Atlassian is breaking out its economic recession playbook to grab customers with free editions that will convert to paid in the long run.
The enterprise collaboration company, best known for its JIRA products, delivered better-than-expected third quarter earnings, but had an outlook that was a bit light. For the third quarter, Atlassian reported a net loss of $158.8 million, or 65 cents a share, on revenue of $411.6 million, up 33% from a year ago. Non-IFRS earnings were 25 cents a share, 4 cents better than estimates.
As for the outlook, Atlassian projected adjusted earnings of 17 cents a share to 22 cents a share on revenue of $400 million to $415 million. Analysts were expecting earnings of 23 cents a share on revenue of $417.7 million.
But the best reading was the shareholder letter from co-CEOs Scott Farquhar and Mike Cannon-Brookes. Enterprises may want to follow some of Atlassian's playbook for the COVID-19 pandemic.Here are the key takeaways:
Roll out starter editions of cloud products to garner new signups as businesses are looking to cut costs and collaborate in a hurry. The co-CEOs said:
As this crisis began, we quickly looked to add value for teams in a remote-work world. In March, we accelerated the planned full-scale rollout of free cloud editions across our core products - Jira Software, Confluence, and Jira Service Desk. Early results are promising with new sign-ups increasing approximately 125% in recent weeks. Just as with starters in 2009, free cloud editions have the potential to significantly expand our user base, build new long-term relationships, fuel word-of-mouth advocates, and drive millions of user insights to improve our products. We're happily making the trade-off again, choosing long-term gain over short-term ROI.
Ride the trend. Atlassian's Trello collaboration platform launched a Remote Work Hub to highlight best practices and integrations with partners like Slack and Zoom.
Cut prices to boost the top of the marketing funnel. Atlassian cut the price of its introductory core products from more than $1,000 to $10. Atlassian now has 150,000 organizations on starter licenses. In the 2008-2009 downturn, these types of customers gave Atlassian more wallet share over time. Atlassian also uses pricing as part of its go-to-market strategy, which revolves around word-of-mouth over an enterprise sales force.
Hire because there is talent on the market. Atlassian said:
Against a work-from-home backdrop, March represented the strongest month of hiring in our history. We welcomed approximately 200 new members to our team. The IT and HR teams didn't miss a beat in delivering hundreds of laptops and welcome kits across 8 countries, each with a fully digital onboarding experience.
Now Atlassian was already a strong company with $2 billion in cash and investments. In that way, Atlassian has a luxury many companies lack, but pandemics have a way of making the strong stronger.