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ATLASSIANCORPORATIONPLCINDEXTOCONSOLIDATEDFINANCIALSTATEMENTS
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AsfiledwiththeSecuritiesandExchangeCommissiononNovember9,2015.
RegistrationNo.333-
UNITEDSTATES
SECURITIESANDEXCHANGECOMMISSION
WASHINGTON,D.C.20549
FORMF-1
REGISTRATIONSTATEMENT
UNDER
THESECURITIESACTOF1933
AtlassianCorporationPlc
(ExactNameofRegistrantasSpecifiedinItsCharter)
UnitedKingdom
(StateorOtherJurisdictionof
IncorporationorOrganization)
7372
(PrimaryStandardIndustrial
ClassificationCodeNumber)
98-1258743
(I.R.S.Employer
IdentificationNumber)
ExchangeHouse
PrimroseStreet
LondonEC2A2EG
c/oHerbertSmithFreehillsLLP
415.701.1110
(Address,IncludingZipCode,andTelephoneNumber,Including
AreaCode,ofRegistrant'sPrincipalExecutiveOffices)
TomKennedy
ChiefLegalOfficer
Atlassian,Inc.
1098HarrisonStreet
SanFrancisco,California94103
415.701.1110
(Name,address,includingzipcode,andtelephonenumber,including
areacode,ofagentforservice)
Copiesto:
AnthonyJ.McCusker
RichardA.Kline
An-YenE.Hu
GoodwinProcterLLP
135CommonwealthDrive
MenloPark,California94025
650.752.3100
TomKennedy
ChiefLegalOfficer
AtlassianCorporationPlc
1098HarrisonStreet
SanFrancisco,California94103415.701.1110
DavidPeinsipp
AndrewS.Williamson
EricC.Jensen
CooleyLLP
101CaliforniaStreet,5 Floor
SanFrancisco,California94111
415.693.2000
Approximatedateofcommencementofproposedsaletothepublic:
Assoonaspracticableafterthisregistrationstatementbecomeseffective.
IfanyofthesecuritiesbeingregisteredonthisFormaretobeofferedonadelayedorcontinuousbasispursuanttoRule415undertheSecuritiesActof1933,checkthefollowingbox.
o
IfthisFormisfiledtoregisteradditionalsecuritiesforanofferingpursuanttoRule462(b)undertheSecuritiesAct,checkthefollowingboxandlisttheSecuritiesActregistrationstatementnumberoftheearliereffectiveregistrationstatementforthesameoffering.
o
IfthisFormisapost-effectiveamendmentfiledpursuanttoRule462(c)undertheSecuritiesAct,checkthefollowingboxandlisttheSecuritiesActregistrationstatementnumberoftheearliereffectiveregistrationstatementforthesameoffering.
o
IfthisFormisapost-effectiveamendmentfiledpursuanttoRule462(d)undertheSecuritiesAct,checkthefollowingboxandlisttheSecuritiesActregistrationstatementnumberoftheearliereffectiveregistrationstatementforthesameoffering.
o
CALCULATIONOFREGISTRATIONFEE
th
TitleofEachClassofSecurities
TobeRegistered
ProposedMaximum
AggregateOffering
Price(1)(2)
Amountof
RegistrationFee
ClassAordinaryshares,nominalvalue$0.10pershare $250,000,000 $25,175
(1) EstimatedsolelyforthepurposeofcomputingtheamountoftheregistrationfeepursuanttoRule457(o)undertheSecuritiesActof1933,asamended.
(2) Includestheaggregateofferingpriceofadditionalsharesthattheunderwritershavetheoptiontopurchase,ifany.
TheRegistrantherebyamendsthisRegistrationStatementonsuchdateordatesasmaybenecessarytodelayitseffectivedateuntiltheRegistrantshallfileafurtheramendmentwhichspecificallystatesthatthisRegistrationStatementshallthereafterbecomeeffectiveinaccordancewithSection8(a)oftheSecuritiesActof1933oruntiltheRegistrationStatementshallbecomeeffectiveonsuchdateastheSecuritiesandExchangeCommission,actingpursuanttosaidSection8(a),maydetermine.
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Theinformationinthispreliminaryprospectusisnotcompleteandmaybechanged.ThesesecuritiesmaynotbesolduntiltheregistrationstatementfiledwiththeSecuritiesandExchangeCommissioniseffective.Thispreliminaryprospectusisnotanoffertosellnordoesitseekanoffertobuythesesecuritiesinanyjurisdictionwheretheofferorsaleisnotpermitted.
SubjecttoCompletion:Dated
,2015
Shares
AtlassianCorporationPlcClassAOrdinaryShares
ThisisaninitialpublicofferingofClassAordinarysharesofAtlassianCorporationPlc.
Followingthisoffering,wewillhavetwoclassesofordinaryshares,ClassAordinarysharesandClassBordinaryshares.TherightsoftheholdersofClassAordinarysharesandClassBordinarysharesareidentical,exceptwithrespecttovoting,conversionandtransferrights.EachClassAordinaryshareisentitledtoonevote.EachClassBordinaryshareisentitledtotenvotesandisconvertibleintooneClassAordinaryshare.TheholdersofouroutstandingClassBordinaryshareswillholdapproximately
%ofthevotingpowerofouroutstandingsharecapitalfollowingthisoffering.
Priortothisoffering,therehasbeennopublicmarketforourClassAordinaryshares.Itiscurrentlyestimatedthattheinitialpublicofferingpricewillbebetween$
and$
pershare.WehaveappliedtolistourClassAordinarysharesontheNASDAQGlobalMarketunderthesymbol"TEAM".
Wearean"emerginggrowthcompany"asthattermisusedintheJumpstartOurBusinessStartupsActof2012,and,assuch,haveelectedtocomplywithreducedpubliccompanyreportingrequirements.
See "Risk Factors" on page 15 to read about factors you should consider before buying our Class A ordinary shares.
NeithertheSecuritiesandExchangeCommissionnoranystatesecuritiescommissionhasapprovedordisapprovedofthesesecuritiesordeterminedifthisprospectusistruthfulorcomplete.Anyrepresentationtothecontraryisacriminaloffense.
Totheextentthattheunderwriterssellmorethan
ClassAordinaryshares,theunderwritershavetheoptiontopurchaseuptoanadditional
ClassAordinarysharesfromusattheinitialpublicofferingpricelesstheunderwritingdiscount.Theymayexercisethisoptionfor30days.
TheunderwritersexpecttodeliverthesharesagainstpaymentinNewYork,NewYorkon
,2015.
Prospectusdated
,2015
PerShare Total
Initialpublicofferingprice $
$
Underwritingdiscount(1) $
$
Proceeds,beforeexpenses,tous $
$
See"Underwriting"foradditionalinformationregardingunderwritingcompensation.(1)
Goldman,Sachs&Co. MorganStanley
Allen&CompanyLLC UBSInvestmentBank
Jefferies
CanaccordGenuity JMPSecurities
RaymondJames
WilliamBlair
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Neitherwenoranyoftheunderwritershaveauthorizedanyonetoprovideyouwithanyinformationortomakeanyrepresentationsotherthanascontainedinthisprospectusorinanyfreewritingprospectuseswehaveprepared.Neitherwenortheunderwriterstakeresponsibilityfor,andprovidenoassuranceastothereliabilityof,anyinformationthatothersmaygiveyou.Thisprospectusisanoffertosellonlythesharesofferedhereby,butonlyundercircumstancesandinjurisdictionswhereitislawfultodoso.Theinformationcontainedinthisprospectusisaccurateonlyasofthedateofthisprospectus,regardlessofthetimeofdeliveryofthisprospectusoranysaleoftheClassAordinaryshares.Ourbusiness,financialcondition,resultsofoperationsandprospectsmayhavechangedsincethatdate.
Unlessotherwiseindicated,allreferencesinthisprospectusto"Atlassian"orthe"company","we","our","us"orsimilartermsrefertoAtlassianCorporationPlcanditssubsidiaries.
OurconsolidatedfinancialstatementsarepresentedinU.S.dollars.Allreferencesinthisprospectusto"$","U.S.$","U.S.dollars"and"dollars"meanU.S.dollars,unlessotherwisenoted.
NoactionisbeingtakeninanyjurisdictionoutsidetheUnitedStatestopermitapublicofferingofourClassAordinarysharesorpossessionordistributionofthisprospectusinanysuchjurisdiction.PersonswhocomeintopossessionofthisprospectusinjurisdictionsoutsidetheUnitedStatesarerequiredtoinformthemselvesaboutandtoobserveanyrestrictionsastothisofferingandthedistributionofthisprospectusapplicabletothosejurisdictions.
ProspectusSummary 1RiskFactors 15SpecialNoteRegardingForward-LookingStatements 44MarketandIndustryData 45UseofProceeds 46DividendPolicy 47Capitalization 48Dilution 50CorporateStructure 52SelectedConsolidatedFinancialandOtherData 54Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations 58LetterfromtheFounders 96Business 98Management 126RelatedPartyTransactions 142PrincipalShareholders 144DescriptionofShareCapital 147SharesEligibleforFutureSale 170Taxation 172Underwriting 181ExpensesoftheOffering 188ServiceofProcessandEnforcementofJudgments 188LegalMatters 188Experts 189WhereYouCanFindAdditionalInformation 189IndextoConsolidatedFinancialStatements F-1
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PROSPECTUSSUMMARY
This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you shouldconsider before investing in our Class A ordinary shares. You should read this entire prospectus carefully, including "Risk Factors" and "Management'sDiscussion and Analysis of Financial Condition and Results of Operations", and our consolidated financial statements and the related notes includedelsewhere in this prospectus, before making an investment decision.
Overview
Ourmissionistounleashthepotentialineveryteam.
Ourproductshelpteamsorganize,discussandcompletetheirwork—deliveringsuperioroutcomesfortheirorganizations.
Webelievehumanadvancementhasalwaysbeendrivenbyteamwork—fromthegreatexplorationsofearthandspacetoinnovationsinindustry,medicine,musicandtechnology.Andwhileit'scommontocelebratetheindividualgeniusbehindabreakthroughidea,innearlyeverycasethereisateamofunsungheroesthatactuallygettheworkdone.
Wealsobelievethatthegreatestleverteamshavetoadvancehumanityliesinthepowerofsoftwareinnovation.Throughsoftware,contactlensesnowmonitorandreportonthebloodglucoselevelsofdiabetespatients,allowingpatientanddoctortobettermanagethedisease.Throughsoftware,carscanmonitorandreportonvehiclestatus,improvingdriversafety.Throughsoftware,peoplecanread,writeandconversewithpeopleinlanguagestheydonotspeak.Eachoftheseadvanceswasdeliveredbyteams.
Software'stransformationalimpactisforcingorganizationstousesoftwaretoinnovate,orfacedisruptionfromcompetitorsthatdo.Today,organizationsineveryindustryarebecomingsoftware-driven.Asaresult,theteamsthatimagine,createanddeliverthatsoftwarearemoreessentialthanever.
Ourcompanywasfoundedin2002tohelpsoftwareteamsworkbettertogether.Fromthebeginning,ourproductsweredesignedtohelpdeveloperscollaboratewithothernon-developerteamsinvolvedinsoftwareinnovation.Thisbreakthroughapproachseparatedusfromtraditionalsoftwareprovidersfocusedsolelyondevelopers.
Asmorenon-developerteamsareexposedtoourproducts,theyadoptandextendthemtonewusecases,bringingourproductstootherusersandothertypesofteamsintheirorganizations.Thishascreatedanexpansivemarketopportunityforus.
Today,ourproductsserveteamsofallshapesandsizes,invirtuallyeveryindustry—fromsoftwareandtechnicalteamstoITandserviceteams,fromsalesandmarketingteamstoHR,financeandlegalteams.OurproductsincludeJIRAforteamplanningandprojectmanagement,Confluenceforteamcontentcreationandsharing,HipChatforteammessagingandcommunications,BitbucketforteamcodesharingandmanagementandJIRAServiceDeskforteamservicesandsupportapplications.
Ourproductsformanintegratedsystemfororganizing,discussingandcompletingsharedwork,becomingdeeplyentrenchedinhowpeopleworktogetherandhoworganizationsrun.OurproductshavebeenusedbyNASAtodesigntheMarsRover,byCochleartodevelopauralimplants,andbyRunkeepertocreateGPSfitnesstrackingapplications.
Wefoundedourcompanyonthepremisethatgreatproductscouldsellthemselvesandwehavedevelopedauniqueapproachtothemarketthatiscenteredonthisbelief.Webeginwitha
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deepinvestmentinproductdevelopmenttocreateandrefinehigh-qualityandversatileproductsthatuserslove.Wemakeourproductsaffordablefororganizationsofallsizesandwetransparentlyshareoursimplepricingonline.Wepursuecustomeranduservolume,targetingteamsineveryorganization,regardlessofsize,industryorgeography.
Toreachthisexpansivemarket,wedistributeandsellourproductsonlinewithouttraditionalsalesinfrastructurewhereuserscangetstartedinminuteswithouttheneedforassistance.Wefocusonenablingaself-service,low-frictionmodelthatmakesiteasyforuserstotry,adoptanduseourproducts.
Ourcultureofinnovation,transparencyanddedicationtocustomerservicedrivesoursuccessinimplementingandrefiningthisuniqueapproach.Webelievethisapproachfostersinnovation,quality,customerhappiness,scaleandprofitability.
Werecognizethatusersdrivetheadoptionandproliferationofourproductsand,asaresult,wearerelentlesslyfocusedonmeasuringandimprovingusersatisfaction.Weknowthatonehappyuserwillbegetanother,therebyexpandingthelargeandorganicword-of-mouthcommunitythathelpsdriveourgrowth.Weoperateatunusualscaleforanenterprisesoftwarecompany,withmorethan5millionmonthlyactiveusersofourproductsandmorethan51,000customers(organizationsthathaveatleastoneactiveandpaidlicenseorsubscriptionforwhichtheypaidmorethan$10permonth)acrossvirtuallyeveryindustrysectorinmorethan160countries.Ourcustomersrangefromsmallorganizationsthathaveadoptedoneofourproductsforasmallgroupofusers,to79oftheFortune100and273oftheFortune500,manyofwhichuseamultitudeofourproductsacrossthousandsofusers.
Ourmodelhasallowedustogrowwhilemaintainingprofitabilityforeachofthelast10fiscalyears.Ourtotalrevenueswere$148.5million,$215.1millionand$319.5millionforthefiscalyearsendedJune30,2013,2014and2015,respectively,representingacompoundannualgrowthrateof46.7%fromfiscal2013tofiscal2015.Ourtotalrevenueswere$67.9millionand$101.8millionforthethreemonthsendedSeptember30,2014and2015,respectively,representinganannualgrowthrateof49.9%.Wegeneratednetincomeof$10.8million,$19.0millionand$6.8millionforthefiscalyearsendedJune30,2013,2014and2015,respectively,and$3.6millionand$5.1millionforthethreemonthsendedSeptember30,2014and2015,respectively.Wealsogeneratedfreecashflowof$47.1million,$65.0millionand$65.5millionforthefiscalyearsendedJune30,2013,2014and2015,respectively,and$3.6millionand$8.2millionforthethreemonthsendedSeptember30,2014and2015,respectively.
MarketTrends
• SoftwareisChangingEverything—Softwareisimpactingalmosteveryaspectofourlivesandredefiningthelimitsofwhatpeopleandorganizationscanachieve.Softwareiseverywhereandincreasinglyineverything,andorganizationsofalltypesandsizesfaceanexistentialimperativetodrivesoftwareinnovation.
• SoftwareTeamsareEssentialandMulti-Dimensional—Teamsthatcandeliversoftwareinnovationrequireamyriadoftalentsandfunctionalexpertiseandarecriticaltoeachorganization'seffortstothriveandcompete.Softwaredevelopershavebecomemoreessentialandinfluentialandthedemandforsoftwaredevelopmenttalenthasgrown.
• SoftwareTeamCollaborationisComplexandChallenging—Modernsoftwaredevelopmentishighlycreative,iterativeandasynchronous,andverycomplex.Softwareteamstodaymustiterateandmovefasterthaneverbefore,andarebecomingthemodelformodernworkforcecollaborationacrossallteams.
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• IncreasingComplexityMakesCollaborationCriticalforAllTeams—Acrosstheglobaleconomy,workisbecomingmorecomplex,faster-pacedandmorecollaborative.Inaddition,moreandmoreteamsarenowspreadacrossgeographies.
• AllTeamsareSeekingBetterWaystoConnectandGetWorkDone—Assoftwareprojectsbecomemorecross-functional,knowledgeworkersthroughoutorganizationshavebeenexposedtothecollaborationandworkflowpracticesofsoftwareteams.Thisexposureacrossorganizationshascoincidedwithgrowingdissatisfactionwithtraditionalproductivitytools.
• TeamsAreNowMakingTheirOwnTechnologyChoices—Followingthe"bringyourowndevice"trend,employeesareincreasinglyempoweredto"bringyourownsoftware",leadingtotheuser-drivenviraladoptionofnewtypesofconsumer-stylesoftwareproductswithinanorganization.
LimitationsofTraditionalApproaches
TraditionalTools
Mosttraditionalsoftwaredevelopmenttechnologiesarecostly,complex,poorlydesigned,hardtouseandnoteasilyintegratedwithothersoftwaresystems.Moreover,thesetechnologiesweredesignedsolelyfortheneedsofsoftwaredevelopersanddonotextendwelltootherusecases.Otherpointsolutionsdonotprovidethebreadth,integrationandsecuritythatorganizationsrequire.
Inanefforttoservetheneedsofteamsandintegratesoftwaredevelopersandotherknowledgeworkers,organizationshaveoftenreliedontraditionalpersonalproductivitytools.Whilethesetoolsarewidelyused,theyweredesignedmanyyearsago,providenarrowfunctionality,arenotintegrated,andarenotsuitedforthedemandsofmanagingcomplexprojectsamongdiverseandbroadlydistributedteams.
TraditionalDistributionModels
Traditionalenterprisesoftwaredistributionmodels,withtheirfocusonquota-drivensalesrepresentativesandrelianceonlargedeals,arenotwellsuitedtoreach,influenceormeettheneedsofteams,whoareincreasinglydrivingtechnologypurchasingdecisions.
Historically,enterprisesoftwarewaspurchasedinacentralized,topdownfashion.Asaresult,purchasedecisionswereoftendisconnectedfromactualuserneedsandresultedinlowadoptionrates.
Theconsumerizationofenterprisetechnologyhasgivenamuchbroaderpopulationofworkersastakeandavoiceintheprocurementofsoftwaresolutions.Teamsofallkindshaveincreasingfreedomtochoosethetechnologytheywant.
MarketOpportunity
Ourproductsaddressseverallargeandwell-establishedcategoriesofITspending.Investmentinthesetraditionalcategoriesisexpectedtototalmorethan$35.0billionin2015.AccordingtoGartner,Inc.,amarketresearchfirm,theApplicationDevelopmentmarketisexpectedtobe$8.8billionandtheITOperationsmarketisexpectedtobe$9.1billionin2015fortheITAssetandFinancialManagement,ITServiceSupportManagementToolsandAutomationToolsmarkets.InternationalDataCorporation("IDC"),amarketresearchfirm,expectsthemarketforCollaborativeApplicationstobe$13.5billionandtheProjectandPortfolioManagementmarkettobe$3.8billionin2015.
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Webelievethatthelimitationsoftraditionaltoolsanddistributionmodels,coupledwiththegrowingdemandformoderncollaborationtechnology,presentanopportunitytoexpandwithinthesetraditionalcategories.Byprovidingaffordable,versatile,adaptableandmodernsoftwarebuiltfortheneedsofteams,webelievethatwecancontinuetodisruptandincreaseourshareoftheselarge,existingmarkets.
TheAtlassianWay
Ourproductstrategy,distributionmodelandcompanycultureworkinconcerttocreateuniquevalueforourcustomersandcompetitiveadvantageforourcompany.
Weinvestsignificantlyindevelopingandrefiningproductsthatallowteamstoachievetheirfullpotential.Wemakeversatileproductsthatcanbeusedinamyriadofways.Ourproductsareeasytoadoptanduseandcanbedistributedandproliferatedorganicallyandefficiently.
Weoffertheseproductsataffordablepricepointsinahigh-velocityonlinedistributionmodel.Ourdistributionmodeldoesnotrelyoncostlysalesinfrastructuretopushproducttoourcustomers.Bymakingourproductssimple,powerfulandeasytoadopt,wegeneratedemandfromword-of-mouthandviralexpansionwithinorganizations.Ourmodelisdesignedtooperateatscaleandservemillionsofcustomers.
Webelievethatourproductstrategy,distributionmodelandcompanyculturearemutuallyreinforcing.Byinvestingininnovationandmakingourproductsaffordableandeasytouse,weoperatewithoutrelianceontraditionalsalesinfrastructure,whichenhancesourdistributionmodelandpermitslong-terminvestmentinproductleadershipandouruniqueculture.
OurProductStrategy
Wehavedevelopedandacquiredabroadportfolioofproductsthathelpteamslargeandsmalltoorganize,discussandcompletetheirworkinacoordinated,efficientandmodernfashion.
Ourproducts,whichincludeJIRA,Confluence,HipChat,BitbucketandJIRAServiceDesk,servetheneedsofteamsofsoftwaredevelopers,ITmanagersandknowledgeworkers.Whiletheseproductsprovidearangeofdistinctfunctionalitytousers,theysharecertaincoreattributes:
• BuiltforTeams—Ourproductsaresingularlydesignedtohelpteamsworkbettertogetherandachievemore.
• EasytoAdoptandUse—Weinvestsignificantlyinresearchanddevelopmenttoenableourproductstobebothpowerfulandextremelyeasytouse.
• VersatileandAdaptable—Wedevelopsimpleandwell-designedproductsthatareusefulinabroadrangeofworkflowsandprojects.
• Integrated—Ourproductsareintegratedanddesignedtoworkwelltogether.
• Open—Wearededicatedtomakingourproductsopenandinteroperablewitharangeofotherplatformsandapplications.
OurDistributionModel
Ourhigh-velocitydistributionmodelisdesignedtodriveexceptionalcustomerscalebymakingaffordableproductsavailableviaourconvenient,low-frictiononlinechannel.Wefocusonproductquality,automateddistributionandcustomerserviceinlieuofacostlytraditionalsalesinfrastructure.Werelyonword-of-mouthandlow-touchdemandgenerationtodrivetrial,adoptionandexpansionofourproductswithincustomers.
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Thefollowingarekeyattributesofouruniquemodel:
• Innovation-driven—Relativetootherenterprisesoftwarecompanies,weinvestsignificantlyinresearchanddevelopmentratherthansalesandmarketing.
• SimpleandAffordable—Weofferourproductsataffordablepricesinasimpleandtransparentformat,withafreetrialbeforepurchase.
• OrganicandExpansive—Ourmodelbenefitsfromsignificantcustomerword-of-mouthaboutourproductsthatdrivestraffictoourwebsite.
• Scale-oriented—Ourmodelisdesignedtogenerateandbenefitfromsignificantcustomerscaleandourgoalistomaximizethenumberofindividualusersofoursoftware.
• Data-driven—Ourscaleandthedesignofourmodelallowsustogatherinsightsintoandimprovethecustomerexperience.
OurCulture
Ourcompanycultureisexemplifiedbyourcorevalues:
• OpenCompany,NoBullsh*t
• BuildwithHeartandBalance
• Don't#@!%theCustomer
• Play,asaTeam
• BetheChangeYouSeek
Thesevaluescontributetoaculturethatisopen,innovative,dedicatedtoourcustomers,team-drivenandlong-termfocused,allofwhichenableustodrivecustomervalueandachievecompetitivedifferentiation.
OurFinancialModel
Bydevelopingaproductstrategy,distributionmodelandculturethataredesignedaroundtheneedsofourcustomersandusers,webelievethatwehaveestablishedafinancialmodelthatisfavorableforourshareholders.Ourmodelhasallowedustogrowcustomersandrevenuesteadilywhilemaintainingprofitabilityforeachofthelast10fiscalyears.Ourmodelreliesonrapidlyandefficientlylandingnewcustomersandexpandingourrelationshipwiththemovertime.Thefollowingarethekeyelementsofourmodel:
• SignificantInvestmentinOngoingProductDevelopmentandSalesAutomation—Ourresearchanddevelopmentinvestmentsenableustorapidlybuildnewproducts,continuouslyenhanceourexistingproducts,acquireandintegratetechnologiesandalsohelpusobtaindata-driveninsightsandfurtherautomateandstreamlineourapproachtocustomeracquisition.
• RapidandEfficientAcquisitionofNewCustomers—Bybuildingproductsthatareaffordableandeasytoadoptanduse,weareabletoattractcustomersrapidlywithoutemployingatraditionalsalesforce,andtherebylowerthecostofcustomeracquisitionsignificantly.AtSeptember30,2015,wehadover5millionmonthlyactiveusersofoursoftwareacrossmorethan450,000organizationsandmorethan51,000customers.
• ContinuedExpansion—Oursuccessisdependentonourabilitytoexpandtherelationshipwithourexistingbaseofcustomers.Sinceourfounding,theaggregatesalesfrom
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customersacquiredinanyfiscalyearhaveexpandedsincetheyfirstpurchasedanAtlassianproduct,throughtheadditionofmoreusers,teamsandproducts.
• PredictabilityofSales—Aswearenotdependentonatraditionalsalesmodelandrelyonahigh-velocityonlinedistributionmodel,wehavehistoricallyexperiencedalinearquarterlysalescycle.Onceteamsbeginworkingtogetherwithoursoftware,webecomeembeddedintheirworkflows,becomingasystemforengagementwithinorganizations.Thismakesitdifficulttodisplaceusandprovidesuswithsteadyandpredictablerevenue.
• PositiveFreeCashFlow—Byreducingcustomeracquisitioncostandestablishingarevenuemodelthathasscaledlinearly,ourmodelhasallowedustohavepositivefreecashflowforeachofthelast10fiscalyears.
OurGrowthStrategy
Ourgrowthstrategyistomakeoursoftwareaccessibletoeveryorganization,teamandusertohelpthemgetworkdone.Weintendtocontinuethisapproachbyaddingcustomers,developingnewproducts,expandinginexistingcustomersandpursuingselectiveacquisitions.
Keydriversofourgrowthstrategyinclude:
• ProtectandPromoteOurCulture—Ourcultureisatthefoundationofeverythingwedoandfuelsourbusinessstrategyandsuccess.
• ContinuetoRefineOurUniqueBusinessModel—WewillcontinuetodevelopthetechnologyandproductsthatenableourcustomerstoeasilyadoptanduseourproductsovertheInternet.
• IncreaseProductValue—Weintendtocontinuetoincreasethevalueofoursoftwaretocustomersbyprovidingthemwithabroader,integratedsetofproducts.
• GrowtheAtlassianMarketplaceandPartnerEcosystem—TheAtlassianMarketplaceisanopenplatformthatallowsindependentvendorsanddeveloperstocontinuetodevelopadd-onsandextensionsthatextendourplatformandgeneratemillionsofdollarsinrevenueforboththethird-partyvendorsandforus.
RiskFactorsSummary
Ourbusinessissubjecttonumerousrisksanduncertainties,includingthosehighlightedin"RiskFactors"immediatelyfollowingthisprospectussummary.Theserisksinclude,butarenotlimitedto,thefollowing:
• Ourrapidgrowthmakesitdifficulttoevaluateourfutureprospectsandmayincreasetheriskthatwewillnotcontinuetogrowatornearhistoricalrates.
• Wemaynotbeabletosustainourrevenuegrowthrateormaintainprofitabilityinthefuture.
• Themarketsinwhichweparticipateareintenselycompetitive,andifwedonotcompeteeffectively,ourbusiness,resultsofoperationsandfinancialconditioncouldbeharmed.
• Ourdistributionmodelofofferinganddeployingourproductsviaboththecloudandonpremisesincreasesourexpenses,mayimpactrevenuerecognitiontimingandmayposeotherchallengestoourbusiness.
• Ourbusinessdependsonourcustomersrenewingtheirsubscriptionsandmaintenanceplansandpurchasingadditionallicensesorsubscriptionsfromus.Anydeclineinourcustomerretentionorexpansionwouldharmourfutureresultsofoperations.
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• Ifwearenotabletodevelopnewproductsandenhancementstoourproductsthatachievemarketacceptanceandthatkeeppacewithtechnologicaldevelopments,ourbusinessandresultsofoperationswouldbeharmed.
• Ifwecannotcontinuetoexpandtheuseofourproductsbeyondourinitialfocusonsoftwaredevelopers,ourabilitytogrowourbusinessmaybeharmed.
• Weinvestsignificantlyinresearchanddevelopment,andtotheextentourresearchanddevelopmentinvestmentsdonottranslateintonewproductsormaterialenhancementstoourcurrentproducts,orifwedonotusethoseinvestmentsefficiently,ourbusinessandresultsofoperationswouldbeharmed.
• Ifwefailtoeffectivelymanageourgrowth,ourbusinessandresultsofoperationscouldbeharmed.
• Ifourcurrentmarketingmodelisnoteffectiveinattractingnewcustomers,wemayneedtoincuradditionalexpensestoattractnewcustomersandourbusinessandresultsofoperationscouldbeharmed.
• Ifoursecuritymeasuresarebreachedorunauthorizedaccesstocustomerdataisotherwiseobtained,ourproductsmaybeperceivedasinsecure,wemayloseexistingcustomersorfailtoattractnewcustomers,andwemayincursignificantliabilities.
• Thedualclassstructureofourordinaryshareshastheeffectofconcentratingvotingcontrolwithcertainshareholders,inparticular,ourco-chiefexecutiveofficersandtheiraffiliates,whichwilllimityourabilitytoinfluencetheoutcomeofimportanttransactions,includingachangeincontrol.
CorporateInformation
ThelegalandcommercialnameofourcompanyisAtlassianCorporationPlc.WewereregisteredinAustraliain2002andreorganizedintotheUnitedKingdomin2014.See"CorporateStructure"foradditionalinformation.
OurregisteredofficeislocatedatExchangeHouse,PrimroseStreet,LondonEC2A2EG,c/oHerbertSmithFreehillsLLP.OurAustralianheadquartersislocatedatLevel6,341GeorgeSt.,Sydney,NSW,2000Australia,andourtelephonenumberis+61292621443.OurU.S.headquartersislocatedat1098HarrisonStreet,SanFrancisco,California94103andourtelephonenumberis(415)701-1110.Ourwebsiteaddressiswww.atlassian.com.Informationcontainedon,orthatcanbeaccessedthrough,ourwebsiteisnotincorporatedbyreferenceintothisprospectus,andyoushouldnotconsiderinformationonourwebsitetobepartofthisprospectus.TheAtlassiandesignlogo,"Atlassian"andourotherregisteredandcommonlawtradenames,trademarksandservicemarksarethepropertyofAtlassianCorporationPlcoroursubsidiaries.
EmergingGrowthCompany
TheJumpstartOurBusinessStartupsAct("JOBSAct")wasenactedinApril2012withtheintentionofencouragingcapitalformationintheUnitedStatesandreducingtheregulatoryburdenonnewlypubliccompaniesthatqualifyas"emerginggrowthcompanies".WeareanemerginggrowthcompanywithinthemeaningoftheJOBSAct.Asanemerginggrowthcompany,wemaytakeadvantageofcertainexemptionsfromvariouspublicreportingrequirements,includingtherequirementthatourinternalcontroloverfinancialreportingbeauditedbyourindependentregisteredpublicaccountingfirmpursuanttoSection404oftheSarbanes-OxleyActof2002("Sarbanes-OxleyAct")andcertainrequirementsrelatedtothedisclosureofexecutive
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compensationinthisprospectusandinourperiodicreports.Wemaytakeadvantageoftheseexemptionsuntilwearenolongeranemerginggrowthcompany.
Wewillremainanemerginggrowthcompanyuntiltheearliesttooccurof(i)thelastdayofthefiscalyearinwhichwehavemorethan$1.0billioninannualsales;(ii)thedatewequalifyasa"largeacceleratedfiler",withatleast$700millionofequitysecuritiesheldbynon-affiliates;(iii)thedateonwhichwehaveissued,inanythree-yearperiod,morethan$1.0billioninnon-convertibledebtsecurities;and(iv)thelastdayofthefiscalyearendingafterthefifthanniversaryofthecompletionofthisoffering.
See"RiskFactors—RisksRelatedtoOurBusinessandIndustry—Wearean"emerginggrowthcompany"andwecannotbecertainifthereduceddisclosurerequirementsapplicabletoemerginggrowthcompanieswillmakeourClassAordinaryshareslessattractivetoinvestors"forcertainrisksrelatedtoourstatusasanemerginggrowthcompany.
ForeignPrivateIssuer
WeareincorporatedintheUnitedKingdom,andamajorityofouroutstandingsecuritiesareownedbynon-U.S.residents.AftertheconsummationofthisofferingandundertherulesoftheU.S.SecuritiesandExchangeCommission("SEC")andtheNASDAQStockMarketLLC("NASDAQ"),wewillbea"foreignprivateissuer".Asaforeignprivateissuer,wewillbesubjecttolessstringentcorporategovernanceguidelinesanddifferentdisclosurerequirementsthanU.S.domiciledregistrants.Forexample,wewillnotberequiredtofileperiodicreportsandfinancialstatementswiththeSECasfrequentlyoraspromptlyasdomesticregistrantswhosesecuritiesareregisteredundertheSecuritiesExchangeActof1934,asamended("ExchangeAct").Nevertheless,followingthisoffering,weintendtosubmitquarterlyinterimconsolidatedfinancialdatatotheSECundercoveroftheSEC'sForm6-K.Youwillbeabletoreadandobtaincopiesofthesereportsattheaddressessetforthin"WhereYouCanFindAdditionalInformation".Foradditionalinformation,see"RiskFactors—RisksRelatedtoInvestinginaForeignPrivateIssueroranEnglishCompany".
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TheOffering
9
ClassAordinarysharesofferedbyus
shares
ClassAordinarysharestobeoutstandingafterthisoffering
shares
ClassBordinarysharestobeoutstandingafterthisoffering
155,803,022shares
TotalClassAordinarysharesandClassBordinarysharestobeoutstandingafterthisoffering
shares
Underwriters'optiontopurchaseadditionalClassAordinaryshares
shares
Useofproceeds
WeestimatethatournetproceedsfromthesaleofourClassAordinarysharesthatweareofferingwillbe$
million,assuminganinitialpublicofferingpriceof$
pershare,themidpointoftheestimatedpricerangesetforthonthecoverpageofthisprospectus,andafterdeductingestimatedunderwritingdiscountsandcommissionsandestimatedofferingexpensespayablebyus.
TheprincipalpurposesofthisofferingaretoincreaseourcapitalizationandfinancialflexibilityandcreateapublicmarketforourClassAordinaryshares.Weintendtousethenetproceedswereceivefromthisofferingforgeneralcorporatepurposes,includingworkingcapital,operatingexpensesandcapitalexpenditures.Wealsomayuseaportionofthenetproceedstoacquirecomplementarybusinesses,products,servicesortechnologies.However,wedonothaveagreementsorcommitmentsforanyspecificacquisitionsatthistime.Wealsomayusecertainofthenetproceedstosatisfytaxwithholdingobligationsrelatedtothevestingofrestrictedshareunits("RSUs")heldbycurrentandformeremployees.See"UseofProceeds"foradditionalinformation.
Votingrights
Followingthisoffering,wewillhavetwoclassesofordinaryshares,ClassAordinarysharesandClassBordinaryshares.ClassAordinarysharesareentitledtoonevotepershareandClassBordinarysharesareentitledtotenvotespershare.
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ThenumberofClassAordinarysharesandClassBordinarysharesthatwillbeoutstandingafterthisofferingisbasedon30,872,107ClassAordinarysharesand155,803,022ClassBordinarysharesoutstandingasofSeptember30,2015,andexcludes:
• 15,288,310ClassAordinarysharesissuableupontheexerciseofshareoptionsoutstandingasofSeptember30,2015,withaweighted-averageexercisepriceof$2.23pershare;
• 9,758,363ClassAordinarysharesissuableuponthevestingofRSUsoutstandingasofSeptember30,2015;
• 1,552,500ClassBordinarysharesissuableupontheexerciseofshareoptionsoutstandingasofSeptember30,2015,withaweighted-averageexercisepriceof$0.51pershare;and
• 26,400,000ClassAordinarysharesreservedforfutureissuanceunderourequitycompensationplans,consistingof:
• 20,700,000ClassAordinarysharesreservedforfutureissuanceunderour2015ShareIncentivePlan("2015Plan");and
• 5,700,000ClassAordinarysharesreservedforfutureissuanceunderour2015EmployeeSharePurchasePlan("ESPP").
Our2015PlanandESPP,whichwillbecomeeffectiveontheconsummationofthisoffering,willprovideforannualautomaticincreasesinthenumberofsharesreservedthereunder.Our2015PlanalsowillprovideforincreasesinthenumberofsharesreservedthereunderbasedonawardsunderourAtlassianUKEmployeeShareOptionPlan("ShareOptionPlan"),2013U.S.ShareOptionPlan("2013Plan")and2014RestrictedShareUnitPlan("2014Plan")thatexpire,areforfeitedorotherwiserepurchasedbyus,asmorefullydescribedin"Management—Compensation—EquityCompensationPlans".
10
HoldersofourClassAordinarysharesandClassBordinaryshareswillgenerallyvotetogetherasasingleclass,unlessotherwiserequiredbylaworouramendedandrestatedarticlesofassociation.TheholdersofouroutstandingClassBordinaryshareswillhold
%ofthevotingpowerofouroutstandingsharesfollowingthisofferingandwillhavetheabilitytocontroltheoutcomeofmatterssubmittedtoourshareholdersforapproval,includingtheelectionofourdirectorsandtheapprovalofanychangeincontroltransaction.See"PrincipalShareholders"and"DescriptionofShareCapital"foradditionalinformation.
Concentrationofownership
Uponthecompletionofthisoffering,ourexecutiveofficersanddirectorsandshareholdersholdingmorethan5%ofouroutstandingshares,andtheiraffiliates,willbeneficiallyown,intheaggregate,approximately
%ofouroutstandingshares.
ProposedNASDAQGlobalMarkettradingsymbol
"TEAM"
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Otherthaninourconsolidatedfinancialstatements,andunlessotherwiseindicated,theinformationinthisprospectusassumes:
• thefilingofouramendedandrestatedarticlesofassociation,whichwillbeineffectuponthecompletionofthisoffering;
• theautomaticconversionof(i)alloutstandingconvertibleSeriesApreferencesharesinto12,387,798ClassAordinaryshares,(ii)alloutstandingrestrictedsharesinto15,233,149ClassAordinarysharesand(iii)alloutstandingconvertibleSeriesBpreferencesharesinto15,046,180ClassBordinarysharesasofSeptember30,2015,theconversionofeachofwhichwilloccurimmediatelypriortothecompletionofthisoffering;
• noexerciseoftheunderwriters'optiontopurchaseadditionalClassAordinaryshares;and
• exercisepricesforoptionsforoursharecapitalthataredenotedinAustraliandollarshavebeenconvertedintoU.S.dollarsbasedontheU.S.DepartmentofTreasuryreportingratesofexchangeasofSeptember30,2015,whichprovidesanexchangerateofU.S.$1.00toAUS$1.4230.
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SummaryConsolidatedFinancialandOtherData
Thefollowingtablessummarizeourconsolidatedfinancialandotherdata.WederivedtheconsolidatedstatementsofoperationsdataforthefiscalyearsendedJune30,2013,2014and2015fromourauditedconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.WederivedtheunauditedconsolidatedstatementsofoperationsdataforthethreemonthsendedSeptember30,2014and2015andtheunauditedconsolidatedsummaryoffinancialpositiondataasofSeptember30,2015fromourunauditedconsolidatedfinancialstatementsincludedelsewhereinthisprospectus.WeprepareourconsolidatedfinancialstatementsinaccordancewithInternationalFinancialReportingStandards("IFRS"),whichincludesallstandardsissuedbytheInternationalAccountingStandardsBoard("IASB")andrelatedinterpretationsissuedbytheIFRSInterpretationsCommittee.Wehavepreparedtheunauditedconsolidatedfinancialstatementsonthesamebasisastheauditedconsolidatedfinancialstatementsandhaveincludedalladjustments,consistingonlyofnormalrecurringadjustmentsthat,inouropinion,arenecessarytostatefairlythefinancialinformationsetforthinthosestatements.Ourhistoricalresultspresentedbelowarenotnecessarilyindicativeoffinancialresultstobeachievedinfutureperiods,andourinterimresultsarenotnecessarilyindicativeofresultsthatshouldbeexpectedforthefullfiscalyearoranyotherperiod.Youshouldreadthefollowingsummaryconsolidatedfinancialdatainconjunctionwith"SelectedConsolidatedFinancialandOtherData"and"Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations"andourconsolidatedfinancialstatementsandrelatednotesincludedelsewhereinthisprospectus.
12
FiscalYearEndedJune30,
ThreeMonthsEnded
September30,
2013 2014 2015 2014 2015
(inthousands,exceptpersharedata)
ConsolidatedStatementsofOperationsData:
Revenues
Subscription $ 28,780 $ 51,007 $ 85,891 $ 17,176 $ 30,467
Maintenance 83,978 112,134 160,373 34,752 50,354
Perpetuallicense 32,789 44,186 57,373 12,917 15,501
Other 2,965 7,782 15,884 3,077 5,500
Totalrevenues 148,512 215,109 319,521 67,922 101,822
Costofrevenues(1)(2) 33,031 37,986 52,932 11,846 16,420
Grossprofit 115,481 177,123 266,589 56,076 85,402
Operatingexpenses
Researchanddevelopment(1)
57,301 78,640 140,853 29,225 45,460
Marketingandsales(1)(2) 18,795 34,968 67,989 11,997 16,262
Generalandadministrative(1) 26,266 41,984 57,330 12,758 17,068
Totaloperatingexpenses 102,362 155,592 266,172 53,980 78,790
Operatingincome 13,119 21,531 417 2,096 6,612
Othernon-operatingincome(expense),net (1,918) 608 (1,318) (881) (137)Financeincome 474 317 226 73 46
Financecosts (272) (228) (74) (16) (8)
Income(loss)beforeincometaxbenefit(expense) 11,403 22,228 (749) 1,272 6,513
Incometaxbenefit(expense) (642) (3,246) 7,524 2,311 (1,431)Netincome $ 10,761 $ 18,982 $ 6,775 $ 3,583 $ 5,082
Netincomepershareattributabletoordinaryshareholders(3):
Basic $ 0.07 $ 0.11 $ 0.04 $ 0.02 $ 0.03
Diluted $ 0.07 $ 0.11 $ 0.04 $ 0.02 $ 0.03
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OurconsolidatedfinancialpositiondataasofSeptember30,2015ispresentedon:
• anactualbasis;and
• aproformaasadjustedbasis,givingeffecttothesaleandissuanceof
ClassAordinarysharesbyusinthisoffering,basedupontheassumedinitialpublicofferingpriceof$
pershare,themidpointoftheestimatedpricerangesetforthonthecoverpageofthisprospectus,afterdeductingtheestimatedunderwritingdiscountsandcommissionsandestimatedofferingexpensespayablebyus.
13
FiscalYearEndedJune30,
ThreeMonthsEnded
September30,
2013 2014 2015 2014 2015
(inthousands,exceptpersharedata)
Weighted-averagesharesoutstandingusedtocomputenetincomepershareattributabletoordinaryshareholders(3):
Basic 140,748 141,530 144,008 144,008 144,008
Diluted 142,558 143,602 145,500 145,488 145,513
Proformanetincomepershareattributabletoordinaryshareholders(3):
Basic
$ 0.04
$ 0.03
Diluted
$ 0.03
$ 0.02
Proformaweighted-averagesharesoutstandingusedtocomputeproformanetincomepershareattributabletoordinaryshareholders(3):
Basic
185,112
187,113
Diluted
204,177
205,827
Amountsincludeshare-basedpaymentexpense,
asfollows:
(1)
Costofrevenues $ 251 $ 625 $ 2,862 $ 452 $ 1,206
Researchanddevelopment
1,189 5,120 22,842 4,632 5,921
Marketingandsales 583 2,068 6,670 1,142 2,742
Generalandadministrative
1,468 3,551 9,160 1,700 4,227
Amountsincludeamortizationofintangibleassets,
asfollows:
(2)
Costofrevenues $ 7,633 $ 7,591 $ 6,417 $ 1,622 $ 1,745
Marketingandsales 129 98 40 8 21
SeeNote17oftheNotestoourConsolidatedFinancialStatementsincludedelsewhereinthisprospectusforanexplanationofthemethodusedtocalculatebasic,dilutedandproformanetincomepershareattributabletoordinaryshareholdersandtheweighted-averagenumberofsharesusedinthecomputationofthepershareamounts.
(3)
AsofSeptember30,2015
Actual
ProForma
asAdjusted
(inthousands)
ConsolidatedStatementofFinancialPositionData:
Cashandcashequivalents $ 208,332 $
Workingcapital 67,927
Totalassets 414,155
Deferredrevenue 143,266
Totalshareholders'equity 215,979
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Theproformaasadjustedinformationsetforthinthetableaboveisillustrativeonlyandwillbeadjustedbasedontheactualinitialpublicofferingpriceandothertermsofthisofferingdeterminedatpricing.A$1.00increaseordecreaseintheassumedinitialpublicofferingpriceof$
perClassAordinaryshare,themidpointoftheestimatedpricerangesetforthonthecoverpageofthisprospectus,wouldincreaseordecreaseeachofourproformaasadjustedcashandcashequivalents,workingcapital,totalassetsandtotalshareholders'equitybyapproximately$
million,assumingthenumberofsharesofferedbyus,assetforthonthecoverpageofthisprospectus,remainsthesame,andafterdeductingestimatedunderwritingdiscountsandcommissionsandestimatedofferingexpensespayablebyus.Similarly,eachincreaseordecreaseof1.0millionsharesinthenumberofClassAordinarysharesofferedbyuswouldincreaseordecreaseeachofourproformaasadjustedcashandcashequivalents,workingcapital,totalassetsandtotalshareholders'equitybyapproximately$
million,assumingtheassumedinitialpublicofferingpriceof$
perClassAordinaryshare,themidpointoftheestimatedpricerangesetforthonthecoverpageofthisprospectus,remainsthesame,andafterdeductingestimatedunderwritingdiscountsandcommissionsandestimatedofferingexpensespayablebyus.
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FiscalYearEndedJune30,
ThreeMonthsEnded
September30,
OtherData(1): 2013 2014 2015 2014 2015
(inthousands)
Non-IFRSoperatingincome(2) $ 24,372 $ 40,584 $ 48,408 $ 11,652 $ 22,474
Non-IFRSnetincome(3) 20,447 35,685 45,522 11,119 18,379
Freecashflow(4) 47,064 65,021 65,545 3,576 8,249
See"SelectedConsolidatedFinancialandOtherData—Non-IFRSFinancialResults"forfurtherinformationonnon-IFRSoperatingincome,non-IFRSnetincomeandfreecashflow,andforareconciliationtothemostcomparableIFRSmeasures.
Non-IFRSoperatingincomeisanon-IFRSfinancialmeasurethatwecalculateasoperatingincomeexcludingshare-basedpaymentexpenseandamortizationofintangibleassets.
Non-IFRSnetincomeisanon-IFRSfinancialmeasurethatwecalculateasnetincomeexcludingshare-basedpaymentexpense,amortizationofintangibleassetsandtherelatedtaxeffectsofthoseitems.
Freecashflowisanon-IFRSfinancialmeasurethatwecalculateasnetcashprovidedbyoperatingactivitieslesspurchasesofpropertyandequipmentandintangibleassets.
(1)
(2)
(3)
(4)
AsofJune30, AsofSeptember30,
2013 2014 2015 2014 2015
Customers 27,676 37,250 48,622 40,070 51,636
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RISKFACTORS
Investing in our Class A ordinary shares involves a high degree of risk. Before making a decision to invest in our Class A ordinary shares, youshould carefully consider the following risks, together with all of the other information contained in this prospectus, including our consolidated financialstatements and related notes. While we believe that the risks and uncertainties described below are the material risks currently facing us, additional risksthat we do not yet know of or that we currently think are immaterial may also arise and harm our business. If any of these risks actually occur, ourbusiness, results of operations, financial condition and prospects could be harmed. In that event, the trading price of our Class A ordinary shares coulddecline, which could cause you to lose all or part of your investment.
RisksRelatedtoOurBusinessandIndustry
Our rapid growth makes it difficult to evaluate our future prospects and may increase the risk that we will not continue to grow at or nearhistorical rates.
Wehavebeengrowingrapidlyoverthelastseveralyears,andasaresult,ourabilitytoforecastourfutureresultsofoperationsissubjecttoanumberofuncertainties,includingourabilitytoeffectivelyplanforandmodelfuturegrowth.Ourrecentandhistoricalgrowthshouldnotbeconsideredindicativeofourfutureperformance.Wehaveencounteredinthepast,andwillencounterinthefuture,risksanduncertaintiesfrequentlyexperiencedbygrowingcompaniesinrapidlychangingindustries.Ifourassumptionsregardingtheserisksanduncertainties,whichweusetoplanandoperateourbusiness,areincorrectorchange,orifwedonotaddresstheseriskssuccessfully,ouroperatingandfinancialresultscoulddiffermateriallyfromourexpectations,ourgrowthratesmayslowandourbusinesswouldsuffer.
We may not be able to sustain our revenue growth rate or maintain profitability in the future.
Ourhistoricalgrowthrateshouldnotbeconsideredindicativeofourfutureperformanceandmaydeclineinthefuture.Infutureperiods,ourrevenuecouldgrowmoreslowlythaninrecentperiodsordeclineforanumberofreasons,includinganyreductionindemandforourproducts,increaseincompetition,limitedabilityto,orourdecisionnotto,increasepricing,contractionofouroverallmarketorourfailuretocapitalizeongrowthopportunities.Inaddition,weexpectexpensestoincreasesubstantiallyinthenearterm,particularlyaswecontinuetomakesignificantinvestmentsinresearchanddevelopmentandtechnologyinfrastructureforourcloudofferings,expandouroperationsgloballyanddevelopnewproductsandfeaturesfor,andenhancementsof,ourexistingproducts.Inaddition,inconnectionwithoperatingasapubliccompany,wewillincursignificantadditionallegal,accountingandotherexpensesthatwedidnotincurasaprivatecompany.Asaresultofthesesignificantinvestments,andinparticularshare-basedcompensationassociatedwithourgrowth,wedonotexpecttoachieveIFRSprofitabilityinfiscalyear2016andmaynotbeabletoachieveIFRSprofitabilityinfutureperiods.Inaddition,theadditionalexpenseswewillincurmaynotleadtosufficientadditionalrevenuetomaintainhistoricalrevenuegrowthratesandprofitability.
The markets in which we participate are intensely competitive, and if we do not compete effectively, our business, results of operations andfinancial condition could be harmed.
Themarketsforoursolutionsarefragmented,rapidlyevolvingandhighlycompetitive,andhaverelativelylowbarrierstoentry.Wefacecompetitionfrombothtraditional,largersoftwarevendorsofferingfullcollaborationandproductivitysuitesandsmallercompaniesofferingpointproductsforfeaturesandusecases.OurprincipalcompetitorsvarydependingontheproductcategoryandincludeMicrosoftCorporation,IBM,Hewlett-PackardCompany,Google,ServiceNow,salesforce.com,Zendeskandseveralsmallersoftwarevendors.Inaddition,someofour
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competitorshavemadeacquisitionstoofferamorecomprehensiveproductorserviceoffering,whichmayallowthemtocompetemoreeffectivelywithourproducts.Weexpectthistrendtocontinueascompaniesattempttostrengthenormaintaintheirmarketpositionsinanevolvingindustry.Companiesresultingfromthesepossibleconsolidationsmaycreatemorecompellingproductofferingsandbeabletooffermoreattractivepricingoptions,makingitmoredifficultforustocompeteeffectively.
Ourcompetitors,particularlyourlargercompetitorswithgreaterfinancialandoperatingresources,maybeabletorespondmorequicklyandeffectivelythanwecantoneworchangingopportunities,technologies,standardsorcustomerrequirements.Withtheintroductionofnewtechnologies,theevolutionofourproducts,andnewmarketentrants,weexpectcompetitiontointensifyinthefuture.Forexample,asweexpandourfocusintonewusecasesorotherproductofferingsbeyondsoftwaredevelopmentteams,weexpectcompetitiontoincrease.Pricingpressuresandincreasedcompetitiongenerallycouldresultinreducedsales,reducedmargins,lossesorthefailureofourproductstoachieveormaintainmorewidespreadmarketacceptance,anyofwhichcouldharmourbusiness,resultsofoperationsandfinancialcondition.
Manyofourcurrentandpotentialcompetitorshavegreaterresourcesthanwedowithestablishedmarketingrelationships,largeenterprisesalesforces,accesstolargercustomerbases,pre-existingcustomerrelationships,andmajordistributionagreementswithconsultants,systemintegratorsandresellers.Additionally,somecurrentandpotentialcustomers,particularlylargeorganizations,haveelected,andmayinthefutureelect,todeveloporacquiretheirowninternalcollaborationandproductivitysoftwaretoolsthatwouldreduceoreliminatethedemandforoursolutions.
Ourproductsseektoservemultiplemarkets,andwearesubjecttocompetitionfromawideandvariedfieldofcompetitors.Somecompetitors,particularlynewandemergingcompanies,couldfocusalltheirenergyandresourcesononeproductlineorusecaseand,asaresult,anyonecompetitorcoulddevelopamoresuccessfulproductorserviceinaparticularmarketwhichcoulddecreaseourmarketshareandharmourbrandrecognitionandresultsofoperations.Forallofthesereasonsandotherswecannotanticipatetoday,wemaynotbeabletocompetesuccessfullyagainstourcurrentandfuturecompetitors,whichcouldharmourbusiness,resultsofoperationsandfinancialcondition.
Our distribution model of offering and deploying our products via both the cloud and on premises increases our expenses, may impactrevenue recognition timing and may pose other challenges to our business.
Weofferandsellourproductsviaboththecloudandonpremisesusingthecustomer'sowninfrastructure.Ourcloudofferingenablesquicksetupandsubscriptionpricing,whileouron-premisesofferingpermitsmorecustomization,aperpetualortermlicensefeestructureandcompleteapplicationcontrol.Historically,ourproductsweredevelopedinthecontextoftheon-premisesoffering,andwehavelessoperatingexperienceofferingandsellingourproductsviaourcloudoffering.Althoughasubstantialmajorityofourrevenuehashistoricallybeengeneratedfromcustomersusingouron-premisesproducts,webelievethatovertimemorecustomerswillmovetothecloudoffering,andthecloudofferingwillbecomemorecentraltoourdistributionmodel.Asmoreofourcustomerstransitiontothecloud,wemaybesubjecttoadditionalcompetitivepressures,whichmayharmourbusiness.Further,asmorecustomerselectourcloudofferingasopposedtoouron-premisesofferings,revenuesfromsuchcustomersistypicallylowerintheinitialyear,whichmayimpactournear-termrevenuegrowthrates.Ifourcloudofferingdoesnotdevelopasquicklyasweexpect,orifweareunabletocontinuetoscaleoursystemstomeettherequirementsofasuccessfullarge,cloudoffering,ourbusinessmaybeharmed.Wearedirectingasignificantportionofourfinancialandoperatingresourcestoimplementarobustcloud
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offeringforourproducts,butevenifwecontinuetomaketheseinvestments,wemaybeunsuccessfulingrowingorimplementingourcloudofferingthatcompetessuccessfullyagainstourcurrentandfuturecompetitorsandourbusiness,resultsofoperationsandfinancialconditioncouldbeharmed.
Our business depends on our customers renewing their subscriptions and maintenance plans and purchasing additional licenses orsubscriptions from us. Any decline in our customer retention or expansion would harm our future results of operations.
Inorderforustomaintainorimproveourresultsofoperations,itisimportantthatourcustomersrenewtheirsubscriptionsandmaintenanceplanswhenexistingcontracttermsexpireandthatweexpandourcommercialrelationshipswithourexistingcustomers.Ourcustomershavenoobligationtorenewtheirsubscriptionsormaintenanceplans,andourcustomersmaynotrenewsubscriptionsormaintenanceplanswithasimilarcontractperiodorwiththesameorgreaternumberofusers.Ourcustomersdonotenterintolong-termcontracts,rathertheyprimarilyhavemonthlyorannualterms.Someofourcustomershaveelectednottorenewtheiragreementswithusanditisdifficulttoaccuratelypredictlong-termcustomerretention.
Ourcustomerretentionandexpansionmaydeclineorfluctuateasaresultofanumberoffactors,includingourcustomers'satisfactionwithourproducts,ourproductsupport,ourprices,thepricesofcompetingsoftwareproducts,reductionsinourcustomers'spendinglevels,newproductreleasesandchangestopackagingofourproductofferings,mergersandacquisitionsaffectingourcustomerbaseortheeffectsofglobaleconomicconditions.Althoughitisimportanttoourbusinessthatourcustomersrenewtheirsubscriptionsandmaintenanceplanswhenexistingcontracttermsexpireandthatweexpandourcommercialrelationshipswithourexistingcustomers,giventhevolumeofourcustomers,wedonottracktheretentionratesofourindividualcustomers.Asaresult,wemaybeunabletotimelyaddressanyretentionissueswithspecificcustomers,whichcouldharmourresultsofoperations.Ifourcustomersdonotpurchaseadditionallicensesorsubscriptionsorrenewtheirsubscriptionsormaintenanceplans,renewonlessfavorabletermsorfailtoaddmoreusers,ourrevenuemaydeclineorgrowlessquickly,whichwouldharmourfutureresultsofoperationsandprospects.
If we are not able to develop new products and enhancements to our products that achieve market acceptance and that keep pace withtechnological developments, our business and results of operations would be harmed.
Ourabilitytoattractnewcustomersandincreaserevenuefromexistingcustomersdependsinlargepartonourabilitytoenhanceandimproveourexistingproductsandtointroducecompellingnewproductsthatreflectthechangingnatureofourmarkets.Thesuccessofanyenhancementtoourproductsdependsonseveralfactors,includingtimelycompletionanddelivery,competitivepricing,adequatequalitytesting,integrationwithexistingtechnologiesandourplatformandoverallmarketacceptance.Anynewproductorservicethatwedevelopmaynotbeintroducedinatimelyorcost-effectivemanner,maycontainbugs,ormaynotachievethemarketacceptancenecessarytogeneratesignificantrevenue.Ifweareunabletosuccessfullydevelopnewproducts,enhanceourexistingproductstomeetcustomerrequirements,orotherwisegainmarketacceptance,ourbusiness,resultsofoperationsandfinancialconditionwouldbeharmed.
If we cannot continue to expand the use of our products beyond our initial focus on software developers, our ability to grow our business maybe harmed.
Ourabilitytogrowourbusinessdependsinpartonourabilitytopersuadecurrentandfuturecustomerstoexpandtheiruseofourproductstoadditionalusecasesbeyondsoftwaredevelopers.Ifwefailtopredictcustomerdemandsorachievefurthermarketacceptanceofourproductswithin
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theseadditionalareasandteams,orifacompetitorestablishesamorewidelyadoptedproductfortheseapplications,ourabilitytogrowourbusinessmaybeharmed.
We invest significantly in research and development, and to the extent our research and development investments do not translate into newproducts or material enhancements to our current products, or if we do not use those investments efficiently, our business and results ofoperations would be harmed.
Akeyelementofourstrategyistoinvestsignificantlyinourresearchanddevelopmenteffortstodevelopnewproductsandenhanceourexistingproductstoaddressadditionalapplicationsandmarkets.Infiscal2014and2015,ourresearchanddevelopmentexpenseswere37%and44%ofourrevenue,respectively,andduringthethreemonthsendedSeptember30,2014and2015,ourresearchanddevelopmentexpenseswere43%and45%ofourrevenue,respectively.Ifwedonotspendourresearchanddevelopmentbudgetefficientlyoreffectivelyoncompellinginnovationandtechnologies,ourbusinessmaybeharmedandwemaynotrealizetheexpectedbenefitsofourstrategy.Moreover,researchanddevelopmentprojectscanbetechnicallychallengingandexpensive.Thenatureoftheseresearchanddevelopmentcyclesmaycauseustoexperiencedelaysbetweenthetimeweincurexpensesassociatedwithresearchanddevelopmentandthetimeweareabletooffercompellingproductsandgeneraterevenue,ifany,fromsuchinvestment.Additionally,anticipatedcustomerdemandforaproductorservicewearedevelopingcoulddecreaseafterthedevelopmentcyclehascommenced,andwewouldnonethelessbeunabletoavoidsubstantialcostsassociatedwiththedevelopmentofanysuchproductorservice.Ifweexpendasignificantamountofresourcesonresearchanddevelopmentandoureffortsdonotleadtothesuccessfulintroductionorimprovementofproductsthatarecompetitiveinourcurrentorfuturemarkets,itwouldharmourbusinessandresultsofoperations.
If we fail to effectively manage our growth, our business and results of operations could be harmed.
Wehaveexperiencedandexpecttocontinuetoexperiencerapidgrowth,whichhasplaced,andmaycontinuetoplace,significantdemandsonourmanagement,operationalandfinancialresources.Forexample,ourheadcounthasgrownfrom533employeesasofJune30,2013to769employeesasofJune30,2014to1,259employeesasofJune30,2015.Inaddition,weoperateglobally,sellourproductstocustomersinmorethan160countries,andhaveemployeesinAustralia,theUnitedStates,theUnitedKingdom,theNetherlands,thePhilippines,JapanandGermany.Weplantocontinuetoexpandouroperationsintoothercountriesinthefuture,whichwillplaceadditionaldemandsonourresourcesandoperations.Wehavealsoexperiencedsignificantgrowthinthenumberofcustomers,users,transactionsanddatathatourproductsandourassociatedinfrastructuresupport.Finally,ourorganizationalstructureisbecomingmorecomplexandwemayneedtoscaleandadaptouroperational,financialandmanagementcontrols,aswellasourreportingsystemsandprocedurestomanagethiscomplexity.Wewillrequiresignificantcapitalexpendituresandtheallocationofmanagementresourcestogrowandchangeintheseareas.Ifwefailtosuccessfullymanageouranticipatedgrowthandchange,thequalityofourproductsmaysuffer,whichcouldnegativelyaffectourbrandandreputationandharmourabilitytoretainandattractcustomers.
If our current marketing model is not effective in attracting new customers, we may need to incur additional expenses to attract new customersand our business and results of operations could be harmed.
Unliketraditionalenterprisesoftwarevendors,whorelyondirectsalesmethodologiesandfacelongsalescycles,complexcustomerrequirementsandsubstantialupfrontsalescosts,weutilizeaviralmarketingmodeltotargetnewcustomers.Throughthisword-of-mouthmarketing,we
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havebeenabletobuildourbrandwithrelativelylowsalesandmarketingcosts.Wealsobuildourcustomerbasethroughvariousonlinemarketingactivitiesaswellastargetedweb-basedcontentandonlinecommunications.Thisstrategyhasallowedustobuildasubstantialcustomerbaseandcommunityofuserswhouseourproductsandactasadvocatesforourbrandandsolutions,oftenwithintheirowncorporateorganizations.Attractingnewcustomersandretainingexistingcustomersrequiresthatwecontinuetoprovidehigh-qualityproductsatanaffordablepriceandconvincecustomersofourvalueproposition.Ifwedonotattractnewcustomersthroughword-of-mouthreferrals,ourrevenuemaygrowmoreslowlythanexpectedordecline.Inaddition,highlevelsofcustomersatisfactionandmarketadoptionarecentraltoourmarketingmodel.Anydecreaseinourcustomers'satisfactionwithourproducts,includingasaresultofactionsoutsideofourcontrol,couldharmword-of-mouthreferralsandourbrand.Ifourcustomerbasedoesnotcontinuetogrowthroughword-of-mouthmarketingandviraladoption,wemayberequiredtoincursignificantlyhighersalesandmarketingexpensesinordertoacquirenewsubscribers,whichcouldharmourbusinessandresultsofoperations.
If our security measures are breached or unauthorized access to customer data is otherwise obtained, our products may be perceived asinsecure, we may lose existing customers or fail to attract new customers, and we may incur significant liabilities.
Useofoursolutionsinvolvethestorage,transmissionandprocessingofourcustomers'proprietarydata,includingpotentiallypersonaloridentifyinginformation.Unauthorizedaccessto,orsecuritybreachesof,ourproductscouldresultintheloss,compromiseorcorruptionofdata,lossofbusiness,severereputationaldamageadverselyaffectingcustomerorinvestorconfidence,regulatoryinvestigationsandorders,litigation,indemnityobligations,damagesforcontractbreach,penaltiesforviolationofapplicablelawsorregulations,significantcostsforremediationandotherliabilities.Wehaveincurredandexpecttoincursignificantexpensestopreventsecuritybreaches,includingdeployingadditionalpersonnelandprotectiontechnologies,trainingemployees,andengagingthird-partyexpertsandconsultants.Ourerrorsandomissionsinsurancecoveragecoveringcertainsecurityandprivacydamagesandclaimexpensesmaynotbesufficienttocompensateforallliabilitiesweincur.
Wehaveinthepastexperiencedbreachesofoursecuritymeasuresandourproductsareatriskforfuturebreachesasaresultofthird-partyaction,oremployee,vendororcontractorerrorormalfeasance.
Becausethetechniquesusedtoobtainunauthorizedaccessortosabotagesystemschangefrequentlyandgenerallyarenotidentifieduntiltheyarelaunchedagainstatarget,wemaybeunabletoanticipatethesetechniquesortoimplementadequatepreventativemeasures.Wemayalsoexperiencesecuritybreachesthatmayremainundetectedforanextendedperiodand,therefore,haveagreaterimpactontheproductsweoffer,theproprietarydatacontainedtherein,andultimatelyonourbusiness.
One of our marketing strategies is to offer free trials or a limited free version or affordable starter license for certain products, and we may notbe able to realize the benefits of this strategy.
Weofferfreetrials,alimitedfreeversionoranaffordablestarterlicenseforcertainproductsinordertopromoteadditionalusage,brandandproductawarenessandadoption.Historically,amajorityofusersneverconverttoapaidversionofourproductsfromthesefreetrialsorlimitedfreeversionsorupgradebeyondthestarterlicense.Ourmarketingstrategyalsodependsinpartonpersuadinguserswhousethefreetrials,freeversionorstarterlicenseofourproductstoconvinceotherswithintheirorganizationtopurchaseanddeployourproducts.Totheextentthattheseusers
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donotbecome,orleadotherstobecome,customers,wewillnotrealizetheintendedbenefitsofthismarketingstrategy,andourabilitytogrowourbusinessmaybeharmed.
Our business model relies on a high volume of transactions and affordable pricing. As lower cost, competitive products are introduced into themarketplace, our ability to generate new customers could be harmed.
Ourbusinessmodelisbasedinpartonsellingourproductsatpriceslowerthancompetingproductsfromothercommercialvendors.Forexample,weofferentry-levelpricingforcertainproductsforsmallteamsatapricethattypicallydoesnotrequirecapitalbudgetapprovalandisorders-of-magnitudelessthanthepriceoftraditionalenterprisesoftware.Asaresult,oursoftwareisfrequentlypurchasedbyfirst-timecustomerstosolvespecificproblemsandnotaspartofastrategictechnologypurchasingdecision.Ascompetitorsenterthemarketwithlowcostalternativestoourproducts,itmaybeincreasinglymoredifficultforustocompeteeffectivelyandourabilitytogarnernewcustomerscouldbeharmed.Wemayalsofromtimetotimeincreaseourprices.Additionally,somecustomersmayconsiderourproductstobediscretionarypurchases,whichmaycontributetoreduceddemandforourofferingsintimesofeconomicuncertainty.Ifweareunabletoselloursoftwareinhighvolume,acrossnewandexistingcustomers,ourbusiness,resultsofoperationsandfinancialconditioncouldbeharmed.
We derive, and expect to continue to derive, a substantial majority of our revenue from a limited number of software products.
Wederive,andexpecttocontinuetoderive,asubstantialmajorityofourrevenuefromourJIRAandConfluenceproducts.RevenuegeneratedfromourJIRAandConfluenceproductscomprisedovertwo-thirdsofourtotalrevenuesforeachofthepriorthreefiscalyears.Assuch,themarketacceptanceoftheseproductsiscriticaltooursuccess.Demandfortheseproductsandourotherproductsisaffectedbyanumberoffactors,manyofwhicharebeyondourcontrol,suchascontinuedmarketacceptanceofourproductsbycustomersforexistingandnewusecases,thetimingofdevelopmentandreleaseofnewproducts,featuresandfunctionalitythatarelowercostalternativesintroducedbyusorourcompetitors,technologicalchangesanddevelopmentswithinthemarketsweserveandgrowthorcontractioninouraddressablemarkets.Ifweareunabletocontinuetomeetcustomerdemandsortoachievemorewidespreadmarketacceptanceofourproducts,ourbusiness,resultsofoperationsandfinancialconditioncouldbeharmed.
If the Atlassian Marketplace does not continue to be successful, our business and results of operations could be harmed.
WeoperateAtlassianMarketplace,anonlinemarketplace,forsellingthird-party,aswellasAtlassian-built,add-onsandextensions.WerelyontheAtlassianMarketplacetosupplementourpromotionaleffortsandbuildawarenessofourproducts,andbelievethatthird-partyadd-onsandextensionsfromtheAtlassianMarketplacefacilitategreaterusageandcustomizationofourproducts.Fromitsinceptionin2012toSeptember30,2015,theAtlassianMarketplacehasgeneratedover$100millioninrevenue,includingover$80millioninrevenueforthesethird-partyvendors.Asaresult,wehavegeneratedover$20millioninrevenuefromtheAtlassianMarketplaceduringthisperiod.Ifthesevendorsanddevelopersstopdevelopingorsupportingtheseadd-onsandextensionsthattheysellonAtlassianMarketplace,ourbusinesscouldbeharmed.Inaddition,third-partyadd-onsandextensionsmaynotmeetthesamequalitystandardsthatweapplytoourowndevelopmenteffortsand,totheextenttheycontainbugsordefects,theymaycreatedisruptionsinourcustomers'useofourproducts,leadtodataloss,damageourbrandandreputationandaffectthecontinueduseofourproducts,anyofwhichcouldharmourbusiness,resultsofoperationsandfinancialcondition.
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Interruptions or performance problems associated with our technology and infrastructure may harm our business and results of operations.
Ourcontinuedgrowthdependsinpartontheabilityofourexistingandpotentialcustomerstoaccessoursolutionsatanytimeandwithinanacceptableamountoftime.Inaddition,werelyalmostexclusivelyonourwebsitesforthedownloadingandpaymentofallourproducts.Wehaveexperienced,andmayinthefutureexperience,disruptions,dataloss,outagesandotherperformanceproblemswithourinfrastructureandwebsitesduetoavarietyoffactors,includinginfrastructurechanges,introductionsofnewfunctionality,humanorsoftwareerrors,capacityconstraints,denialofserviceattacksorothersecurity-relatedincidents.Insomeinstances,wemaynotbeabletoidentifythecauseorcausesoftheseperformanceproblemswithinanacceptableperiodoftime.Itmaybecomeincreasinglydifficulttomaintainandimproveourperformance,especiallyduringpeakusagetimesandasourproductsandwebsitesbecomemorecomplexandourusertrafficincreases.Ifourproductsandwebsitesareunavailableorifourusersareunabletoaccessourproductswithinareasonableamountoftime,oratall,ourbusinesswouldbeharmed.Moreover,wedependonservicesfromvariousthirdparties,suchasAmazonWebServicesandNTTCommunications,tomaintainourinfrastructureanddistributeourproductsviatheInternet.Anydisruptionsintheseservices,includingasaresultofactionsoutsideofourcontrol,wouldsignificantlyimpactthecontinuedperformanceofourproducts.Inthefuture,theseservicesmaynotbeavailabletousoncommerciallyreasonableterms,oratall.Anylossoftherighttouseanyoftheseservicescouldresultindecreasedfunctionalityofourproductsuntilequivalenttechnologyiseitherdevelopedbyusor,ifavailablefromanotherprovider,isidentified,obtainedandintegratedintoourinfrastructure.Totheextentthatwedonoteffectivelyaddresscapacityconstraints,upgradeoursystemsasneeded,andcontinuallydevelopourtechnologyandnetworkarchitecturetoaccommodateactualandanticipatedchangesintechnology,ourbusiness,resultsofoperationsandfinancialconditioncouldbeharmed.
Real or perceived errors, failures, vulnerabilities or bugs in our products could harm our business and results of operations.
Errors,failures,vulnerabilitiesorbugsmayoccurinourproducts,especiallywhenupdatesaredeployedornewproductsarerolledout.Oursolutionsareoftenusedinconnectionwithlarge-scalecomputingenvironmentswithdifferentoperatingsystems,systemmanagementsoftware,equipmentandnetworkingconfigurations,whichmaycauseerrorsorfailuresofproducts,orotheraspectsofthecomputingenvironmentintowhichtheyaredeployed.Inaddition,deploymentofourproductsintocomplicated,large-scalecomputingenvironmentsmayexposeerrors,failures,vulnerabilitiesorbugsinourproducts.Anysucherrors,failures,vulnerabilitiesorbugsmaynotbefounduntilaftertheyaredeployedtoourcustomers.Realorperceivederrors,failures,vulnerabilitiesorbugsinourproductscouldresultinnegativepublicity,lossofcustomerdata,lossofordelayinmarketacceptanceofourproducts,lossofcompetitiveposition,orclaimsbycustomersforlossessustainedbythem,allofwhichcouldharmourbusinessandresultsofoperations.
Any failure to offer high-quality product support may harm our relationships with our customers and our financial results.
Indeployingandusingourproducts,ourcustomersdependonourproductsupportteamstoresolvecomplextechnicalandoperationalissues.Wemaybeunabletorespondquicklyenoughtoaccommodateshort-termincreasesincustomerdemandforproductsupport.Wealsomaybeunabletomodifythenature,scopeanddeliveryofourproductsupporttocompetewithchangesinproductsupportservicesprovidedbyourcompetitors.Increasedcustomerdemandforproductsupport,withoutcorrespondingrevenue,couldincreasecostsandharmourresultsofoperations.Inaddition,aswecontinuetogrowouroperationsandreachaglobalandvastcustomerbase,we
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needtobeabletoprovideefficientproductsupportthatmeetsourcustomers'needsgloballyatscale.Thenumberofourcustomershasgrownsignificantlyandthatwillputadditionalpressureonoursupportorganization.Forexample,thenumberofourcustomershasgrownfrom37,250asofJune30,2014to51,636asofSeptember30,2015.Inordertomeettheseneeds,wehavereliedinthepastandwillcontinuetorelyonthird-partycontractorsandself-serviceproductsupporttoresolvecommonorfrequentlyaskedquestions,whichsupplementourcustomersupportteams.Ifweareunabletoprovideefficientproductsupportgloballyatscale,includingthroughtheuseofthird-partycontractorsandself-servicesupport,ourabilitytogrowouroperationsmaybeharmedandwemayneedtohireadditionalsupportpersonnel,whichcouldharmourresultsofoperations.Oursalesarehighlydependentonourbusinessreputationandonpositiverecommendationsfromourexistingcustomers.Anyfailuretomaintainhigh-qualityproductsupport,oramarketperceptionthatwedonotmaintainhigh-qualityproductsupport,couldharmourreputation,ourabilitytosellourproductstoexistingandprospectivecustomers,andourbusiness,resultsofoperationsandfinancialcondition.
Our lack of a direct salesforce may impede the growth of our business.
Wedonothaveadirectsalesforceandoursalesmodeldoesnotincludetraditional,quota-carryingsalespersonnel.Althoughwebelieveourbusinessmodelcancontinuetoscalewithoutalargeenterprisesalesforce,ourviralmarketingmodelmaynotcontinuetobeassuccessfulasweanticipateandtheabsenceofadirectsalesfunctionmayimpedeourfuturegrowth.Aswecontinuetoscaleourbusiness,asalesinfrastructurecouldassistinreachinglargerenterprisecustomersandgrowingourrevenue.Identifyingandrecruitingqualifiedsalespersonnelandtrainingthemwouldrequiresignificanttime,expenseandattentionandwouldsignificantlyimpactourbusinessmodel.Inaddition,addingsalespersonnelwouldconsiderablychangeourcoststructureandresultsofoperations,andwemayhavetoreduceotherexpenses,suchasourresearchanddevelopmentexpenses,inordertoaccommodateacorrespondingincreaseinsalesandmarketingexpensesandmaintainourprofitability.Ifourlackofadirectsalesforcelimitsusfromreachinglargerenterprisecustomersandgrowingourrevenueandweareunabletohire,developandretaintalentedsalespersonnelinthefuture,ourrevenuegrowthandresultsofoperationsmaybeharmed.
Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.
Ourquarterlyfinancialresultsmayfluctuateasaresultofavarietyoffactors,manyofwhichareoutsideofourcontrol.Ifourquarterlyfinancialresultsfallbelowtheexpectationsofinvestorsoranysecuritiesanalystswhofollowus,thepriceofourClassAordinarysharescoulddeclinesubstantially.Factorsthatmaycauseourrevenue,resultsofoperationsandcashflowstofluctuatefromquartertoquarterinclude,butarenotlimitedto:
• ourabilitytoattractnewcustomers,retainandincreasesalestoexistingcustomers,andsatisfyourcustomers'requirements;
• changesinourorourcompetitors'pricingpoliciesandofferings;
• newproducts,features,enhancementsorfunctionalitiesintroducedbyourcompetitors;
• theamountandtimingofoperatingcostsandcapitalexpendituresrelatedtotheoperationsandexpansionofourbusiness;
• significantsecuritybreaches,technicaldifficultiesorinterruptionstoourproducts;
• thenumberofnewemployeesadded;
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• changesinforeigncurrencyexchangeratesoraddingadditionalcurrenciesinwhichoursalesaredenominated;
• theamountandtimingofacquisitionsorotherstrategictransactions;
• extraordinaryexpensessuchaslitigationorotherdispute-relatedsettlementpayments;
• generaleconomicconditionsthatmayadverselyaffecteitherourcustomers'abilityorwillingnesstopurchaseadditionallicenses,subscriptionsandmaintenanceplans,delayaprospectivecustomer'spurchasingdecision,reducethevalueofnewlicense,subscriptionormaintenanceplansoraffectcustomerretention;
• theimpactofnewaccountingpronouncements;and
• thetimingofthegrantorvestingofequityawardstoemployees,directorsorconsultants.
Manyofthesefactorsareoutsideofourcontrol,andtheoccurrenceofoneormoreofthemmightcauseourrevenue,resultsofoperationsandcashflowstovarywidely.Assuch,webelievethatquarter-to-quartercomparisonsofourrevenue,resultsofoperationsandcashflowsmaynotbemeaningfulandshouldnotberelieduponasanindicationoffutureperformance.
If we are unable to develop and maintain successful relationships with channel partners, our business, results of operations and financialcondition could be harmed.
Wehaveestablishedrelationshipswithcertainchannelpartnerstodistributeourproducts.Webelievethatcontinuedgrowthinourbusinessisdependentuponidentifying,developingandmaintainingstrategicrelationshipswithourexistingandpotentialchannelpartnersthatcandrivesubstantialrevenueandprovideadditionalvalued-addedservicestoourcustomers.Ouragreementswithourexistingchannelpartnersarenon-exclusive,meaningourchannelpartnersmayoffercustomerstheproductsofseveraldifferentcompanies,includingproductsthatcompetewithours.Theymayalsoceasemarketingourproductswithlimitedornonoticeandwithlittleornopenalty.Weexpectthatanyadditionalchannelpartnersweidentifyanddevelopwillbesimilarlynon-exclusiveandnotboundbyanyrequirementtocontinuetomarketourproducts.Ifwefailtoidentifyadditionalchannelpartners,inatimelyandcost-effectivemanner,oratall,orareunabletoassistourcurrentandfuturechannelpartnersinindependentlydistributinganddeployingourproducts,ourbusiness,resultsofoperationsandfinancialconditioncouldbeharmed.Ifresellersdonoteffectivelymarketandsellourproducts,orfailtomeettheneedsofourcustomers,ourreputationandabilitytogrowourbusinessmayalsobeharmed.
If we are not able to maintain and enhance our brand, our business, results of operations and financial condition may be harmed.
Webelievethatmaintainingandenhancingourreputationasadifferentiatedandcategory-definingcompanyiscriticaltoourrelationshipswithourexistingcustomersandtoourabilitytoattractnewcustomers.Thesuccessfulpromotionofourbrandattributeswilldependonanumberoffactors,includingourchannelpartners'marketingefforts,ourabilitytocontinuetodevelophigh-qualityproductsandourabilitytosuccessfullydifferentiateourproductsfromcompetitiveproducts.Inaddition,independentindustryanalystsoftenprovidereviewsofourproducts,aswellastheproductsofferedbyourcompetitors,andperceptionoftherelativevalueofourproductsinthemarketplacemaybesignificantlyinfluencedbythesereviews.Ifthesereviewsarenegative,orlesspositiveascomparedtothoseofourcompetitors'products,ourbrandmaybeharmed.
Thepromotionofourbrandrequiresustomakesubstantialexpenditures,andweanticipatethattheexpenditureswillincreaseasourmarketbecomesmorecompetitive,asweexpandintonewmarkets,andasmoresalesaregeneratedthroughourchannelpartners.Totheextentthattheseactivitiesyieldincreasedrevenue,thisrevenuemaynotoffsettheincreasedexpenseswe
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incur.Ifwedonotsuccessfullymaintainandenhanceourbrand,ourbusinessmaynotgrow,wemayhavereducedpricingpowerrelativetocompetitors,andwecouldlosecustomersorfailtoattractpotentialcustomers,anyofwhichwouldharmourbusiness,resultsofoperationsandfinancialcondition.
Our global operations subject us to risks that can harm our business, results of operations and financial condition.
Akeyelementofourstrategyistooperategloballyandsellourproductstocustomersacrosstheworld.Operatinggloballyrequiressignificantresourcesandmanagementattentionandwillsubjectustoregulatory,economic,geographicandpoliticalrisks.Inparticular,ourglobaloperationssubjectustoavarietyofadditionalrisksandchallenges,including:
• increasedmanagement,travel,infrastructureandlegalcompliancecostsassociatedwithhavingoperationsinmanycountries;
• difficultiesinenforcingcontracts,includingso-called"clickwrap"contractsthatareenteredintoonline,onwhichwehavehistoricallyreliedaspartofourproductlicensingstrategy,butwhichmaybesubjecttoadditionallegaluncertaintyinsomeforeignjurisdictions;
• increasedfinancialaccountingandreportingburdensandcomplexities;
• requirementsorpreferencesfordomesticproducts,anddifficultiesinreplacingproductsofferedbymoreestablishedorknownregionalcompetitors;
• differingtechnicalstandards,existingorfutureregulatoryandcertificationrequirementsandrequiredfeaturesandfunctionality;
• communicationandintegrationproblemsrelatedtoenteringandservingnewmarketswithdifferentlanguages,culturesandpoliticalsystems;
• compliancewithforeignprivacyandsecuritylawsandregulationsandtherisksandcostsofnon-compliance;
• compliancewithlawsandregulationsforforeignoperations,includinganti-briberylaws(suchastheU.S.ForeignCorruptPracticesAct,theU.S.TravelAct,andtheU.K.BriberyAct),importandexportcontrollaws,tariffs,tradebarriers,economicsanctions,andotherregulatoryorcontractuallimitationsonourabilitytosellourproductsincertainforeignmarkets,andtherisksandcostsofnon-compliance;
• heightenedrisksofunfairorcorruptbusinesspracticesincertaingeographiesthatmayimpactourfinancialresultsandresultinrestatementsofourconsolidatedfinancialstatements;
• fluctuationsincurrencyexchangeratesandrelatedeffectsonourresultsofoperations;
• difficultiesinrepatriatingortransferringfundsfromorconvertingcurrenciesincertaincountries;
• weakeconomicconditionsineachcountryorregionandgeneraleconomicuncertaintyaroundtheworld;
• differinglaborstandards,includingrestrictionsrelatedto,andtheincreasedcostof,terminatingemployeesinsomecountries;
• difficultiesinrecruitingandhiringemployeesincertaincountries;
• thepreferenceforlocalizedsoftwareandlicensingprograms;
• thepreferenceforlocalizedlanguagesupport;
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• reducedprotectionforintellectualpropertyrightsinsomecountriesandpracticaldifficultiesofenforcingrightsabroad;and
• compliancewiththelawsofnumerousforeigntaxingjurisdictions,includingwithholdingobligations,andoverlappingofdifferenttaxregimes.
Compliancewithlawsandregulationsapplicabletoourglobaloperationssubstantiallyincreasesourcostofdoingbusinessinforeignjurisdictions.Wemaybeunabletokeepcurrentwithchangesingovernmentrequirementsastheychangefromtimetotime.Failuretocomplywiththeseregulationscouldharmourbusiness.Inmanycountries,itiscommonforotherstoengageinbusinesspracticesthatareprohibitedbyourinternalpoliciesandproceduresorotherregulationsapplicabletous.Althoughwehaveimplementedpoliciesandproceduresdesignedtoensurecompliancewiththeselawsandpolicies,therecanbenoassurancethatallofouremployees,contractors,partnersandagentswillcomplywiththeselawsandpolicies.Violationsoflawsorkeycontrolpoliciesbyouremployees,contractors,partnersoragentscouldresultindelaysinrevenuerecognition,financialreportingmisstatements,enforcementactions,reputationalharm,disgorgementofprofits,fines,civilandcriminalpenalties,damages,injunctions,othercollateralconsequencesortheprohibitionoftheimportationorexportationofourproductsandcouldharmourbusiness,resultsofoperationsandfinancialcondition.
We depend on our executive officers and other key employees and the loss of one or more of these employees or an inability to attract andretain highly skilled employees could harm our business.
Oursuccessdependslargelyuponthecontinuedservicesofourexecutiveofficersandkeyemployees.Werelyonourleadershipteamandotherkeyemployeesintheareasofresearchanddevelopment,products,operations,security,marketing,IT,supportandgeneralandadministrativefunctions.Fromtimetotime,theremaybechangesinourexecutivemanagementteamresultingfromthehiringordepartureofexecutives,whichcoulddisruptourbusiness.InOctober2015,ourformerChiefFinancialOfficer,ErikBardman,resignedfromthecompanytofocusonmattersrelatedtoapastemployer,includinganinvestigationofcertainaccountingpracticesentirelywithrespecttosuchpastemployment.MurrayDemowasappointedasournewChiefFinancialOfficerinOctober2015toreplaceMr.Bardman.WhileMr.DemohasservedonourboardofdirectorssinceDecember2011,includingasthechairofourauditcommittee,hehasbeenourChiefFinancialOfficerandanexecutiveofficerforashortperiodoftimepriortothisoffering.Inaddition,wedonothaveemploymentagreementswithourexecutiveofficersorotherkeypersonnelthatrequirethemtocontinuetoworkforusforanyspecifiedperiodand,therefore,theycouldterminatetheiremploymentwithusatanytime.Thelossofoneormoreofourexecutiveofficers,especiallyourco-chiefexecutiveofficers,orkeyemployeescouldharmourbusiness.
Inaddition,inordertoexecuteourgrowthplan,wemustattractandretainhighlyqualifiedpersonnel.CompetitionforthesepersonnelinSydney,Australia,theSanFranciscoBayArea,andinotherlocationswherewemaintainoffices,isintense,especiallyforengineersexperiencedindesigninganddevelopingsoftwareandSaaSapplications.Wehave,fromtimetotimeexperienced,andweexpecttocontinuetoexperience,difficultyinhiringandretainingemployeeswithappropriatequalifications.Inparticular,recruitingandhiringseniorproductengineeringpersonneltoworkinourSydney,Australiaoffice,whereourproductteamisconcentrated,hasbeen,andweexpecttocontinuetobe,challenging.Ifweareunabletohiretalentedproductengineeringpersonnel,wemaybeunabletoscaleouroperationsorreleasenewproductsinatimelyfashionand,asaresult,customersatisfactionwithourproductsmaydecline.
Manyofthecompanieswithwhichwecompeteforexperiencedpersonnelhavegreaterresourcesthanwehave.Ifwehireemployeesfromcompetitorsorothercompanies,theseemployersmayattempttoassertthattheemployeesorwehavebreachedcertainlegalobligations,
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resultinginadiversionofourtimeandresources.Inaddition,jobcandidatesandexistingemployeesoftenconsiderthevalueoftheequityawardstheyreceiveinconnectionwiththeiremployment.Ifthevalueorperceivedvalueofourequityawardsdeclines,itmayharmourabilitytorecruitandretainhighlyskilledemployees.Ifwefailtoattractnewpersonnelorfailtoretainandmotivateourcurrentpersonnel,ourbusiness,resultsofoperationsandfinancialconditioncouldbeharmed.
Acquisitions of other businesses, products or technologies could disrupt our business, and we may be unable to integrate acquiredbusinesses and technologies successfully or achieve the expected benefits of such acquisitions.
Wehavecompletedanumberofacquisitionsandexpecttoevaluateandconsideradditionalstrategictransactions,includingacquisitionsof,orinvestmentsin,businesses,technologies,services,products,andotherassetsinthefuture.Wealsomayenterintorelationshipswithotherbusinessestoexpandourproducts,whichcouldinvolvepreferredorexclusivelicenses,additionalchannelsofdistribution,discountpricingorinvestmentsinothercompanies.
Anyacquisition,investmentorbusinessrelationshipmayresultinunforeseenoperatingdifficultiesandexpenditures.Inparticular,wemayencounterdifficultiesassimilatingorintegratingthebusinesses,technologies,products,personneloroperationsoftheacquiredcompanies,particularlyifthekeypersonneloftheacquiredcompanieschoosenottoworkforus,theirsoftwareandservicesarenoteasilyadaptedtoworkwithourproducts,orwehavedifficultyretainingthecustomersofanyacquiredbusinessduetochangesinownership,managementorotherwise.Acquisitionsmayalsodisruptourbusiness,divertourresourcesandrequiresignificantmanagementattentionthatwouldotherwisebeavailablefordevelopmentofourexistingbusiness.Wemaynotsuccessfullyevaluateorutilizetheacquiredtechnologyorpersonnel,oraccuratelyforecastthefinancialimpactofanacquisitiontransaction,includingaccountingcharges.Moreover,theanticipatedbenefitsofanyacquisition,investmentorbusinessrelationshipmaynotberealizedorwemaybeexposedtounknownrisksorliabilities.
Inthefuture,wemaynotbeabletofindothersuitableacquisitioncandidates,andwemaynotbeabletocompleteacquisitionsonfavorableterms,ifatall.Ourpreviousandfutureacquisitionsmaynotachieveourgoals,andanyfutureacquisitionswecompletecouldbeviewednegativelybyusers,customers,developersorinvestors.
Negotiatingthesetransactionscanbetimeconsuming,difficultandexpensive,andourabilitytocompletethesetransactionsmayoftenbesubjecttoapprovalsthatarebeyondourcontrol.Consequently,thesetransactions,evenifannounced,maynotbecompleted.Foroneormoreofthosetransactions,wemay:
• issueadditionalequitysecuritiesthatwoulddiluteourexistingshareholders;
• usecashthatwemayneedinthefuturetooperateourbusiness;
• incurlargecharges,expensesorsubstantialliabilities;
• incurdebtontermsunfavorabletousorthatweareunabletorepay;
• encounterdifficultiesretainingkeyemployeesoftheacquiredcompanyorintegratingdiversesoftwarecodesorbusinesscultures;and
• becomesubjecttoadversetaxconsequences,substantialdepreciation,impairmentordeferredcompensationcharges.
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Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovativeapproach, creativity and teamwork fostered by our culture and our business could be harmed.
Webelievethatacriticalcontributortooursuccesshasbeenourcorporateculture,whichwebelievefostersinnovation,teamworkandanemphasisoncustomer-focusedresults.Inaddition,webelievethatourculturecreatesanenvironmentthatdrivesandperpetuatesourproductstrategyandlow-costdistributionapproach.Aswegrowanddeveloptheinfrastructureofapubliccompany,wemayfinditdifficulttomaintainourcorporateculture.Anyfailuretopreserveourculturecouldharmourfuturesuccess,includingourabilitytoretainandrecruitpersonnel,innovateandoperateeffectivelyandexecuteonourbusinessstrategy.
We face exposure to foreign currency exchange rate fluctuations.
WhilewesellourproductsexclusivelyinU.S.dollars,weincurexpensesincurrenciesotherthantheU.S.dollar,whichexposesustoforeigncurrencyexchangeratefluctuations.BecausealargepercentageofourexpensesaredenominatedintheAustraliandollarandduetotheAustraliandollar'srecentweakeningpositionrelativetotheU.S.dollar,ourresultsofoperationswerepositivelyimpactedbyforeigncurrencyratefluctuationsinrecentperiods.However,thismaynotcontinue,andfuturefluctuationscouldnegativelyimpactourresultsofoperations.Inaddition,inthefuture,wemaytransactinnon-U.S.dollarcurrenciesforourproducts,and,accordingly,futurechangesinthevalueofnon-U.S.dollarcurrenciesrelativetotheU.S.dollarcouldaffectourrevenueandresultsofoperationsduetotransactionalandtranslationalremeasurementsthatarereflectedinourresultsofoperations.
Wedonotcurrentlymaintainameaningfulprogramtohedgeexposuresinnon-U.S.dollarcurrencies.Moreover,otherthanourU.S.subsidiaries,oursubsidiariesmaintainnetassetsthataredenominatedincurrenciesotherthantheU.S.dollar.Inthefuture,wemayusederivativeinstruments,suchasnon-U.S.dollarcurrencyforwardandoptioncontracts,tohedgecertainexposurestofluctuationsinnon-U.S.dollarcurrencyexchangerates.Theuseofsuchhedginginstrumentsmaynotfullyoffsettheadversefinancialeffectsofunfavorablemovementsinnon-U.S.dollarexchangeratesoverthelimitedtimethehedgesareinplace.Moreover,theuseofhedginginstrumentsmayintroduceadditionalrisksifweareunabletostructureeffectivehedgeswithsuchinstruments.
We are subject to government regulation, including import, export, economic sanctions and anti-corruption laws and regulations, that mayexpose us to liabi