Atlassian : Third Quarter 2024 Shareholder letter

From the CEOs

Fellow shareholders,

It's been a milestone quarter for the Atlassian history books.

Today, Atlassian is a cloud-majority company. We have over 300,000 customers using our Cloud products and have seen a 3x increase in paid seats in the cloud since we announced the end-of- support for our Server products three and a half years ago. As we watched our dashboard tracking paid Server users reach zero, we reflected on how daunting this mountain appeared when we first drew up plans to sunset our Server offerings.

And while this milestone is just that - one significant moment amongst many across our multi- year journey - we are chuffed with our accomplishments. Overall, we migrated more paid seats to the cloud than we had initially projected, underscoring the innovation we've been shipping and our customers' desire to make the switch. We've also consistently seen lower-than-expected churn from our Server base, which speaks to the mission-critical role our products play and value they deliver. As we look ahead, we have an even larger opportunity in the cloud than we had originally believed. We'll continue to execute against our roadmap to pave the path for our Data Center customers to realize the innovation that can only be found in the Atlassian cloud.

However, this quarter will be marked by more than a momentous cloud milestone. After an incredible 23 years, Scott Farquhar has made the decision to step down as co-CEO. Scott's last day as co-CEO will be August 31, 2024. He will remain active as a Board member and assume a special advisor role.

The contribution Scott has made in founding and building Atlassian is impossible to quantify, but can best be illustrated by the tens of thousands of jobs created, the hundreds of thousands of customers supported, and the millions of daily users around the world whose lives are improved by Atlassian's software. Atlassian paved the way for other Australian technology companies and continues to do so today.

Scott steps away to spend more time with his young family, improve the world via philanthropy, and help further the technology industry globally. Rest assured, there will be many moments of thanks and celebration of the incredible impact Scott has made in the coming months.

Mike will continue to lead as CEO as Atlassian pursues its mission to unleash the potential of every team and capitalize on its strengths in the AI era.

Atlassian in the AI era

Atlassian is uniquely positioned to harness its competitive edge in the AI space.

By combining the transformative power of AI with our 20+ years of data and insights into how teams plan, track, and deliver work, we can increase the velocity at which teams move work forward. And because we lead with R&D (as opposed to marketing or pricing), we focus on shipping high-quality features that drive user adoption by delivering value from day one.

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Last quarter, following the general availability (GA) announcement of Atlassian Intelligence, we said we'd be shipping new AI features at a healthy clip. In March we shipped the capability to create automation rules in Jira using natural language, powered by Atlassian Intelligence. With a simple description of what to automate, users can quickly create automation rules and let Atlassian Intelligence take care of the intricate process of formulating these rules.

We also continued to thread Atlassian Intelligence throughout Jira Service Management to help teams deliver exceptional employee support. By rolling out advancements to the Virtual Agent as well as AI-powered

summaries and agent recommendations, we're making it dead simple for 1) employees to self-serve and get help fast; and 2) support agents to provide help faster. In addition, the new AI-powered service desk configuration capabilities make it even easier for teams beyond IT (e.g., HR, facilities, legal) to configure service desks tailored to their needs.

We're already seeing many of our customers benefit from the power of AI and virtual agent

capabilities. FanDuel Group, a driving force in a multi-billion dollar gaming industry, cut tickets that require human intervention by 85%. Similarly, OVO Energy, a renewable energy leader with 4 million customers, is resolving 23% of all support requests in less than 5 seconds.

AT L A S S I A N + O V O E N E R G Y

"Atlassian Intelligence has helped our DevOps practices by reducing context- switching. We leveraged the virtual agent to create an AI-powered Developer Assistant to streamline support for developers in Slack; this means they can get help without having to leave their favorite tools. Alongside AI answers and issue summaries, harnessing Atlassian Intelligence to reduce distractions has led to a boost in our developer experience."

Martin Brignall

Developer Tooling Specialist at OVO Energy

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Our approach has translated to over 30,000 customers enabling Atlassian Intelligence, with monthly active users (MAU) increasing 3x since launching into GA in December 2023. And the early feedback we're hearing demonstrates the value these customers are realizing. Weekly users of Atlassian Intelligence in Confluence tell us they're saving over 45 minutes a week on average, and 77% of users report saving time using AI search functions.

This is just the tip of the iceberg when it comes to the customer impact we can make in the AI space. We have the talent, resources, and platform capabilities to harness the unique data and deep knowledge of teamwork we've built over years of helping millions of teams drive mission-critical work forward. We're eagerly awaiting Team '24, where we'll take the stage and unveil more ways in which we'll unleash the potential of Atlassian customers through Atlassian Intelligence.

A consistent innovation drumbeat

We had a busy Q3 shipping an array of innovations to support our customers.

Earlier this quarter, we delivered AI enhancements across Loom for better async video collaboration. Loom was subsequently named one of Fast Company's Most Innovative Companiesin the workplace category. This reinforces our belief that the rise of distributed work will mean async video increasingly becomes a communication mode of choice alongside text, presentations, and worksheets for the next generation of working professionals.

We're already seeing this culture change play out, with more and more customers choosing to collaborate via Loom in order to reduce real-time meetings.

AT L A S S I A N + W E B S T RAT E G I E S

"I prefer Loom for the organization capabilities in the platform and the AI summaries layered on top for the added gained efficiencies. Fifteen meetings [were] eliminated after switching to Loom in the second half of 2023."

Caroline Hall Prettyman

Senior Manager, HubSpot Strategy, WebStrategies inc.

Turbocharged by new AI capabilities, 23 million videos have been enhanced via Loom AI, boosting viewer engagement by 18%. We're excited to continue innovating in this space in order to help teams collaborate in richer, more human ways.

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We also launched Confluence whiteboards into GA, a dynamic and interactive feature that facilitates ideation and collaboration, turning the in-person team whiteboarding experience into an effortless digital experience. We shipped recent enhancements like dark mode,

as well as smart sections, which take the effort out of making updates to Jira issues after planning sessions.

With Confluence whiteboards, customers can avoid adding another tool to their organization, instead consolidating their collaboration tools to where their work is getting done - right in Confluence. One large technology company is saving $60,000 a year by using Confluence whiteboards instead of competitor tools. To date, over 600,000 Confluence whiteboards have been created, capturing the beginning of millions of bright ideas.

AT L A S S I A N + T RU S T B A N K

"Confluence whiteboards have helped Trust Bank collaborate more effectively across our teams, especially in the discovery and delivery phases of our product development. This has allowed us to visualize and align on development plans and key priorities, raise and identify risks and blockers early, and track progress on key items at a glance."

Stewart Gray

Agile Coach, Trust Bank

We also are excited to announce we've acquired Optic, an API documentation and management tool that makes it easy for developers to publish accurate API documents, avoid breaking changes, and improve the design of their APIs. Adding Optic to Compass will accelerate our ability to empower engineering teams and improve productivity by helping developers find the documentation they need and ship faster. Customers will be better able to keep accurate, useful, and relevant API documentation to improve how they build and operate software.

While our product suite serves customers' core needs around aligning, planning, and sharing work, our Marketplace extends the product's capabilities to cover specialized use cases. In Q3, the Atlassian Marketplace surpassed $4 billion in lifetime sales. More than 1,800 Marketplace partners have built more than 5,700 apps and integrations, delivering even more value and innovation to our customers. This is a testament to our philosophy of having an open, extensible, yet flexible foundation.

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A landmark quarter for our cloud future

We're proud as punch to showcase our cloud progress to date.

When we announced we'd be sunsetting Server products three and a half years ago, we knew this change would require a big transition for us and for our on-premises customers. But we also knew that it would accelerate our progress in driving the future of teamwork. At the same time, we've always maintained cloud migrations would be a multi-year journey and Server's end-of- support would be one milestone on that journey.

Today, the Atlassian cloud is powering more than 300,000 customers like NASA, Reddit,

Rivian, Domino's Pizza Enterprises Ltd, and Paypal. Our customers now have more paid seats in Cloud products than in on-premises deployments. In fact, 94% of customers who use Jira Software, Confluence, and/or Jira Service Management have a presence in the cloud. What's more, after migrating to Cloud, our customers are telling us they're experiencing greater productivity and collaboration:

Customers benefit after migrating to Cloud

27%	47%	44%
Average productivity	Average improvement	Improvement in their ability
increase	in cross-functional	to make insight-driven
	collaboration	decisions more quickly

Source: TechValidate survey of 487 migrated Atlassian customers

The program to sunset our Server products has been an overall success. We beat our original expectations in both the number of paid seats migrated to Cloud and in customer churn. These numbers reflect the immense effort of teams right across Atlassian. What's even more exciting is that we have an even bigger opportunity than we originally believed, as Data Center customers migrate to Cloud in the coming years.

Paid seats by deployment

KEY

Cloud

Data center

Server

Beginning	Ending	Future
(10/31/20)	(3/31/24)

Notes:

Ending balance includes an estimate of active Server seats post-end of support date. Future is illustrative of the paid seat composition at an unspecified future date.

Data Center to Cloud Migrations

FY21

FY22

FY23

FY24E

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Data Center has proven to be a stepping stone for our customers to ultimately get to the cloud. We've already seen strong Data Center to Cloud migration success, and that progress has been building each year.

This reflects the deep relationships we've built with our largest customers, the significant

advancements we've made in building enterprise platform capabilities, and the strong desire from customers to move to Cloud.

In order to pave the way for our Data Center customers, we've been laser-focused on advancing our enterprise-gradecloud platform. We've been consistently increasing the scale of our Cloud products, meeting critical regulatory compliance standards, and enhancing data governance.

Steady delivery on our Cloud roadmap

Each quarter that we've shipped a new capability, we've seen customers from highly regulated industries make the move to Cloud thereafter. A few examples:

• Healthcare: Castlight and CHC Healthcare
• Financial Services: EMC Insurance, EQ Bank and Finoa
• Government: UK Driver & Vehicle Licensing Agency
• Highly regulated regions: The European Union, where customers like Software AG and Voith reside.

And on the heels of announcing our Canada data residency option last quarter, we added multiple new regions in Q3 that will unlock Cloud for even more customers including the United Kingdom, Japan, Switzerland, India, and South Korea.

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Once customers experience Cloud, the value is clear. With the additions of platform features like automation, Atlassian Analytics, and Atlassian Intelligence, customers are getting more bang for their buck, and teams are able to work faster and smarter, together.

As our largest customers migrate from Data Center to Cloud, we've had the opportunity to engage more deeply, build strategic relationships, and open the door to conversations with customers who want to do more with us. That might be consolidating tools onto the Atlassian platform, adding more products to address their challenges, or upgrading to higher-level editions to take advantage of more advanced capabilities.

One such success story is the State of Utah, a customer whose vision is to be a technology leader that delivers value and simplifies the lives of Utah residents.

State of Utah

Several teams across the state government were already using Atlassian tools, including Trello, Jira Software, Bitbucket, Confluence, and Atlassian Access. Trello had become particularly popular as an intuitive project management tool that anyone could learn fast. As it spread quickly and organically, the IT team utilized Atlassian Access and reinforced to leadership the need for a more centralized, secure, cloud-based ecosystem.

IT was able to convince leadership to migrate and consolidate on Atlassian's cloud

platform. Not only would they save money, but it would also reduce the IT team's pain points, allowing them to be more strategic by giving them just one platform to manage.

Today, the State of Utah relies on an integrated ecosystem of Enterprise edition tools to serve its constituents:

• Jira Software for continuous integration and continuous delivery (CI/CD)
• Bitbucket for securely storing code
• Trello for non-technical project management
• Confluence for knowledge management
• Atlassian Access for single sign-on and enterprise-grade identity management

The State of Utah has been able to unlock efficiency and effectiveness in the cloud to transform the way they work. Prior to Jira, they were using 14 different project management systems. But a move to Jira Cloud meant a speed up provisioning, improved collaboration and project management, and more transparency into projects across the State of Utah.

This example is not an uncommon one. As we work with Data Center customers on their journey to Cloud, these conversations are happening more frequently. Atlassian is heads-down and focused on execution so we can help customers realize their full potential, which will ultimately be unleashed in the cloud.

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More to come at Team '24

We're excited to be hosting our flagship user event, Team '24, in Las Vegas next week. This will be a three-day live event, April 30 - May 2, where we unveil plenty of new product features, along with breakout sessions, interactive labs, hands-on training, and networking opportunities for our customers.

We'll also be holding our Investor Day at Team '24 on May 1st, with a live stream option for those who can't make it to Vegas. We hope to see you there!

M I K E & S C O T T

Mike Cannon-Brookes	Scott Farquhar
Co-founder and co-CEO	Co-founder and co-CEO

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Joe Binz

Chief Financial Officer

Financial highlights

Third quarter fiscal year 2024 financial summary

(U.S. $ in thousands, except percentages and per share data)

A reconciliation of GAAP to non-GAAP measures is provided within the tables at the end of this letter, in our earnings press release, and on our Investor Relations website.

Third quarter fiscal year 2024 highlights

Strong migrations and enterprise sales execution drove revenue, gross profit, and operating income ahead of our expectations.

We delivered record billings and surpassed $1 billion in subscription revenue driven by growth in our Cloud and Data Center businesses. Strong customer retention drove record migrations as we ended support for our Server offerings, resulting in better-than-expected Data Center and Marketplace revenue. Gross profit and operating income benefited from revenue outperformance and disciplined cost management.

We continue to execute well against our long-term objectives of consistently delivering differentiated value and innovation to customers, making meaningful progress on our cloud roadmap, and building new capabilities to better serve enterprise customers. The strong migrations to Data Center this quarter demonstrate not only customer commitment to the Atlassian platform but also the significant opportunity we have to deliver sustained, long-term Cloud revenue growth in the future.

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