Bootstrapped Unicorn Atlassian Is Acquiring Capital-Efficient Startups

I’m publishing this series on LinkedIn to discuss a topic that I follow closely - cloud stocks, trends, strategy, acquisitions, and more. Please subscribe to my Cloud Stock Analysis series and never miss an article. Today: Bootstrapped Unicorn Atlassian Is Acquiring Capital-Efficient Startups

According to a recent MarketsAndMarkets report, the global enterprise collaboration software market is estimated to grow 11% annually over the next five years to 59.86 billion by 2023 from $34.57 billion in 2018. Billion Dollar Unicorn Atlassian (Nasdaq: TEAM) is a leading service provider in this market which delivered a stellar quarterly performance recently.

Atlassian’s Financials

Atlassian’s second quarter revenues grew 39% over the year to $299 million, compared with the market’s forecast of $288.3 million. It reported an adjusted EPS of $0.25, which was also significantly better than the Street’s estimated $0.21 for the quarter. This was the fourth consecutive quarter that Atlassian surpassed market expectations.

By segment, revenues from subscription services grew 56% to $152.5 million, ahead of the Street’s estimated $150 million. Revenues from the maintenance segment grew 21% to $97.16 million. Perpetual License revenues reported a 20% growth to $25.8 million. Other revenues grew 58% to $23.45 million.

This was the first calendar year that Atlassian clocked in revenues of more than a billion dollars. It had recorded revenues of $873.95 million in the last fiscal. Its flagship product Jira Software surpassed 65,000 customers and ended the quarter with more than 138,000 total customers.

For the current quarter, Atlassian expects revenues of $303-$305 million, and a non-IFRS EPS of $0.18. It expects to end the year with revenues of $1.195-$1.199 billion and non-IFRS EPS of $0.81-$0.82. The Street was looking for revenues of $300.7 million and an EPS of $0.17 for the quarter.

Atlassian’s Acquisitions

Atlassian appears to recognize the market potential in acquiring smaller startups to get to the next level. Earlier last year, it had announced the $295 million acquisition of OpsGenie. Virginia-based OpsGenie’s platform helped companies better plan for and respond to software and website service disruptions by quickly routing alerts to the appropriate IT teams. Prior to the acquisition, OpsGenie was privately held and, according to Crunchbase, had raised $10 million from Battery Ventures at an undisclosed valuation in 2016. This is a very interesting case in point vis-a-vis my recent article, Bootstrapping to Exit, where I point out that capital-efficient startups are appealing for larger companies to acquire.

Continuing with the inorganic growth strategy, Atlassian recently announced the acquisition of bootstrapped startup Butler for Trello for an undisclosed sum. Dover, Delaware-based Butler for Trello was developed by Ludable in 2016. Trello, which had raised funding for $10.3 million, was acquired for $425 million by Atlassian in 2017 and is now Atlassian’s powerful project management offering. Trello is known to be a very flexible platform, but it is prone to becoming a tedious platform due to the mundane and repetitive tasks that users have to perform on it.

Unlike Siri Shortcuts or Zapier, Trello does not offer an option to automate some of these routine tasks. To address this gap, Oscar Triscon developed Butler for Trello. It was built as a rules-based system that allows Trello users to program routines and processes using natural language. Today, it allows users to consolidate multiple steps into one, and assign rules such as user assignments or status change based on identifiable triggers. Butler’s solutions have been available to Trello users as a Power-up option. Analysts estimate that post the acquisition, some of these features will now come inbuilt into the Trello platform.

Atlassian appears to have caught on to the phenomenon of acquiring smaller startups that deliver product-market fit and strategic alignment to its core operations. Butler for Trello is one such example of acquiring a company that can add the much needed natural language processing capabilities to its project management service.

Some of the other acquisitions on similar lines include Hall, an all-in-one unified communications app that Atlassian acquired in 2015 for an estimated $20 million. Hall was privately held and had raised $6 million in funding prior to the acquisition. In 2014, Atlassian had acquired bootstrapped startup doctape for an estimated $7.5 million. doctape let users view and organize files in the browser, including a wide range of different document, image, video & audio formats without a local software installation. What other such capabilities do you think Atlassian could benefit from acquiring?

Atlassian’s stock is trading at $102.75 with a market capitalization of $24.45 billion. It has recovered from the 52-week low of $47.74 that it had fallen to in January last year.

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Photo credit: DennisM2/Flickr.com.