, it’s a big number, hoping maybe we can touch on whether the more explicit move towards ITSM is influencing either the type of customer or the pace at which you’re adding customers or seeing engagement from that area. Thank you.

Hey, Michael. Look, I think we’re – as I said before, we’re very happy where we sit in the ITSM space. The type of customer – look, we – there’s clearly a type of customer that’s large that uses ITSM solutions. I think one of the exciting parts inside that is that we continue to learn smaller customers in ITSM, as well, as those skills of the large companies are more taken up by small businesses is saying 50, 100 to 200 person businesses really thinking deeply around their IT capabilities and technology and the strength broadly. And we’ve long said we’re targeting a Fortune 500 and 1000. And we have very big aspirations for that. We don’t think the ITSM opportunity is restricted to the sort of Fortune 2000 or the Global 5000, or whatever we think the ITSM opportunity is far, far, far broader than that. And as such, we’re thinking about it in that manner, that plays into Atlassian core DNA and strengths of how we go about doing what we’re doing. So that part is very exciting. We for sure need to solve the needs of the largest enterprises at the same time. I think you’ve seen us continue to do that. So that the type of customers that I believe we will see in ITSM, are as broad as the general Atlassian customer base, which I know is not the expectation of sound, but I believe that is one of our strengths, our ability to really changed that change the IT and technology capabilities of companies of all sizes, small, all the way through to the biggest companies in the world. That – that’s how we think about it, and will continue to embrace that opportunity to attack that opportunity with vigor. And that we’ve said that in the shareholder letter, two and a half years ago, when we said we’re going to double down on IT. We meant it when we said that, and we mean it just as much today, there’s a huge opportunity in that space, as there is in all of our three markets that we are that we’re playing up against.

Thank you for presenters. Ladies and gentlemen, that concludes our Q&A session for today. I will hand it back over to Mr. Mike Cannon-Brookes for any closing remarks.

Just wanted to say thank you everyone for joining the call today. We appreciate your continued support and questions. Thank you to all of the Atlassian on a fantastic year. We look forward to continuing to power into the future. I hope you and your loved ones wherever you are in the world remain safe and healthy. And we’ll talk to you next quarter. Thank you very much.

Thank you ladies and gentlemen. This concludes today’s conference call. Thank you for your participation. You may now disconnect.