Atlassian Corporation PLC at Morgan Stanley Technology, Media & Telecom Conference

Mar 03, 2020 PM UTC 查看原文
TEAM - Atlassian Corporation PLC
Atlassian Corporation PLC at Morgan Stanley Technology, Media & Telecom Conference
Mar 03, 2020 / 04:00PM GMT 

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Corporate Participants
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   *  Jay Simons
      Atlassian Corporation Plc - President
   *  Robert Chatwani
      Atlassian Corporation Plc - CMO

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Conference Call Participants
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   *  Keith Weiss
      Morgan Stanley, Research Division - Equity Analyst

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Presentation
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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [1]
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 Excellent. Thank you, everyone, for joining us this morning. My name is Keith Weiss. I run software research in the U.S. for Morgan Stanley. Really pleased to have with us from Atlassian this morning Jay Simons, President; and Robert Chatwani, CMO.

 Before we get started with the conversation, I do have to read disclosures. Please note that all important holdings, including personal holdings disclosures and Morgan Stanley disclosures, appear on the Morgan Stanley public website at www.morganstanleyresearchdisclosures, or at the registration desk. I forgot the backslash, but you guys got it. Thank you for joining us.

 So unfortunately, this is going to be your last conference speaking to us as Atlassian President after 12 years, a very successful 12 years at the company.

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Questions and Answers
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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [1]
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 So a couple of questions. One, just to address this sort of off the bat, can you talk to us about kind of why now? So you've had a really nice run. But I guess, importantly, on a forward-looking basis, who's going to be sort of taking over your roles and responsibilities? Sort of how you guys are going to fill the executive gap once you leave?

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 Jay Simons,  Atlassian Corporation Plc - President   [2]
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 Maybe I'll take the second question first. Anybody see the HBO show, Succession?

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [3]
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 Yes.

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 Jay Simons,  Atlassian Corporation Plc - President   [4]
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 It won't be like that. And in truth, the answer to both questions is the same, that the leadership team underneath me and in the company is both incredibly tenured and just incredible. So after 12 years, I felt like the company, we've done a lot of really important foundation building, and the company is in a really incredible spot with great leadership to continue building forward.

 And so it -- after 12 years here and 12 years at the company prior to Atlassian, I was ready to go to Disneyland, finally. And then COVID-19 hit and squashed those plans. But that's the answer.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [5]
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 The lines are really [clear now]. Excellent. And then, Robert, maybe you could give us a little bit of an introduction. How long have you been with Atlassian? And kind of what sort of your significant priorities have been over the past year and what you're looking to do over the next year.

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 Robert Chatwani,  Atlassian Corporation Plc - CMO   [6]
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 Sure. Great to be here. This is my third year with Atlassian. My background actually is not in the software space, it's in consumer e-commerce. The longest was at eBay. So I joined the company when there were just a few thousand people and left when we're close to 35,000. And really, the passion that I have for Atlassian is, one, the business model; and two, where we are in our growth curve. And so, really, what my team is focused on and what I'm focused on is bringing sort of the engines of e-commerce into the Atlassian business model. Much of that has already been here, but as we think about scaling the company and expanding our reach for customers, sort of the core nuts and bolts of efficiency and growth and scalability is what we're focused on.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [7]
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 Got it. Excellent. So Jay, I actually created a theme for this presentation since this is your last one, around what I think is -- make me excited about Atlassian. We got back on board with the stock earlier. And from my perspective, it's not a simple story, but it's an easy story that is really about the Ps and Qs. Atlassian has done a tremendous job of growing out the customer base. That's your Q side of the equation. I think there's a lot of opportunity to continue there. And on the P side of the equation, there's just a lot of product that you can sell into those existing customers. And you could also take pricing against those customers. So it's really easy to sort of sketch out how the Ps and Qs work for Atlassian on a going-forward basis. Every question is about digging into those Ps and Qs.

 So we're going to start on the Q side of the equation and really sort of the market opportunity from the customer perspective. You guys have talked about targeting Fortune 500,000, not Fortune 500. From my perspective, one of the biggest assets and proof points of your success has been how well you've been all expand the customer base. I think last quarter, you talked about approximately 160,000 customers. Can you tell us a little bit about the profile of that customer base today? Who represents sort of the typical Atlassian customer, if there is one? And where are the green spaces? How do you take that 160,000 to 500,000 over time?

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 Jay Simons,  Atlassian Corporation Plc - President   [8]
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 It's maybe the most important thing to understand about the company. The shape of the customer base is really varied and diverse. And so we talk about the Fortune 500,000 partners that we're in, investors and people external to the company around the size of the TAM for us. It is not just G2K and Fortune 500 companies and big enterprises; it is a really wide range of small to very, very big.

 And I think we serve customers in all industries of all shapes and sizes in 100 -- I've lost count, 120-plus countries. And our products basically serve a really critical need around team productivity and team collaboration, supporting a bunch of very critical workflows for companies. One of the secular trends that's driven a lot of our growth is just this notion that companies are becoming more technology-oriented, and that software's eating the world and most companies are beginning to be software companies. And so as more brick-and-mortar companies, the smaller companies in-source their own technology strategy, the toolkit that they'll give those teams of people that they're putting in charge of driving the digital strategy for their company will include one or all of Atlassian products. And that's sort of a core landing spot for us in any company, is that. You're going to build some technology project or drive some technology strategy. There's a lot of moving parts to that for the teams involved. And our products become the bedrock that supports the type of operation.

 Maybe I'll give one anecdote just for how diverse the customer base is. I was in Japan when -- during my last trip in Japan, we had a press briefing where it's typical to have a Japanese translator. And so we met with the Japanese translator before, and she said, "Hey, you don't need to really explain the products to me. I use Jira to run my translation business." And I'm like, "Oh, what do you mean?" And she said, "Oh, yes, I've got a handful of translators, and all of our translation projects are in Jira. Here, let me show you." And then she opened her laptop and gave me a demo of one of our products, Jira, which is this collaborative project-tracking system. And that same software is used by Boeing and NASA and your company and like massive organizations to do effectively the same thing, track collaborative work. And then a weird twist, I told that story to the press that she then had to translate about herself, which is pretty funny.

 But so I think all shapes and sizes and just driving a lot of really critical collaborative workflow for companies all around the world. And I think we should probably talk about the Fortune 1 million because there are at least 1 million companies in the world that have annual turnover of more than $10 million. And so whichever way you slice it, just the TAM is significant. We believe that every company in the world should use one or more of our products every day.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [9]
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 Got it. Got it. So Robert, similar question to you but from like a marketing perspective and a targeting perspective. Atlassian has been very successful in sort of being virally adopted, has been very well known by developers across the world. How do you sort of target those next, what's a good count? 340,000 to get to that 500,000 target? What's the marketing strategy to go out and get Atlassian known in places that it's not?

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 Robert Chatwani,  Atlassian Corporation Plc - CMO   [10]
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 One way to think about it is we are going to continue to do what we do extraordinarily well and do that even better. And then we're also going to start engaging customers at more senior levels. And so looking at the opportunity from sort of 2 ends of the spectrum. On the first, it's -- if you look at some of the guiding principles that have driven companies like Amazon, eBay, Netflix: efficient traffic acquisition, both organic and paid, really optimizing the funnel and thinking about the metrics of how we continue to improve the onboarding experience, the activation experience, the engagement and personalization, we are continuously optimizing what Atlassian is already really good at, and effectively setting ourselves up for that next chapter of growth. Part of that, by the way, is reaching more customers. And so like Trello and like Bitbucket, which have had 3 editions of those products, we're also looking at ways to reach new geographies and new audiences by making our products even more accessible. So that's a sort of high efficient, self-serve business, which will continue to scale and the technology that supports that.

 On the other end of the spectrum, we have -- we serve Fortune 500 user base globally, Global 2000, and that is a growing part of our business, both in terms of the number of end users within those companies using our products and also the senior-level engagement that we have with decision-makers who are deploying them more enterprise-wide.

 And so over the last 12 to 24 months, we've done a lot more around events. We've done a lot more around building those deeper relationships with executives through direct interactions at our conferences. And we're finding that to be a really effective mechanism to, one, demonstrate the value that Atlassian is already creating for those companies, creating that visibility. But secondly, starting to get more enterprise-wide deployments.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [11]
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 Got it. Jay, how has the role of partners changed in that distribution methodology and sort of that customer outreach as Atlassian scaled and as you guys passed through the $1 billion mark.

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 Jay Simons,  Atlassian Corporation Plc - President   [12]
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 They've continued to grow and I think be a more important contributor to landing customers in different geographies and expanding them. The indirect partner channel, we started about a decade ago. And just to back up a little bit, when I described the model, I talked about there's 3 really important components that drive the business model that really work in concert. One is the high-velocity flywheel, this acquisition engine that allows us to land inside of companies of all shapes and sizes really efficiently. The second is this indirect partner channel that we started to augment that flywheel and serve both acquisition and expansion needs the flywheel basically wouldn't address. And largely, the channel indexes in non-English-speaking geographies where they might be less comfortable with a try-buy model online. And then the channel also over-indexes in the large enterprise segment just because they're all service providers and have some technical consulting expertise that they can apply to the really big canvas that large enterprises offer them.

 And then -- so that's point number two of the model. And the third part of the model is this strategic direct selling motion that largely focuses on the enterprise segment, the large enterprise segment in concert with that channel because in almost every case, there is some delivery or consulting or customization opportunity that the customer themselves might not have the capacity or expertise to do, and they'll want somebody that has the technical background and an acumen to say, okay, I'm going to move you from your development methodology from waterfall to Agile, or I'm going to implement pretty broad IT service management platform that's going to support a bunch of service collaboration opportunity around your business outside of IT, or I'm going to modernize your incident management life cycle platform and make sure that now, you can become a software company and a service-oriented company, you're equipped with all the right technology and process and approach to respond to incidents as well as a Facebook or a Google. If you're a brick-and-mortar company in the Midwest or something, you want basically the same capability that the leading-edge software companies do and how they operate, and that's basically what our technology set brings to any company. And so the channel is a really important contributor to both finding customers, but more importantly, helping us expand them with all the different ways that we can expand them.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [13]
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 Got it. Robert, in terms of kind of the tip of the spear, for Atlassian, traditionally, it had been Jira and Confluence. Those are 2 headline products that have brought new customers into the ecosystem for Atlassian, and then you can expand from there. Is that still the case today? Or has sort of the landing products, if you will, expanded out to a broader set of products?

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 Robert Chatwani,  Atlassian Corporation Plc - CMO   [14]
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 Yes, it's really interesting. When you look at the portfolio of products, we lean in heaviest on Jira and Trello as sort of the primary vectors to land customers into the company, and I'll talk about those in a second. But what we also see is products like Confluence and Jira Service Desk, although we don't go out and market and position those as land products, are seeing a significant percentage of new-to-new customers landing in those products. So Jira Service Desk is a good example. 15% or 16% of our new customers in cloud are first-time Atlassian customers landing with Jira Service Desk. Confluence -- the Confluence number is even higher than that.

 And so, one, we think that demonstrates high potential for future land opportunities. But our land focus is heavily on Jira and Trello. Now with those 2 land products, in Jira, in particular, what we see is growth in nontechnical team members who are using those products. So we did a survey, for example, for Jira Software and Jira Service Desk, and we found that 42% of Jira Service Desk end users are nontechnical. And so what that tells us, it's exactly what we hear from customers, which is these applications are being used by more types of users across more types of teams within companies. And so we get excited about that because our mission is to unleash the potential of every team, and we're starting to see how teams across functions are starting to come together using Atlassian products as sort of the backbone of collaboration across the company.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [15]
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 Got it. Excellent. Shifting gears a little bit onto more of the P side of the equation, if you will. When I just run the back-of-the-envelope math, I take sort of your total revenues divided by the total number of customers. I come to just under about $9,000 per customer per year in terms of overall revenues, which doesn't seem like a lot. It seems like a pretty low starting point from which to grow. Our thesis is that we think that, basically, $8,500, if you go to $17,000 per customer over time. And there's a lot of levers that you guys have for pushing up that sort of revenue per customer. One is just -- and you've mentioned it before, is expansion within the existing customers, getting more users within existing customers. The key kind of landing point people see for Atlassian is that we'd like to develop our IT operations community. I think you've talked to about 10 million potential users within -- or 10 million current users within that community, and potential of going to 100 million, right? How do you get there? Sort of what's the path to getting more IT guys, more developers, kind of on the platform on a going-forward basis? What makes that 100 million a realistic target for Atlassian?

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 Jay Simons,  Atlassian Corporation Plc - President   [16]
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 Well, I mean, I think the 100 million goal really encompasses not just technical users, but lots of line of business users. And supporting the point that Robert made that even in one of our more technical products, 42% of users of that very technical products are outside of who they would identify as a technology team. So they're in line of business. They may be working with the technology teams on the technology initiative. They're in marketing, service, support, sales. So I think when you get to -- there are very few enterprise software franchises that can get to 100 million monthly active users, and we believe we've got the potential. In part, because of the diversity and just variety of users that we can support inside of any business.

 But you get there basically the old-fashioned way. We're building collaboration software that has some natural network effects in it, and so one user begets another user, one team begets another team. That sort of usage expansion path just for a single product is one way we expand. We expand with a pretty wide portfolio that complements the initial land product that companies usually start with, and so we've got multiple ways to sell and expand with products be through whatever.

 We have a really strong and enviable marketplace of third-party applications and extensions. And so there's this whole economy and ecosystem that's building value on top of our platforms. That's another way that we expand with customers, and we participate in some of the economics of developers that are building on top of our platform. So I think you put all those things together, and that's how we're focused on expanding the existing customer base.

 In addition to that, the lifeblood of our business is customer acquisition. So we talk every quarter about adding a net increment of somewhere between 5,000 and 7,000 customers in any given quarter. And those customers become the fuel for future growth.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [17]
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 Excellent. Digging down a little into the developer side of the equation, in particular, sort of the code, build, ship side of the portfolio. A lot of recent acquisitions, Opsgenie, StatusPage, AgileCraft, have all been expanding out the tool set for developers. How much coverage of that kind of developer tool chain do you guys have today? How much further do you kind of want to expand it in terms of sort of covering that entire tool chain?

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 Jay Simons,  Atlassian Corporation Plc - President   [18]
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 I think the pieces that we cover are -- think of us as covering the anchor tenants in the mall. And so I think we don't need to own -- it's kind of it's been a long time since I've been in a mall -- we don't need to own the little knick knack shops, whatever the equivalence of those are. But when you go to a mall, you're going to go into the anchor tenant store, and I think those are the pieces that we support across those collaborative workflows. And so we think about -- we are -- to back up, if you're unfamiliar with us, I mean we are a communication and collaboration vendor. And so like our flagship product, Jira, is a collaborative project tracking system. That is the most important to anchor tenant in almost any collaborative workflow. It keeps track of the work and the dependencies, and the people and the deadlines and sort of all the inter-operation of a really complex or simple project, it can do simple projects, too. That's sort of the backbone. And there's going to be a number of things that feed into that, that we don't necessarily own. But oftentimes, Jira and our products are the most integrated of kind of the non-anchor tenants or the non kind of big-box stores in the mall. And that's the right place to be. And we provide kind of really rich platforms as much as we do sort of simple products.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [19]
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 Got it. And so Robert, from like a market perspective, you talked to some vendors out there, and like, well, Microsoft is trying to kind of consolidate that pool. It sounds like your approach to the market's more so to be kind of the center point of where all the integrations of the best-of-breed solutions are going to be taking place. Am I thinking about that right of how you look at the market?

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 Robert Chatwani,  Atlassian Corporation Plc - CMO   [20]
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 Yes, we don't approach our product portfolio with a suite, I guess, mentality and mindset. What we know -- especially when we talk about developers, but in general, with the consumerization of IT and software applications, we are strong believers in best-of-breed. And so what that means for us is 2 things. First, interoperability. And so when we look at Microsoft, we see they're a partner of ours. We have deep integrations into their tool chain, Microsoft Teams, Microsoft Office, GitHub, Azure. And it's really important for us is that interoperability.

 At the same time, our customers tell us that at times, especially for larger enterprises, the explosion of products creates complexity. And so our focus, in addition to interoperability, is making sure that our products work really, really well together. And so when we think about, for example, an acquisition, a product like Opsgenie, first priority is to migrate that under the Atlassian platform, ensure that we have a unified identity and really start harnessing the power of Opsgenie working in a really integrated way with Jira software. So we want our products to integrate extraordinarily well together and simultaneously ensure that we provide customers with choice.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [21]
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 Got it. And maybe you could give us a kind of status update on where we are on that progression with the recent acquisitions, Opsgenie, StatusPage and AgileCraft. Where are we in terms of the integration with the portfolio? And how aggressively have you started kind of marketing that into the existing customer base?

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 Robert Chatwani,  Atlassian Corporation Plc - CMO   [22]
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 So we are either on track or ahead of plan in terms of our integration. It's one of the strongest value propositions we have that we sell to customers, is that our products are inherently and naturally well integrated together. It's what helps us win deals. If you take Opsgenie and our IT operations and incident management product, time and time again, it's the #1 reason why we beat out competitors is because of the deep integration into the existing tool chain.

 So we are, in most cases, ahead of all plans on integration. What's interesting is, historically, Atlassian has been a very product-centric company, not necessarily a solution-centric company. That has served us well, and it will continue to serve us well. But if you go to the atlassian.com home page, just this last week, we've slightly evolved some of the positioning of our products to show how they work better together. And so I think we're still at the very early stages of marketing the products this way. What we will never do is let complexity get in the way of getting customers in our products fast. And so if they want to try 1 product, 2 products, 3 products, we'll do everything we can to make sure that those barriers are low. But we are seeing a lot of resonance of demonstrating how these products can work better together, and we're going to continue in testing and learning our marketing to see how responsive the market is. But so far, we've been really happy.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [23]
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 Got it. Jay, if we think about the broader market for IT professionals and your mall analogy, what are other kind of anchor stores? Or what are other services or parts of the broader IT services that you think would make sense for Atlassian to provide versus what's in the portfolio today?

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 Jay Simons,  Atlassian Corporation Plc - President   [24]
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 I think we have good coverage. I mean, if you think about just the teams that are involved in technology transformation, and that's sort of like the kind of broad life cycle that I think we're deeply embedded in and that we're foundational for. So it begins with teams that are working on some strategy or technology development. And that's really hard. And the pieces that -- the really important pieces that we support there are Jira for collaborative project management, Confluence for collaborative content development. And so -- and a technology project that begins with a business plan or specification, a lot of collaborative work that people are writing and creating together before a developer writes a line of code, that's a really important P.

 And then as you move through into IT and operation, the technology that you built, StatusPage supports incident communication out to people that are affected with downtime. Opsgenie supports modern incident response, alerting, rostering and connection back into systems like Jira that are managing the distributed and fragmented collaborative work that involves in troubleshooting an issue and responding to an issue.

 If you go back to Confluence, which was that collaborative content piece, the artifacts that are involved in modern incident response are things like run books and post-mortem documentation. So you make sure, man, when this particular service is out, what's the script that we need to follow to troubleshoot it and the systems that we need to Splunk into and the people that are experts in those particular systems. That's documented somewhere in a place that needs to be alive. It needs to be a living document that's updated by people in the process of responding to that incident.

 So I would say, if you look at the -- that life cycle of building a piece of technology, running and operating and supporting a piece of technology, responding and looping all the way back to fixing the technology in the first place and so you don't face more risk as for future issues, the big piece is basically we support, which is why I think you -- we're growing the way we're growing.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [25]
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 Okay. Got it. So shifting gears a little bit to the broader opportunity outside of the IT department. Question number one, we've talked about some of the numbers in terms of what percentage of the users are working outside of technical teams. Does the portfolio have to be further built out there? Do you need to start to get domain expertise in some of those areas that you're trying to automate the workflows like HR or service -- customer service desk? Or could it just be built upon the Jira platform itself?

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 Jay Simons,  Atlassian Corporation Plc - President   [26]
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 I think it's built on top -- today, I mean it's built on top of the platform as it exists, and we're supporting all those teams today. In some cases, we're supporting them just because the products are so mutantly flexible and already built for nontechnical use cases and nontechnical users. And in addition to that, they've got this extensibility model that allows both the customer-developer or a third-party developer to fill a hole or a gap in the technology from a feature perspective. And so I think that's why we're well-equipped to support a few -- if you go to our user conference, you'll bump into somebody in finance or somebody in marketing or somebody in support and you'll say, "What are you using this for?" And it will be some collaborative workflow that's germane to that particular function or department. And in some cases, you'll bump into customers who are supporting the technology strategy that I talked about before, that life cycle. Then in many cases, in addition to that, we've spread across the organization and just supporting really critical deep collaborative work, oftentimes, replacing crude uses of Microsoft Office and e-mail which stitches a lot of collaborative workflow together just because it's what people know and are used to, but it is not the most effective way to drive team productivity.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [27]
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 Got it. Robert, let me -- I think one of the things that investors struggle a little bit is understanding the size of the market opportunity outside of IT versus the size of the market opportunity inside of IT. Can you help us with your perspective there in terms of how you guys think about that market opportunity?

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 Robert Chatwani,  Atlassian Corporation Plc - CMO   [28]
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 Sure. Well, I get excited about that. It's one of the reasons I love what I do, is I feel that we are at the earliest stage of this growth curve around companies adopting teamwork practices and collaboration. So when we look at the market, give or take, there's about 25 million software developers and software engineers globally. You go one step outside of that, there's about 100 million technology team members. Those are individuals who interface with software engineering teams: product managers, R&D, program managers, data scientists. You zoom out even more, there's about 800 million knowledge workers globally. And so when we look at the opportunity for how to break down the silos within organizations, certainly, our core is in technology and IT teams where customers are naturally pulling us in the direction of our products being used by all the different types of teams that integrate with them.

 I mean I'll share one of my favorite stories. We have so many great customer stories. Eli Lilly, they are one of the leaders in drug delivery for insulin and for diabetic patients. And one of our champions inside of Lilly has done a remarkable job -- remarkably young, came over from Johnson & Johnson and moved to Indianapolis. And the challenge he saw is that there's disparate teams within Lilly, all trying to work and collaborate on a single problem, which is they're developing a mobile application which governs the amount of drug delivery from an insulin pen that is Bluetooth-enabled. And so now, you have a mobile app that's actually defining the drug delivery tied to your glucose meter. And so you have hardware, software, mobile application that all need to work together, over a dozen different teams that need to collaborate within Lilly to make that happen.

 And Jay mentioned sort of the configurability of our products. It turns out that Jira is one of the only products in the market that can help do 2 things, which is connect to all of these teams for a common workflow; and second, meet the FDA's strict requirements for R&D because the principles that define how a mobile app gets developed are the same exact principles that define how to develop a medical device. It's a mobile app; the FDA call it a medical device.

 And he has deployed this across that business unit within Lilly. And it's been so successful that he's been actually appointed to the FDA advisory board on configuring Atlassian tools for regulated industries. And so this is a remarkable example of a product like Jira really serving as a backbone across compliance, legal, R&D, pharma, hardware, all these different teams coming together. And we see this story time and time again across our customer base.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [29]
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 Great. Jay, I think one of the key investor debates on Atlassian since the IPO has always been -- the question of, at some point, are they going to have to build out a traditional enterprise sales force? And as you guys sort of go outside the IT department and when I hear stories like that, about Eli Lilly, and we talked a little bit about this with partners, as you get into more strategic deployments, more involved deployments, it -- I think it opens up that question again. When you acquire assets like Jira Align, it brings up that topic again. What's the kind of current answer in terms of will Atlassian be building out a traditional enterprise sales force to support these needs?

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 Jay Simons,  Atlassian Corporation Plc - President   [30]
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 Yes. I mean the answer is the same one that we've given. I mean, we have a sales force. I think the sales force, in our case, will always be smaller than maybe we're accustomed to because we have those 2 other acquisition expansion levers that are really well developed, that high-velocity acquisition engine and expansion engine.

 And we built products like -- take a step back. One of the reasons that companies can only scale their go-to-market models with an enterprise sales organization is because that's what they've started, and they never built an indirect channel. They never built products to be self-service. They never built an e-commerce vehicle for customers to buy on their own. We built all those things 15-plus years ago. And then we're augmenting that -- or we've augmented that with a strategic direct enterprise selling motion for really large enterprise opportunities. But I think it's -- that's complementing a bunch of things that it doesn't need to replace. It needs to augment it. And so you should expect our direct selling motion relative to a company like ServiceNow, as an example, if you were to compare us, we're just going to have a much smaller direct selling footprint because we have a really capable, stable, global indirect selling channel and this high-velocity flywheel that acquires customers in a way that a company like ServiceNow just can't. Because the product, there's no way for you to try the product on your own. Not to pick on them, but you just can't do it.

 And so I think we've built products that a company as big as yours can try and buy on their own if they want to, and they're going to have a bunch of care and feeding from both an indirect channel and from us to support the pretty big expansion opportunity that a company of your size presents.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [31]
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 Got it. I want to touch on sort of the cloud, not migration, but it is sort of the new customer acquisitions are all coming in through the cloud. How does that -- is that -- any change? Or maybe you can make easier your job in terms of marketing solution, cross-marketing across the various solutions? How do that -- from a go-to-market perspective, how does cloud kind of change the game for you guys?

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 Robert Chatwani,  Atlassian Corporation Plc - CMO   [32]
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 Well, one thing that's really fascinating is the thrust and the driver of our business has been champions within companies who then take our products and help expand them or they move companies and bring their expertise around Atlassian products with them. This will -- this is a sort of very fundamental shift that's happened in our business, but an important one. In an on-prem world, with data center and server products, we get a lot of information about our billing contact and our admin. In a cloud world, the dynamic is completely different. Now we go to not only having great information about the person who's -- the billing contact and the admin who's deploying the product, but every single end user. And one, that gives us a treasure trove of behavioral data to help us make better products. But secondly, we start to understand what are the different roles across the team? What are the interaction points between departments and functions? And then how can we leverage that to create better opportunities for us to expand the Atlassian footprint? And we're very judicious and thoughtful and careful about this. I don't even call it marketing. It's, how do we build a great product and provide a service?

 And so a really simple example that's been extremely powerful for us is if we see a team or an end user, including links to Google Docs within their Jira instance, and we see that repeatedly, we think that that's a great opportunity for us to introduce Confluence because that's a signal to us that documentation and links to pages that are being shared is something that they're using Jira as a vehicle to do.

 Now we integrate with G Suite, no problem at all, but we'll introduce a little feature there that says, "Hey, let us show you Confluence. Click here for a free trial." And what we find is those are just small nudges, but across the user base of millions and millions of end users now in cloud, we have this whole new expansion vector. And that's proving to be a really powerful growth engine.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [33]
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 I want to shift gears a little bit to talk about the competitive environment. You brought up ServiceNow. So perhaps we can start there. ServiceNow is just one of a lot of companies that are talking a lot more about changing the way people work, becoming more collaborative, helping to automate workflows, both inside the IT department and outside the IT department. So ServiceNow, from a public company standpoint, smart sheets and project management, a host of private vendors who have similar types of stories. Can you talk to us about who do you guys actually see from a competitive environment? Are you running up against ServiceNow in the field? Are you running against other vendors more often?

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 Jay Simons,  Atlassian Corporation Plc - President   [34]
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 I mean I think the biggest thing that we are displacing is what I mentioned earlier, which is just crude, inefficient uses of Office and e-mail and a bunch of collaborative workflows that aren't supported by modern technology. We're going to bump up against lots of the companies that you mentioned in different ways. I think for ServiceNow, in particular, we have, in Jira Service Desk, a product that supports IT service management. And in the G2K where they're serving, we may go head-to-head on kind of like the big canonical IT help desk use case. I think even in cases where they win that, oftentimes, the customer is co-deploying Jira Service Desk for a whole host of other service collaborative applications that would be too expensive to deploy in ServiceNow.

 And so I think if you look at the price points of those 2 products, there's a lot of disparity between them. If you look at the simplicity the 2 products, just in terms of usability and then how quickly you can stamp out applications. You can do that just a lot faster on Jira Service Desk, which is typically why it's selected in cases alongside of Jira Service Desk -- or alongside ServiceNow.

 So I think it's -- the collaboration landscape is always kind of a dog's breakfast of a bunch of different things that from 30,000 feet look and smell similar, but I think it's really important to understand where they get applied and what they're really used for. And I'd just go back to our landing vector where we really land inside of companies, is supporting the technology team transformation. And I think we are -- our products tend to be kind of the Kleenex of the category, where if you're -- if you have a technical team that's responsible for driving some technology strategy collaboratively inside of the organization, that team is going to say, "We need Atlassian here to do this."

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [35]
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 Got it. Last up that I wanted to make sure we cover in the last 2 minutes here is pricing. Obviously, an important component of Ps and Qs. You guys have more aggressively pulled the lever on pricing over the past couple of years and been pushing through actual price increases. How do you think about sort of the current gap between sort of customer value and where your current pricing is? Or maybe also sort of current pricing versus the competitor pricing? How much more room is there under that kind of pricing umbrella for you guys to get more aggressive there?

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 Jay Simons,  Atlassian Corporation Plc - President   [36]
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 Well, I would say a couple of things. Like one, I just think if you look at us relative to any alternative, we are significantly underpriced, and that's part of the strategy. We want the customer to feel like they're always on their side of the value exchange. And that's part of our -- has been part of our strategy and will continue to be part of our pricing philosophy.

 In terms of price changes, I think what we've done is we've gotten into more of a regular cadence of changing price. In some cases, it's not just universally an increase. In some cases, prices will go up; in some tiers, it'll stay the same; in some tiers, they'll go down; in some products, they won't change; in some products, they will. At the same time that we are increasing pricing, in many cases, we're decreasing pricing, introducing a free tier in cloud. So there's lots of puts and takes. What we did prior to a couple of years ago is we would save up a bunch of changes, and then every 3 or 4 years, implement them. What we found is in that particular case, some of the changes were more pronounced. Like if you look at even the increasing that we do, it's really nominal. It's sort of like in the 10% to 15% range on top of a product that is already priced well below $10,000. And so the relative increase for a customer is really small.

 And at the same time, like if you look at how much we spend on R&D, the velocity of innovation and new features and improvements that we're adding to the products, again, favors the customer value exchange, where they feel like they're getting a lot more than what they're paying for, which is a good spot to be.

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 Keith Weiss,  Morgan Stanley, Research Division - Equity Analyst   [37]
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 Excellent. Unfortunately, that takes us to the end of our allotted time slot. But Jay, Robert, thank you very much for joining us.

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 Jay Simons,  Atlassian Corporation Plc - President   [38]
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 Yes. Thank you, Keith. Thanks, everybody.

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 Robert Chatwani,  Atlassian Corporation Plc - CMO   [39]
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 Thank you.




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