Good afternoon, ladies and gentlemen. Thank you for joining Atlassian's Earnings Conference Call for the Q4 of fiscal 2017. As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Atlassian's website following this call. All participants will be in listen only mode. I will now hand the call over to Ian Lee, Arasen's Head of Investor Relations.
Please go ahead.
Good afternoon and welcome to Atlassian's 4th quarter fiscal 2017 earnings conference call. On the call today, we have Atlassian's Co Founders and CEOs, Scott Farquhar and Mike Cannonbrooks in Sydney and our Chief Financial Officer, Marty Dimo and our President, Jay Symonds in San Francisco. Earlier today, we issued a press release and a shareholder letter with our financial results commentary for our Q4 fiscal year 2017. These items are also posted on the Investor Relations section of Atlassian's website at investors. Atlassian.com.
On our website, there is also an accompanying presentation and data sheet available. We'll make some brief opening remarks and then spend the rest of the call on Q and A. Statements made on this call include forward looking statements. Forward looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from our future results, performance or achievements expressed or implied by the forward looking statements. You should not rely upon forward looking statements as predictions of future events.
Forward looking statements represent our management's beliefs and assumptions only as of the date such statements are made. In addition, during today's call, we will discuss non IFRS financial measures. These non IFRS financial measures are in addition to and not as a substitute for or superior to measures of financial performance prepared in accordance with IFRS. There are a number of limitations related to the use of these non IFRS financial measures versus the nearest IFRS equivalents and may be different from non IFRS measures used by other companies. Reconciliation between IFRS and non IFRS financial measures is available in our earnings release, our shareholder letter and in our updated investor data sheet on our IR website.
Further information on these and other factors that could affect the company's financial results is included in filings we make with the Securities and Exchange Commission from time to time, including the section titled Risk Factors in our most recent Forms 20 F and 6 ks. Before we proceed with the call, a quick reminder that we'll be holding our 1st investor and financial analyst session at our U. S. User conference Atlassian Summit at the Hilton San Jose. The investor and analyst session will be held on September 13th, beginning at 1 pm Pacific Time.
Attendees at the session are also welcome to attend the open keynotes and breakout sessions at U. S. Summit. These are being run on September 13 14th at San Jose Convention Center. I'll now turn the call over to Scott for his brief opening remarks before we move to Q and A.
Good afternoon. Thanks everyone for joining today. We capped off fiscal 2017 with another great quarter. We grew revenue 37% year over year and generated over $44,000,000 of free cash flow. For the full year, revenue grew by 36% year over year to almost $620,000,000 with over $183,000,000 of free cash flow and more than 28,000 net new customers.
We now have over 89,000 customers in total and have 100,000 customers firmly in sight. Mike and I mentioned our shareholder letter that has now been 15 years since we started Atlassian. So much in workplace technology has changed dramatically over that time. Fax machines and pages seem like distant memories now that we communicate in real time with our teams through group messaging and video conferencing. Some things remain the same though.
Teams still hold the key to making meaningful progress and teamwork is still hard. Our mission to unlist the potential in every team is more important than ever. We help millions of workers at thousands of companies get the job done whether that's operating in National Railway, designing the car of the future, or reporting on the latest news. We believe openness is a critical component to changing how teams work. Our products are pioneering new ways for teams to create, share, organize and connect through more fluid and open approaches.
Our products remove barriers within and between teams giving us simple ways to plan, collaborate and deliver work. We help create more effective teams and as a result fanatical and loyal users and vocal champions of new ways of working. We took many steps forward in fiscal 2017 and fiscal 2018 was even more promising. Mike, I and the rest of the team are looking forward to sharing more about our business and what's in store for the future at the Atlassian Summit in September. Separately, we also announced today that our CFO, Murray Dimo will be leaving Atlassian on December 31, 2017 to focus on his corporate and non profit Board work.
After serving on Atlassian's Board for 4 years, Murray joined as CFO in 2015 to help support our transition to a public company. We will soon begin our search for a CFO to succeed him. Mike and I really appreciate everything Murray has done for Atlassian over the past 6 years. With that, I'll turn the call over to the operator for Q and A.
We will now begin the question and answer First question comes from John DiFucci with Jefferies. Please go ahead.
John, are you there?
I'm sorry. Can you hear me now?
Sorry about that. Sorry about that.
It's going through it as I'm mute. I got to learn how to do this. The question I have is, I think it's for Murray, but Scott, if you have any comments too. The numbers look really good here. The top line really validates what looks to be a robust opportunity, which we believe and we want to always measure.
But expenses were a bit higher than what we had modeled. And I'm just wondering what the cause of that might have been. Was it the integration of the acquisitions? Or was it more investment in cloud? Because it sounds like that's really taking off and you have to invest there more.
Is it if you can comment on that, that'd be great.
Hey, John, this is Murray. I'll take that. A couple of things. One is that in the 4th quarter, we had our 1st European Summit. So there was additional expenses around that event.
It was a very successful event for us and that obviously would have gone through the marketing and sales line. We also had some other discrete expenses in the quarter where we made some investments in various projects as well as we did some additional advertising and marketing spend in the quarter and that brought us to a 14% operating margin that we had guided for the quarter. It was not headcount related, it was more on just various activities we had. Just keeping in mind that at the outset of the year, we targeted an operating margin of 15% and we achieved 17% for the year. And so we continue to look at expenses carefully, believe in our leverage model and we look forward to our fiscal 2018 targets.
Okay, great. And if I could follow-up Maurice since I get just to get this question out of the way. Whenever a CFO leaves a company as sort of keeper of the numbers, there's always some investor concern. Like I said, the numbers look good here. And Scott, in his opening remarks, talked about 2018 being an even better opportunity.
But if you could, in your words, can you help to comment here a little bit on your I guess relative to your expectations for Atlassian's future financial performance?
Well, first of all, I think it's typical to or wise if there's going to be a CFO transition to do it on the fiscal year. First of all, obviously, we have an audit for our full year. And so we couldn't be releasing earnings unless we had gotten through all of that. So no one should be worried about any kind of accounting issues. Clearly, we're also giving guidance for the full year of fiscal 2018.
So it's always a question, hey, does the CFO see something here? Well, look at our targets for next year. We're very excited about where we're going in fiscal 2018. So kind of on the fiscal year is a wise time to do it and was the same as I did in 2 prior public companies. I am super excited by the opportunity for this company.
You've heard it for since we've been public about just a huge opportunity, the size of our market, the great products we have or how they compelling pricing, the value of our products and our frictionless model. And I am more convinced today than ever that this is a terrific model with a huge opportunity and I am very bullish on the company going forward.
That's really helpful. Thank you very much.
Yes.
The next question comes from Bhavan Suri with William Blair. Please go ahead.
Hey, guys. Can you hear me okay?
Yes, I hear you fine.
Yes, great. Thanks for taking my question and congrats. Nice job there on the numbers and guidance. Mario, obviously, I'll be sad to see you go, but best of luck. Just a question on the product pricing.
Obviously, it's been announced that we've seen a number of things come out. I guess just touching on Service Desk, you had really good growth. You sort of stated fastest growing product. I'd love to know how that's going vis a vis expectations. And given sort of the pricing umbrella, you guys have way lower price than anyone else.
I guess I was just trying to understand, guys, why you lowered price on Service Desk, when you sort of raised it on conference, just sort of the strategic thought process there would be really helpful.
Hey, Bhavan. This is Jay. Just to tackle the first part of the question, really pleased with Jira Service Desk's growth. I mean outside of Jira Software and Confluence, that is one of our largest products and a quick grower. I think still early in a market that's expanding in front of us, both in terms of the internal help desk use cases and then also the external service and support use cases where Jira Service Desk for our customers' customers gets closely connected to what they're doing with our other products around the software that they're building.
So, I think great opportunity in front of us and even though we're licensing per user, even though we're licensing per user, the user that we're actually licensing is the agent. So it's a little different. In most of the other products, every user is effectively an equal user of Jira Software or Confluence or HipChat or Trello. In the case of Jira Service Desk, a lot of companies basically measure the value that they're getting on the number of agents that are servicing a wide variety of either regular or itinerant customers that are basically asking for help. And so that's sort of the, I think, the rationale there.
Hey, Bhavan, it's Murray. I'd also add that we're in it for the long game here. And as Jay said, Service Desk, it's doing very well relative to how we're looking at it internally. So it's not a reaction from a competitive standpoint. It's just that we are in it for the long haul and the product is still just growing really fast is emerging to be one of our largest products.
Got it. That's helpful. One quick follow-up on Confluence. We have talked about it at the Pembry. I know you and I have too.
But obviously, the integration with Jira has helped a lot. But we've also heard a sort of standalone implementation of Confluence where people are taking content management system, potentially ShareFile and replacing them sorry, SharePoint, Microsoft SharePoint and replacing them with Confluence. Is that something that's one off or are you starting to see that happen on a more regular frequent basis? Again, not easy material, but sort of just trying to think through if that's something that you guys are seeing more frequently? Thank you.
Yes. Hey, Bhavan. The frequency isn't necessarily increasing. I think it's been
kind of a
common expansion use case for Confluence over its history. And it can start within a team and I think as it builds more momentum and attracts more teams, I think it becomes the user choice for how content gets created and shared. And so I think in some cases, companies might move off SharePoint in favor of standardizing on Confluence wall to wall. In other cases, it's often that it coexists. There's an integration connector and add on in the marketplace that connects Confluence to SharePoint.
So some parts of the organization might still use office documents heavily and put them in a SharePoint and then sync or connect them back into Confluence for better way maybe to iterate and share with other teams.
Got it. Helpful, guys. Thank you for taking my questions.
Next question comes from Heather Bellini with Goldman Sachs. Please go
ahead. Great. Thank you for taking the question. And Murray, best of luck in your going back to the Board roles. Quick question, a couple of questions.
The first one was on the new product, the premier products that you offer, the data center products. I'm just wondering if you could share with us what the revenue uplift might look like as people upgrade to the data center offering? And then I noticed you said Trello was I think $3,000,000 in the quarter. And I believe you talked about last quarter that being $20,000,000 as a target. Is that still intact?
Thank you.
Hey, Heather, it's Murray. I think
I missed that part of that on the data center what the question was and if you could just repeat
that one for you. What's the price uplift for the new products that you mentioned, the data center products plus the premier support services? How do we think of the uplift that you could get as your customers migrate to that?
Yes. Hey, Arthur, I might take that. It sort of depends on tier. At the 500 user and 1,000 user tier, it's basically a wash. What the customer is doing is moving from their maintenance model for the perpetual license to a subscription, it's sort of roughly the equivalent cost.
And then as you move up tiers, it kind of varies. It can be anywhere from 2 to 3 times as much depending on the tier. And again, data center, what they're upgrading to is subscription from perpetual licensing.
Hey Heather, it's Murray. Two things. 1 is, on our Investor Day, we are going to talk more about pricing. So we will be able to help folks better understand some of those relationships. In terms of the target for revenue for next year, it assumes approximately $20,000,000 for Trello, same as what we had stated on the last call.
Great. Thank you very much.
Next question comes from Gregg Moskowitz with Cowen and Company. Please go ahead.
Hi, this is Matt Broom on for Greg. Thanks for taking my call. So I guess it's somewhat early, but has there been any cross selling of Trello to Jira and Confluence or vice versa?
Yes. Hi, Matt. I can take that. It's Mike. Look, I'd say on Trello, things are going really, really well on both the integration and the product front.
So we've only just started, you'll see announcing and talking about Trello to our customer base. So European Summit, as mentioned on the intro remarks in Barcelona in May, was the first time that our customer base really been exposed in a personal level. Obviously, again in September, we'll start to do that. So pretty happy with how we see Trello fitting in. If anything, I would say no major surprises on the integration and the last few months have really reinforced that the people and culture as well as the product of Trello fit brilliantly inside the Elassian family.
We have said that we're not going to rush into cross selling the product aggressively into the audiences. It's very early in that pace. And like is our sort of DNA, we're going to pragmatically do what makes sense for both businesses. And Trello has built an amazing product and an amazing business. And priority number 1 is to continue that momentum for us.
And priority number 2 is to build obviously connections between the families.
Okay, great. Thanks. And guess I would expect the sales cycles could be quite a bit longer than usual, but what are your expectations for adoption of Atlassian STAT going forward?
It's early days and we just announced the Atlassian stack and just to remind people what it is, it's basically straightforward packaging of all of the data center individual data center products into a single license that customers can purchase at once. So, I think over half of companies with more than 500 users have 3 or more products. That's the cohort that we're focused on upgrading to data centers. They achieve scale and continue to grow with Atlassian. So, I would say it's still early.
Customers have the ability to either add data center a la carte 1 at a time as they're ready to basically move from a single server to the high availability clustered configuration that data center provides or if they're interested in basically upgrading the entire server family to data center, they can do that and stack offers basically a 25% discount off of the a la carte.
Perfect. Thanks very much.
The next question comes from Rob Oliver with Baird. Please go ahead.
Great. Thanks guys for taking my question. Murray, you mentioned on the expense question earlier about some of the additional marketing expense. I know you guys hired a CMO in May. So just curious if that additional marketing cost was somehow correlated with that?
And if not, if you guys could speak a little bit more broadly about some of his initiatives here early on? Thank you.
Yes, Rob, it's Murray. I'll turn over that to Jay as far as what Robert is going to be focusing on. But it was not correlated to his arrival. It was just other things that we were focused on in sales and marketing and also some activities we did in G and A. We also with the European Summit, we launched more languages, local languages of our products, which incurred costs through our cost in our gross margins.
That was a little lighter because of that. So there's a lot of discrete items in the quarter of which sales and marketing made a part of it.
And hey, Rob, this is Jay. I would just say that we're really excited about Robert. He had a long and storied career at eBay and what he will focus on I guess is like 3 main things. One would be, he is going to be familiar with our high velocity, high volume automation model, right? He's going to be familiar with the sort of the patterns that we see in the way that we're building awareness and converting into active happy customers and then growing with products.
Sort of a motion that you'll be familiar with. So continue to scale that part of the growth machine. 2nd, we are a really interesting brand opportunity. I mean we want to be a household name inside of every workplace globally around teamwork and what teams can do. So continuing to build the brand and having more resonance around all the products that are changing the way that modern teams function and work is a big part of what he'll do.
And then finally, 3rd, a big part of our business is just the fanatical customer base that has appreciates basically the change that our products help introduce for their teams and activate as evangelists kind of around the globe. And I think there were a lot of people that had the same sort of activation evangelism at eBay, so continuing to grow and scale that.
Hey, Rob, it's Murray. Just some more on the expenses that I wanted to make sure that everybody saw in our shareholder letter and that really is referenced to fiscal 2018. We provided a target of operating margin of 18% to 19% for fiscal 2018. We also provide a little bit of color about how to think about the 4 quarters of fiscal 2018. The first three quarters we said will be relatively consistent op margins and the 4th quarter will be higher.
There are a number of things going on. This year we have our U. S. Summit. It's in Q1.
It's normally in Q2. So you should think in terms of the sales and marketing expenses being higher in Q1 this year because of some of the activities that we have going with Summit. We also have a number of very important IT projects and other infrastructure projects going on that will involve some consulting expense and those kinds of things that are going to span sort of Q1 through Q3. And then in January 1st, we have our employees, it's the annual salary increase time. And so those things will kind of play across the first three quarters.
As we get into the Q4, some of those things now wane in terms of some of the projects and we wouldn't have the U. S. Summit, obviously, it's in Q1. And so that's why the Q4 now we see a higher margin and the leverage that comes with greater revenue expanding as we finish out 2018.
That's very helpful guys. Thank you very much.
Next question comes from Sanjit Singh with Morgan Stanley. Please go ahead.
Hi. Thank you for taking the question. And Murray, sorry to see you go, but best of luck in your next endeavors. I guess I wanted to step back and maybe ask a longer term question. If you just extend the trend lines, you guys are going to become a $1,000,000,000 business in the next couple of years.
And so my question is, is previous software companies that have been fortunate enough to hit that $1,000,000,000 revenue milestone, they've had to either had some growing pains or they've had to make some changes to the organization to realign for overall larger scale. And So I guess the question for you guys is, do you see any changes that you guys would have to make as you guys become a $1,000,000,000 company? Or do you feel like this the model that you have today, the organizational structure that you have today supports scaling right past that $1,000,000,000 revenue threshold?
Yes, Sanjeet, Scott here. Well, thanks for that. I mean, we all look forward to that day if it comes. But the thing we've always looked at over is building a long term company and we have since the start since 15 years ago, we've always wanted to build a multi generational long term company. And so that hasn't changed through being a private company, being a public company through every revenue threshold we've had.
There's always change internally in terms of how we tweak the model and how we build and add new product to our stable products over time. But the thing we've always been true to is that sort of high velocity model and the fact that we're after the Fortune 500,000 and we really want to be for people everywhere. And so there will be tweaking changes over time, but I wouldn't look at anything drastic that we need to do in the next coming years to achieve our mission, unleashing the potential of every team. I think we're really well set up for that. We operate in really big markets.
Our products are really respected and brought in by our customers and we continue to do that as we grow.
Right. That's really helpful. And then Murray, maybe just a follow-up for you. In terms of your CapEx guidance, it does imply a pretty significant increase over this past fiscal year. So I just wanted to see what the investments are there.
I assume it's sort of related to the cloud infrastructure, but wanted to get a sense of whether that's the sort of the new level we should think about going forward? And then in terms of the pricing impact, are we still thinking about a low single digit impact for fiscal year 2018 revenue?
Yes, Sanjeet. So our CapEx as we are transitioning to really having a public cloud provider doing all the hosting for us as opposed to ourselves, the amount of CapEx that we'll have going forward that's involved in acquiring servers and things like that is diminished rapidly. And for the most part, our CapEx on a go forward basis is going to be tied to facilities. That's what we really got here in fiscal 2018. We've grown in headcount.
We'll grow again in headcount this year. And as you know, with facilities, you go through a stair stepping. They don't sort of happen every year. It's just this year, we're going to have more in terms of leasehold improvements and just building out some of the facilities that we're expanding in the San Francisco Bay Area and other parts of the world. And that's really what it is.
It's not about buying IT equipment or servers and things like that. So it's going to be it will be kind of there will be a year where we will have more around facilities activities and there will be other years that we won't and we didn't have as much in fiscal 2017.
Great. Thanks. And then on the pricing impact, are we still thinking low single digits?
Yes. In terms of pricing, yes, no change to that. And I just want to talk a little bit about it. There's obviously we've gone out now. We announced this at the end of June and it will take effect July 31.
A few things that go into this, we obviously put a tremendous amount of effort into the analysis that went into this and it's not just as simple as we're changing prices. We're moving customers in the cloud from what was kind of a server based model in terms of tiers to a per user model that you tend to see in a cloud environment. So if you're a monthly user, you're going to be on a per user pricing. And if you're going to be annual, it's going to be granular tiers kind of getting close to being like a per user. So it's really important that we move to that industry standard.
We also it's really important that we maintain our low price, high value targeting the Fortune 500,000 pricing. That's the long game. That's giving us incredible competitive advantage and we're not looking to change that. However, we did look to optimize pricing and that did lead to some increases in pricings as part of this transition to per user pricing. In addition to just changing the prices though, we have to model things like will there be some customers that churn, will there be some customers that say, hey, I'm going to go from monthly to annual to get an annual discount, will I try to actively manage my number of users.
So maybe now I'll try to like bring my users down a little bit to see if I can kind of offset some of that price increase. There's just so many things that go into this analysis that I think it would be of hard to figure it out by just looking at our public pricing. And that's why we've done the work for you guys and said it's low single digits points of revenue growth in fiscal 2018.
Great. That's tremendously helpful. Thank you, Mir.
Yes.
The next
question comes from Michael Turits with Raymond James. Please go ahead.
Hey, guys. Thanks for taking my questions. And of course, best of luck to you, Murray, and thanks for everything. First question is sort of I think an extension of what Bhavan was asking about Confluence and SharePoint. Can you talk about where in each of the different major silos, where you're seeing competition, especially outside of the IT realm?
So for example, Confluence, SharePoint, maybe HipChat, Slack and Jira with anywhere else in workflow whether it's ServiceNow or others?
Yes. Hey, Michael, this is Jay. I think you mentioned a lot of them, right? I mean, remember, I think if you take any one sort of point product, it would have different things, different alternatives to it that it's competing against. And you mentioned a lot of them.
And we mentioned before that our focus and philosophy is we want to make sure that we win head to head contests based on the merits of that individual product. That's what we sort of lead with when a customer is comparing. I think if you step out, take a step back from that, the advantage we have as a company is I think we are sort of the singular company that's focused on teamwork holistically and all the dimensions of what makes teams function and work better. People need to organize things, they need to create and share content, they need to communicate and message and discuss work. And I think that the value that we provide companies, I think one of the reasons that we're growing the way we are is people see that holistic approach to changing teamwork.
And even when we lose a particular contest against a SharePoint or Slack or Zendesk or fill in the blank, We have 3 or 4 other category leading compelling products that that customer might choose and over time swap out the one particular thing we lost. And so I think we're in a unique and I think pretty interesting market and competitive position.
Okay. Thanks for that. Thanks, Jay. And then one for Murray. On the guidance for next year, just I think you guided above on revenue, above The Street and granted you hadn't given guidance before and above on The Street on margins and yet EPS is guided slightly below The Street.
So is there anything that you think that might be a disconnect in terms of where the Street was modeling?
Yes. Between fiscal 2017 2018, there is a change in the tax rate. The income and deductions across the various global jurisdictions has sort of changed for us between 2017 2018 and that's led to a higher tax rate, which you've seen in the earnings per share. Our focus from a global tax strategy is going to be focused on cash flow and not on book tax. I mean that's where we are going to focus our efforts and have been in this quarter.
I mean this year you're seeing it leading to a higher book tax, but not having an impact on cash tax.
Yes. Maybe I missed it, but did you have that book tax rate for us to use?
We don't provide a tax rate. It gets quite complicated on IFRS non IFRS reconciliations. And so it's implied in the guidance. We did have a brief comment in the letter about this change in the tax rate. So that's really what's driving it.
Thanks, Marie. Good luck.
Thank you, Michael.
The next question comes from Keith Bachman with Bank of Montreal. Please go ahead.
Hi. Many thanks. I wanted to go back to pricing for a bit. It's been out for a brief period of time. And I just wanted to get your feedback on what customer reaction has been to date.
You mentioned churn and at some price points it looked like or some usage levels I should say, it looked like the price increase was fairly high. And I just wanted to see if you had any incremental thoughts on churn. And the second part of the question is, does the price increase have a duration that's longer than this year? In other words, might some of the price increases actually impact the following year as well to help revenue growth?
Hey, I might take part of that Keith and then pass it over to Murray for the back half. Just in terms of the earlier part of the question, it's still relatively early, so the price change goes into effect. I would say that there hasn't been much negative reaction to the change. I think in part because the change was driven by customer demand and want. The biggest frustration that customers have expressed to us was having to jump through this kind of antiquated tier model and what they really wanted was sort of a per user approach where they could pay for the users that they're adding over time.
So I think that was a big win from the base. And then I think we also talked about in the letter, the majority of accounts in the cloud products that were affected either had no change or could see a decrease based on their actual active user accounts that they could adjust. So I would say it's still early, but generally the reception to
the model shift was positive.
Okay, fair enough. And then on duration?
Yes, at this point we haven't commented on duration. We are just focusing on fiscal 2018. Obviously, at a future point, we'll have more to say on that. But for right now, the focus is on fiscal 2018.
Okay. Many thanks. Best of luck.
Thank you.
The next question comes from Patrick Walravens with JMP Group. Please go ahead.
Great. Thank you. Murray, I'm not going to say goodbye to you yet.
I still wanted to talk to
you for a while. So your question for I don't know if it's Scott, Mike or Jay. I've signed up for the incident reports and I feel like I get a lot of them, like 3 or 4 a day. So I'm just wondering, are you guys
how satisfied
are you with the sort of the maturity and consistency of your hosting operations? And where do you think that goes from here?
Well, Patrick, I appreciate you signing up to the incident report, Tardium. That's a first step for us having analysts sign up for that. So I appreciate the interest. There's a couple of things there. One is that our culture of openness and transparency leads us to be really open with our customers about where we are with things and if there's something maybe most new problem, we want to make sure we're open and honest with our customers about it in case they face that.
So that falls into, I guess, the frequency with what you say things. And obviously, we have a product called Statuspage that allows other companies to be open and transparent with their customers around how their services are running at the same time. The cloud, as other companies would realize, taking on running things for our customers is a huge responsibility for us and we spend a lot of time on that responsibility and improving it every single year. So, you'll see every single year our improvements in that area because cost with our customers is a big part of our business.
Okay. Thank you.
The next question comes from Ben McFadgen with KeyBanc Capital Markets. Please go ahead. Hi.
This is Clark on line for Ben. I was wondering if I could ask about Jira Software and Confluence, some of your more established products. Between the two of those, which is growing faster still? And maybe if that can be broken out, sort of which is becoming more important to the strategy of multiple solutions being sold in, whether the attach rate of one of those is fairly significant confluence with maybe outside of software development?
This is Murray. Yes. So we don't break out our individual products in terms of their specific growth rate and things like that. All we can say is that Jira and Confluence have been around since really almost the inception of the company. They are absolutely critical products for us.
What we have said in the past is that at the time of the IPO, they represented approximately 2 thirds of our total revenue. They have huge market opportunities. We got a long way to go with those products. It's early days for those.
All right. Thank you. And for Jira Core, I was wondering if there would be any color that you could provide on the deal size, whether it's still being sold from department to department or whether you're seeing more often fold across department into the entire firm?
Hey, Clark. Not different actually with other products in our model. We land it's really common for us to land within a small team. With Jira Core, it could be within IT or it could be within a business team that sort of begins with it. And then again, the nature of the products and the network effects of adding other people from other departments or other teams to work on a project aids the expansion and spread of that project.
So it's far less common for a company to say, I'm going to start with Jira Core and just like blanket the whole organization out of the get go. It's typically one team to improving to another team. It's just a better way to work.
All right, great. Thank you very much.
The next question comes from Nate Cunningham with Guggenheim. Please go ahead.
Hey guys, thanks for taking my question. Could you give us a sense of how many of your customers are on subscriptions versus maintenance today?
Well, what we said
in the past is generally that sort of from a cloud versus server, it's generally sort of fifty-fifty in terms of the mix. However, each quarter when we look at new customers, on average, it's been about 3 quarters of new customers are going straight to cloud. This quarter was particularly strong in cloud adoption. And part of the reason for why the perpetual license revenue number in Q4 was maybe a little lower than you would expect it from a trend line. It was because new customers were choosing cloud in a big way this quarter.
It was nothing that we were trying to do. We're agnostic on their deployment model. We'll let them choose. But the secular trend of moving to the cloud is clearly in place. And this particular quarter, we saw more moving to cloud.
Okay. And could you give us a range or like a sweet spot for your average number of seats on the subscription side?
We haven't provided that. And obviously, it would depend on cloud versus data center. Data center subscription product has huge numbers of users on that. So, it's really quite a mix. It can be from a very small number to larger numbers, but the largest ones are going to be on data center.
Yes. I'm thinking more on the cloud side.
We have not provided any specifics on that.
Okay. Thank you.
This concludes our question and answer session. I'd like to turn the conference back over to Mike Cannon Brookes for any closing remarks.
Yes. Thanks everyone for joining the call today. We really appreciate your time. Look forward to keeping you updated on our progress. And just a reminder that we have to see as many of you as possible at our Investor and Analyst sessions at the Atlassian Summit in September.
Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.