Atlassian (TEAM) 1 Feb 242024 Q2 Earnings call transcript

Good afternoon, and thank you for joining Atlassian's Earnings Conference Call for the second quarter of fiscal year 2024.

As a reminder, this conference call is being recorded and will be available for replay on 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.

Welcome to Atlassian's Second Quarter of Fiscal Year 2024 Earnings Call. Thank you for joining us today.

Joining me on the call today, we have Atlassian's co-founders and co-CEOs, Scott Farquhar and Mike Cannon-Brookes; Chief Financial Officer, Joe Binz. Earlier today, we published a shareholder letter and press release with our financial results and commentary for our second quarter of fiscal year 2024. including available section Work you sheet. of find earnings-related is the blog will letter release other Relations press Investor our materials, shareholder on investor Life Atlassian's and also and The supplemental earnings data the website, where

always, management's and the letter commentary contains shareholder our for As insights quarter.

today, brief on the opening call This So Q&A. then include and call will during statements. remarks we'll have forward-looking time focus our

materialize and known could such unknown risks, if assumptions. assumptions and the any uncertainties the differ results results involve uncertainties risks expressed by If prove or have. we or statements statements or from our of any implied Forward-looking incorrect, forward-looking the materially

as You of future should events. rely not forward-looking statements predictions upon

date results to our from and are included factors no time affect to such Commission recently titled that including we undertake represent or make the to or Exchange they information quarterly update filings and Risk on statements these is in time, could and our other assumptions statements the reports. Forward-looking management's the business beliefs made, the obligation our such and filed most in current. we Further cease and change statements section and with revise be Securities Factors should of only performance annual financial as

that, prepared as is include substitute Q&A or for we'll with turn earnings available for accordance During non-GAAP for on possible. financial the over website. today's to of opening Scott also of superior in to Out measures of We'd remarks. time. With and between question the call, call I'll on a sheet in many Investor not call, reconciliation as investor and section Relations shareholder to the one a participate our like you allow to we at of These non-GAAP take performance in non-GAAP measures. letter, respect others financial to data addition financial financial are will GAAP. release measures are GAAP and measures our A in

joining Thank you us today. for

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Your [Operator comes Keith question Stanley. Morgan from first Instructions] from Weiss

the Congratulations quarter business what you the acceleration quarter. saw shareholder signs lot still the a sounds of like solid half. even into stabilization you in In like looks I on be but a of the that expecting this an milestones letter, an Loom about further talked in It the expect second environment? in half and some year? absent Cloud a into what uneven macro the quarter, bit to acceleration was could back that gives little drill still guys the hoping you to on what of And for you confidence to look seems

Thanks, Yes. Joe. This Keith. is

start results XX.X%. QX. Cloud me up in point with the They Let about contributed X of revenue Loom were growth.

guidance landed our excluding quarter. So performance. middle the results for range Loom the of that a in few cross our currents in were There

which execution in as sheet, segment. was This of slightly to in paid in on seat the multiyear them linearity customer This largely a which perspective, the to also which, A are you you upsell customer -- segments products. Results enterprise and then we trends know, bad, and better-than-expected business, the business. the in very the landed SMB shift a mix that premium unearned but from on signal also our quarter, of and strong or and and segment And resulted good SMB in customer quarter terms as customers' expansion driver deals. growth billings annual given on So dynamics large than sales realized pricing. your in in drove balance performance significant commitment annual versions lower of portion our that conversely in driven an to drove subscriptions, part stronger healthy the by expected, help. lower carries healthy monthly know, were transition revenue. I'll had of And into confidence try let walk HX. From around consumer through we question me the

from center exceeded key of in quarter, on terms our we the migrations and that's focus data and expectations, and investment significant our by In the trends put the driven server growth drivers there. execution

remained rate year, or was as worse. the the QX. moderate of paid mentioned earlier, paid to lower from trend, overall than enterprise expected of And slope deceleration expansion prior continued seat terms seat of that SMB within slightly that of pace better trend the while expansion, was than and In

and indicator. And active also to which We and at positive our finally, customers paid terms the funnel of with noteworthy verticals we with that's were that across quarter products, at see in linearity top anything very line another regions rate really largely QX usage healthy monthly churn our cross-sell Cloud or beyond that, stabilized from be our customer in the saw continued growth performed of in to line free expectations. didn't to drivers or leading convert like other in expectations. And and relative the then and retention

premium the the slope the moderate trend our excluding mentioned we're of terms products. I annual moving continuing on rates, quarter-over-quarter. multiyear around leading talked on free-to-pay benefit Cloud recognition offering, sheet, are on large guide, top the and guidance the of the healthy In price slightly our for of billings does seeing paid on to Cloud, midpoint upsell agreements HX the to we increases that enterprise more the about to balance enterprise laddering off And value rolling migrations me customers our range The bring the the cloud HX the and driving and also model confidence and of accelerating line are that of give the assume in into the funnel. unblocking Cloud and growth versions rates. indicator Loom continues expansion innovation momentum the around new focus at of seat to I to QX those the strong and conversions confidence as increasing of momentum factors that

that the that the So accelerating year. revenue confidence things the in hope to the those give half ability are types And second I in of cloud growth me helps. deliver of

comes Michael question from Turrin Wells from Fargo. next Your

For Scott buildup server us focus the there's of life. been or Mike, on of much probably end from and too plenty

line job asking lessen? puts share and around follow-on your Any opens cloud just next, a points that Atlassian should that you the will of the think does vision out. that life, at us for maybe we what can post end data the up about migration there XX For framing Joe, Or has how does what's all then, here. And it consider some Cloud to investors centers? been towards useful. -- of as takes simply that of server But letter from good tailwind for in migration us more shift a are

Scott thanks here. the question, for Michael,

Firstly, for And about from who of that server XX really we been year will Atlassian our for a come of growth coming the reminder, those new few Cloud migrations. which this knew customers. weeks, you said will next happening, we story, have with end has in points historically our of quarter just a the the those our story, has be X-plus journey Atlassian support to

And I answer so there's your want X to make points question, to Michael. in

last for of from with that center come XX% in is our the In from will data migrations about last end Firstly And with the years. the support, multiple even data of our migrations historically lot center of to cloud migrating we migrations said a quarter, continue half our came customers. server that quarter this customers. customers

customers investments continue time we data moving continue also launched expect also secure in the to see launch us we that. We've that, did And software. residency with long and R&D come. you for a huge see to to continue quarter, migrations we've So last our Canada. Cloud to to made This order Bring-Your-Own-Key in doing

remove migrations. continues customers of to blockers the continue open for that and cloud up We aperture our to

to offer. best to getting is continue deliver in And full you see Customers, they to to second get experience. we make The the like the Cloud that continues really the innovation Cloud. are to us I'd Atlassian gateway point can once And Cloud be

comfort, customers, and functionality Loom passing to and about only Discovery, talked ecosystem that's X,XXX all AI continued in the Jira we Cloud. which have whether continue our developed paying to already which available So in grow, that Product we are has develop also

customers it or experience, have more get through these really customers, best migrations deepened difference for is thing And relationships as makes to they're do And saw XX,XXX and also in letter Mercedes discussions to more more that a a enterprise, is that seen with an about talked using American fleets And but of in customers led our auto then of their them, products Benz migrated that a which to usage Jira strategic we've they and adopted discussions data more incredible the by services financial and the manufacturers, that and excited lastly, center and we for to of you enterprise, from really these Benz as better these -- being have our so cloud, started them. they with partner more ITSM so functionality Mercedes that, customers our with and around our Confluence. us. And third opportunity process sell we we're with part with customers cloud whether solution that, to and that customers. North German having want us migrating that, our have

these more for to the And takes? you about partner more so and large strategic we becoming enterprises. Joe, puts do and of are a some want talk

Yes. very those revenue driven driver to are significant cloud a more when to specific Thanks, of and FY because if question expect installed center opportunity Scott. data base. customers. size in of it's early some a the revenue would lot significant give of the 'XX I Michael, That's number FY to them, our be There's beyond. by primarily of the a cloud. growth And not for to impact echo move of to they it's a said, there the largest and we 'XX. too growth what on continue Scott beyond just cloud really migrations migration

So FY to a of we growth significant to 'XX. be continue revenue migrations beyond driver expect see cloud

question Your Gregg Mizuho Securities. from next Moskowitz from comes

focus Okay. center Maybe the on I'll business. data

is think it's from plus, versus at contributions net base So still for migrations, about versus obviously, the new that after net from expansion even relative strong that, Joe, you how growing adjusting XX% when should the business that impressive pricing logos? benefit XX% we look installed reported. growth, actually

Gregg. Thanks, Yes.

was quarter server the past from And get partially is migrations you performance strong our earlier another out, paid by the strong solidly seat seat stronger-than-expected center. was enterprise migrations really point goes to for It expectations, driven around stronger expansion by data this my to expansion. in was once driver biggest right. you as You're ahead I'd impact It of actually Cloud. quite the pointed migration offset, net quarter. that say that's

residency, address around And app certifications, of of we down but integration, macro big customers ultimately stepping things terms and so improve and statement ability a those customers a moving customers scalability, us, are road. data that result in like Cloud, believe we've enterprise-grade a things to capabilities, as as well moving that's our center very their the and staying serve compelling all to data in as made with will stone our is to investments in the to a are that, result -- that the also these migration

So once the it's perspective our you primarily paid get seat expansion migration from impacts. past

Your comes Macquarie. from from next question Fred Havemeyer

I we've although have tech layoffs it in industry once this lower year. wanted year, picking to in the as start seen the up, prior ask, we we was scale than what saw that been substantially again

look conversion be layoffs the So cloud anything derisk industry. And free-to-paid that anything outlook have in revenue comfortable secondly, any your at tech guidance I to your else impacts the is the wanted layoffs date? may growth, once of do these at seen again we you or you in sort signs and that all to impacting ask, as any potential from for how feel

Yes. Thanks, Fred.

a seen announcements. haven't expected we an different we coming year dramatically eye the into than keep it's track. Obviously, to We relative something impact on the and recent

you haven't Cloud. changed how about guidance, for freshened really we the ranges If guidance we the conceptually think the

Keith. That's of in and HX improving high the retention. server healthy from headwinds center and expansion. It end year cloud with our assumes strength growth data rates related that on cross-sell, strong continued in support following impact less and range driven would migrations migrations by seat paid server macro to customer the reiterate, that upsell to have talked also for end guidance to the Just we led acceleration -- cloud assumes about

-- On not paid impacts seat of that up then we cross-sell have, get and areas does migrations year, assume the guide, but have increasing the results and date, the relatively and well do we that of macro only from about assume that expansion, as to low upsell. And the server support to for on relatively such post server the related I end talking migrations business headwinds our would held that lastly, -- to weak also cloud. you're and a on would impact end

At the revenue. midpoint paid where revenue steady kind the favorable of of expansion drives we outcomes they are accelerated that drive at that get today, growth. thus So the slightly improvement we're our that macroeconomic rates to high that of assuming range, seat better are in guidance, and end

those rates. see expansion On and end, that assume the we we low the headwinds seat that impacts paid

weak. and we're cycle, expensive. economic in deals also there a up we're excited at around comes more expensive us about are seeing lot Just we're then lot to still that products add the this replace We're that might customer on providing. of the being might versions different and/or are to had of a excitement expansion a in doing them see but our we enterprise showing are SMB in our early AI very Cloud business, I switch-out. days. of the to other stage. I for amongst great AI that it's now Joe the We of customers. happen other And there. that strongly competitive But paid new older went out over looking talking reception. But early features. great be who pretty products the ways. that see more seat He bit a excitement what talked delivering in to that having and with our to customers And we use in lot actually it's thought products It customers particular comes in biggest of replacing

where and in think up customers picking we and Jira Discovery to great value we're it running talked Product example innovation they're with Cloud a delivering it. and I about that is these

counter are in sort layoffs of strong areas any to that all they're technologies. I think, So

Keirstead from next comes question from Your UBS. Karl

the in to remaining I Are of The us like what vertical, on at you than stickiness? size, cohort. a and customer to at the that and not I'd sequential terms on was to little least million server little will focus likely decline in in like versions server was help looks that less sizing that surprised a by anything? offer the cohort supported maintenance color you perhaps offer $XX of of Can any cohort support date migrate modeling. bit run end continue as

I'll Yes. add. can he go Scott to first, anything Thanks, Karl. chime This is in and has Joe. if

that less-than-expected the better QX, And of highlights to platform. server on nature those the be. In if general, of better than over in our to cloud resilient a In commitment course, customer renewals, Cloud, that thought results mathematically, and remain we're to of terms server and in last this not because expected be is much we of it also and delivered the of migrations seeing map and better performance center, slower have year. terms great certainly referenced, migrations mission-critical expected what to squarely opportunity in. -- I'd product track, ahead not a been to expected which road of of than where the and highlight retention data more it's customer you originally future seat we we results churn, it's Atlassian's course the bigger is means we which position than

of the predominantly customers been the server than are been of no change And the that to are installed migrating our from terms there's There's that of retention. on and from We remain blocked moment, we're of customers as quarter larger, end around customer typically we as X many accounts couple server at out. weeks. discussed complex no moment. In more that seeing really, end weeks support focus in possible. The of other renewals server that those base Cloud stronger about those support change what last we're a

data customers also that's in to to migrate FY account who continue those migrate And of most customers we the to choose and 'XX, our -- for hold factored So assumptions migrate into we will guidance. not continue that to center. prudent expect will

Yes.

Just some there. to color add

with basis I what to Joe has week-by-week it. happens. end-of-life think it's the to talked exactly of aspect financial hard an Obviously, predict moment,

a an that put ideal of sense and it lot still them test will in what they or we've So Cloud across to can't get there. center single take at customer into exists to if move on every looking server data or the

As who of what kind of are come that testament customers for center planning. and and of replacement Cloud, not we built churn the drop data we've valuable we how many of many our to had our for seen products these that months Joe a stickiness to is in customers to a does we referenced, there. And really haven't can't require move it's

can customers switch leave of so center, we and to I And that happen a few cross see the the it server out support minute and as to the of end last in next weeks. lot threshold expect data to

from question next Kash comes Goldman Your Sachs. Rangan from

X on a to the is it X opportunity, results. and XX% or I that from migration. to from big decelerated trend a a is year was so, the clearly. From line last has or the Cloud at QX Cloud so, chunk XX%, Congratulations trend the the you of quarters standpoint, last coming when over migration look big think But

that look what the a growth to data -- or you betting happen? wish cloud do could from for on either for server long XX%. Can Can then data be customers does the what really it you help the rarely product so that's that the there rate, are you going case, win, to It's Cloud maybe net the dichotomy how are or an the you you us If both underlying preference is product. Atlassian. maybe to make be a at center really am champion. wins understand but causing if continues sorry, So -- that has XX% a continues have company? decelerated I with wins term to does understand gone center, it companies what to on-prem generally look it and Because help Where does your customers? like for go your you or

Yes, is are and center cloud. cloud server here to center migration choosing not data Kash, What's Customers this our is over data Joe. both expectations. exceeded happening

expectations, was lower customers see don't cloud than our choosing on expansion. If over SMB. DC server migrations slightly expected, paid more driven was as any in so from one other. performance also as was by hand, And as it than well seat we other paid lower expansion we quarter, in it's versus been weakness that expected. particularly seat has mentioned this stronger there we the strength And the I earlier,

about our that's ultimately, fact to the customers stone So data get as where more and a experience we the we because customers that a experience, as it over most stepping more Atlassian, center add the looking feel really from the are to Scott best at discussed the call. and and good those earlier want Cloud value us chance the to gives customers in time, Cloud to secure receive

every conservative regulated to, we a on me German out would customer to to through which that consider kind the even is that, add whether medium-sized environments. end Let small, of I've a of businesses in talked there bank be scale more

decreasing. are customers Atlassian, me. telling is X them that happening, thousands And but time that they the at we look a need telling largest calling can some so me a we doing cases, users, we that we've migration the migrate of your a the the were case. And tens products plan of but product a at of in All the went Cloud the see ago, These to lot time to the takes Cloud of if days have chance or usage cases, either that if that, bit many replace of got other only are to in little future. customers is expand but we is in of future. not That's Cloud years and you with customers

So FedRAMP." and customers. customers our lot some thinking bought residency with to Cloud have of a data need are I that certification they or a pushing we're about say, Our us or "Oh,

comes from Your Scotiabank. next Nick from question Altmann

perhaps stronger you see stabilizing period think sort quarter, think spending for in wanted software? that guess coming Or it I I of anomaly how you the was just as free-to-pay to kind the an Awesome. stabilization the the in of when back to a over quarters? conversion. Do saw stabilize. you next because about you circle that

it factor. indicator it's it's and do because We question. a -- opportunity. are land think stabilizing the Today's important for durable tomorrow's Thanks see expansion success. customers We super of as stabilizing new a leading

So also I'd the job our of done lot that of that improve believe of free-to-paid a to and we say funnel and fundamentally driven. improve that the efficiency hit is efficiency to good rate we've a investing macro the on conversion.

so Atlassian the off doing on team there. phenomenal hats driving inside And who to a is job improvement

some overall, So of macro, is own absolutely feel And our we it of execution. is it some it's forward. durable moving

comes Barclays. question MacWilliams from next Your Ryan from

Great XX% to this Cloud see data centers driving of at point. migrations more than

in have mentioning just you've help customers them So and the unblocking Cloud. you've center rough move been letter, you the to shareholder been the how of data some a on Do largest idea cloud of these percentage you after move customers unblocked, recently center. to revenue center will willing today? of moving to consider be blocked would And if data the to data what

not we're able go to ahead, sorry, Ryan, -- going Scott. going to not Yes, to I'm --

Joe. okay, it's No,

ahead. go You

to going going provide most those complex. what to we're and was is. center are percentage our be primarily say not that on I able breakdown Ryan, today mind, customers largest to a in data blocked Yes. Keep

investing why in grow of it's you lot effort to data from making that. all integration, cloud. and residency, of to on. investment, imagine certifications, confident lot So we're app I a things migrations scalability, That's mentioned progress to can the continue the earlier, ability we're against center unblock to data going a

our continue migration drive the confident in ability years. very coming feel to And next to so we over

haven't give Mike you I'll the brief in, I've to asked just with over Ryan, it's this our partnership to is product And because here. long-term customers. any chime about questions today. -- a also you

the really so of big. for important, I more even think the that's biggest

they've our delivery the over years the impressed will by enterprise last that that the tell is of One of things X really us the in to customers X been cloud capabilities.

public a cloud map. road have We

partnership last long-term compliance hopefully those do different big data operate decade The terms we believe relationship long-term talk things going about with building delivery enterprise FedRAMP many building customers we a biggest strategic residency all about with decades, we continued the that those delivery, on the quarter, this on We what next we rates. time built road delivery when to we to the mentioned, It's biggest have. And delivery of you built long-term on working is And believing They the deliver. and trust. that across moving map of are that partnership geographies understand it's hit their Cloud business they sorts as XXX% of delivery, in. future. Scott on partnership, in of that over different all in They're talk is is say that. in that's that and that customers. So of those customers, our we're

building a our have has We of partnership over center in great with proportion continue from of of customers. that engineering that delivery obviously, today, that data strength but to terms hallmark our migrations those coming a time. been And we intend

question from Keith from Bachman BMO. comes next Your

Joe, you. guide. for to direct and I quarter solid the this on wanted Congratulations

which quarter rate. June us the extent without June to I And the the FY get implicitly 'XX wanted a server. proxy You've your expiration growth is is given thoughts to guidance for of what quarter, reasonable for -- post just

asking, there that growth words, is for estimates. rates that think should is we quarter anything anything the June pull implied for In data I'm other just considering and for as about So deadline of rate? 'XX, we're bunch cloud run the usual February about our 'XX think is center exit there going in I'm should not forward Or we revenues? but asking to a else that

talk talk individual bit little general, early 'XX. I'll FY the In specifically really about thanks. Yes, to too about lines. a It's

If to accelerate center data cloud migrations Cloud essentially center blockers. server growth data to you expect center, at we as continue migrations drop removing to data decelerate do zero rates on look deliver we and to there will to continue the as

rehash call terms being the a that. talked on of multiyear so we've journey, I a lot won't In about Cloud, the migrations

other keep to of a addition that, have drivers in number that model. in In we mind,

impacted of paid that the within talked been in has And than seat the bigger an factor model expansion headwinds last all, macro most been is First over even area by year. we've migrations the the existing that about. and customers biggest driver that's

Compass, of to and depend customers, opportunity upsell lot drivers on products our that with smaller impact, right value just And and talked in the the with to additions and made view super driver. out, And a Loom. over Then other enterprise new of is free-to-pay the now, to like Discovery ability So point outcomes. then with conversion space to cross-sell we're macro add our premium of price significant is we've Product growth opportunity to high-growth a particularly solid on going we've XXX,XXX I'd and the dynamic about, that increases existing lot additional like 'XX products your our products there's execution. another Jira our a

very a And feel to then support. essentially to multiyear to be healthy obviously, server we ability in Cloud. So revenue going the in get period X deliver zero over we in when weeks to the our confident is server growth and

course I'd and the it where how continue you directionally. But mindset So that's you next think the We'll about our now. that's that's for color -- is, how the would to I of give months. over I update X that's

from Your next Fatima question Boolani Citi. comes from

Management. just gears to to shift wanted I Jira Service

contributor like? of quantitative a hoping about Confluence But since in to monetization a of business? XX% from and about as large when size a become the clocking as ask base. your the to more X.X color looks I to customers expect should the launch, revenue Jira about as arrival some how curve XX,XXX years was to X, You're we JSM And

that. IT the take management The excited JSM look, we incredibly the service broadly, all and market business. management both about service in -- within service for functions of remain terms management enterprise and can I

that certainly combination strength the really on It we customers, about in Jira a It's job I It's fastest has of for alongside lot decade that, broad at market. up growth is it catch-up. other your potential a noting to we do our the also and DevOps we catch done that to continue and have. grow hard businesses plan to think our Agile the always continuing being that a of to market that see when worth business our we've the our markets. good have. It's software got in

which connection them see operating to as blending because become numbers Scott and see you're of migrating to in as buy of market and it switch important. mentioned strategic our but work is who on increasing of across organization. Increasingly, software off we that is Jira they're are that always alongside and management importantly, broader to outs, connection developers this and people core technology some So expensive to Management, incredibly going service advantage the more of see delivering legacy and Service comforting buying the a their connectivity and tools,

ITSM adjacent think which broadly, our spaces beforehand. and the two some customer and very of place. top and strategically Service seen to long-term is competitive quarter as the why last on the bullish the this So color I also are both of on ESM that demonstrated to and have positioning and Jira may Scott of first Management we you because the our add monetization quarter quarter But markets, there connectivity of because we're in that? want we've

we now, moved to recognized key have being unique the right? for analysts, from something can wick is And travel that switcher with valley -- with IT very products And we we've been for Atlassian's company is as our teams recognized started ITSM Software, who a that thing that only everyone started last out and that we And logistics only single large that remind but the market. And in and possible by over not deliver every Jira which to stories, to to -- increasingly want teams XXXX the just right together being closely been the really a JSM. development provide our work the in we with but actually Forrester's were score strategy. again XX-year like goes and the switched see in been there JSM day. one got company that we've this. we've a things again who've it other comforting We all recognized leader a is agents we customer that's with, who I market it's We it that Yes. a few of large we so in were this wasn't who ESM really lottery while space, Wave, a for provider legacy switched vendor. this this and -- that competitors in received doing see by months only of we away and highest where

We're where strength well -- we're we are space That's of started. us. in industry we've So enterprise SMB space. really recognizing as been analysts well, seeing the the strong increasingly kind as in historically as

comes question next Your Wolfe from Alex Research. Zukin from

be I about salespeople start on maybe activity, focus continue and on of the basis a upsell. little that migration to in shift want to and COGS elevated and unlock migration. post to COGS bit cross-sell, think kind we understanding towards focused OpEx the If cloud unlock

kind that quarters? opportunity As think right you've you've portfolio OpEx go the to the the entire kind way R&D next get as of putting we into side we margin this the costs doing into last the been platform as couple What's that as on even and of about well operating the years. been over as incremental the few of --

Thanks, Joe. Yes. This is Alex.

touch me of around growth core from in Cloud and lapping And see our in view we our ongoing OpEx. things management with then and factors. benefit Those the are two in. And in expenses. intelligence, like enterprise on and HX the Let thing by the It's we're One restructuring OpEx we really cost strategic the sort HX, more an directly the I'll from and question year We'll this perspective. OpEx core is accelerate rates investments -- last see bonus other of start of HX driven that artificial priorities. ITSM and points markets received other leverage growth and lower and is we're the growth mechanical. on is your

overall OpEx talk about me management. philosophy our heard on You've

and and the prioritization We're resource allocation gain focus scale. dollar efficiencies on making calls to maximizing on continue on return We operational as driving focused disciplined spent. we every

other I'd of drive leverage side time, opportunity be significant Cloud over we on And to keep potential in point another that the investments to will reallocate that mind it. factor the that's enterprise of other say think investment about to future capability, growth. that long-term will other multiyear and will is in the areas immediate the have not for in the us we as necessarily

Cloud gross have mix. our gross obviously In margin, licensing gross margin gross track business. in lower revenue than will structurally terms of the general, with margin margins

optimize have that on the we pressure to will same mix bigger improvement time, of is our put we're So on usage investments At a we're to year-over-year the overall on that make drive post through right, engineering and big to the becomes improve to blended. consistent engagement. margins deployment you're drive mindset great sale support investments as gross year activity cloud gross making the again, cloud to side and revenue, margins going over and so -- infrastructure on

And time, going we're more and efficient story. then be and that of part to to become over that that opportunity have will an redeploy

that's cloud thinking OpEx general both as the how well the we're So side framework side as going the about on COGS forward.

Alex, an large philosophically, a from color organizations view. engineering SAP-type bit maybe costs. optimize all working in any small to I add of continuing company can engineering engineering fast point just be Look, I or think of world-class should on

more from opportunities and things geographically as save see effectively all platform that's other As residency we running as to the are you -- over you're money time. there now diverse, are incredibly Cloud large efficiently data improvements running things, by an

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is Yes. This Joe. Thanks, Ari.

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

Thanks, We the you're everyone, joining really, today the here. appreciate world. joining really wherever for from call you being

at we analysis. at 'XX and have Las and thoughtful appreciate a*s of A in a April. continued seeing of to also Vegas Atlassian forward And you, end always, As look the hopefully, weekend. of note, questions support all with Team kick that, small