Thank you for joining Atlassian Earnings Conference Call for the Fourth Quarter of Fiscal 2016. [Operator Instructions]. I will now turn the call over to Ian Lee, Atlassian's, Head of Investor Relations.

Good afternoon, and welcome to Atlassian's fourth-quarter fiscal 2016 earnings conference call. On the call today we have Atlassian's cofounders and CEOs Scott Farquhar and Mike Cannon-Brookes; our Chief Financial Officer, Murray Demo; and our President Jay Simons. Scott, Murray, and Jay are in San Francisco, while Mike's calling in from Sydney today. Scott and Mike will begin by recapping some of the highlights from the fourth quarter and full fiscal year 2016. Murray will then cover Atlassian's financial results for the fourth quarter and full fiscal year 2016, and provide our financial targets for the first-quarter and full-year fiscal 2017. Following our prepared remarks, we will have a brief question-and-answer session. Jay will be joining for Q&A. The press release with our results for the fourth quarter and full fiscal year 2016 was issued earlier today and is posted on our Investor Relations website at investors.atlassian.com. There is also an accompanying presentation and data sheet available on our IR website. Statements made on this call include forward-looking statements. Forward-looking statements involve known and unknown risks, certainties, and other factors that may cause other than actual results, performance, or achievements to be materially different from any 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 number of limitations related to the use of these non-IFRS financial measures versus the nearest IFRS equivalents, for example, other companies may calculate non-IFRS financial measures differently or may use other measures evaluate the performance, all of which could reduce the usefulness of our non-IFRS financial measures as tools for comparison. A reconciliation between IFRS and non-IFRS financial measures is available in our earnings release and in our updated investor data sheet on the investor relations section of Atlassian's website. Further mentioned information on these and other factors that could affect the company's financial results is included in the filings we make with the Securities and Exchange Commission from time to time. Including the section titled risk factors in the company's form F-1 previously filed with the SEC in connection with our IPO, and form 6-K report that was filed on May 12, 2016. I will now turn the call over to Scott.

Good afternoon. Our fourth quarter was another strong quarter, and I'm proud of both our results and the groundwork we make for the future. For the fourth quarter of fiscal 2016, we achieved revenue growth of 39% year-over-year, non-IFRS operating margin of 12.2%, and over $17 million of free cash flow. When we look back to fiscal 2016, we grew to over $450 million of revenue, expanded to more than 60,000 customers, and generated over $95 million of free cash flow. Fiscal 2016 was also the year in which made the transition to a public company. While the IPO [indiscernible] was an important milestone, and it's very early one on our mission to unleash the potential in every team. We really appreciate the support from our customers, employees, ecosystem partners, and the many investors and analysts we have met over the past few years, and to everyone who is listening in today. Our products provide the fundamental building blocks of great teamwork. Specifically shared projects, content, and communications. We believe we are the only company to combine these essential capabilities. Focus purely on teams into an integrated collection of products. Our goal is to do for team productivity what Microsoft Office has done for personal productivity. That is a huge goal and remains enormous opportunity. There are close to 900 million knowledge workers globally, and the most important aspect of productivity's how well they all work together. Successful teamwork is hard, and many knowledge workers today are still stuck with tools from the past decades or inefficiently cobbled together email and desktop tools for word processing and spreadsheets. Atlassian provides a better way. Moving teams to a shared online system of collaborative projects, content, and communications is a significant to their productivity as the shift from fax machines to email.…

As Scott mentioned we had a strong quarter of revenue growth and positive free cash flow. We also added more than 3500 net new customers during the fourth quarter of fiscal 2016 bringing our total customer base to 60,950 in over 170 countries. During the last year we added more than 12,300 net new customers in total. Similar to prior quarters about three quarters of the new customers we added during the quarter were in the cloud. As a reminder our definition of a customer is an organization that has at least one active and paid license or subscription which they paid more than $10 per month. During the fourth quarter we continue to add thousands of customers across industries and geographies. A few of our 3500 new customers at highlight the breath of our customer base our IMS health. Esurance, Desso, online payments company Stripe, the Puerto Rico Electric Power Authority, Career and Technology company [indiscernible] bank and financial institution Meriwest Credit Union. We’re also serving a growing number of large enterprise customers. Our data center product family provides the scalability, reliability, security and peace of mind that the largest enterprises demand and is help us grow our presence in large accounts. Today we count over 290 of the fortune 500 as customers as of the end of fiscal 2016. Additionally we had more than 1200 customers spending over $50,000 with us annually at the end of fiscal 2016 up significantly from 865 at the end of fiscal 2015. We've continued to achieve this customer growth with a go to market model that is built around an online highly automated distribution platform. that does not rely on a fleet of quota carrying salespeople. Our low touch model enables us to deliver our products at prices that appeal to a…

Thanks, Mike and good afternoon. I will cover Atlassian's financial performance for the fourth quarter and full-year fiscal 2016 and our financial targets for the first quarter and full year of fiscal 2017. I'll begin with our financials for the fourth quarter of 2016. Total revenue for the fiscal fourth quarter was $127.6 million up 39% year-over-year. As we discussed over the last fiscal year our revenue over the past few years has benefited from some pricing optimizations to Jira and Confluence that we initiated in calendar year 2012. Approximately eight of the 39 percentage points of the revenue growth in the fourth quarter of fiscal 2016 were attributable to these pricing optimizations. Turning to revenue by line item, I will provide a brief overview of each. First, subscription revenue primarily relates to fees earned from sales of our cloud products. A small portion of this revenue also relates to sales of our data center projects which are several products sold to our largest enterprise customers on a subscription basis. We recognize subscription revenue ratably over the term of the contract. For the quarter subscription revenue was $43.6 million up 68% year-over-year. The growth in subscription revenue reflects more of our customers choosing the cloud as well as strong growth in enterprise data center offerings during the quarter. Second, maintenance revenue represents fees earned from providing customer updates, upgrades and technical product support for a perpetual license products. Maintenance revenue is recognized ratably over the support period which is typically 12 months. For the quarter maintenance revenue was $58.8 million up 28% year-over-year. Maintenance revenue has been the primary beneficiary of the prior pricing optimizations to Jira and Confluence. Third, license revenue is related to fees earned from the sale of perpetual licenses for our server or behind the firewall…

[Operator Instructions]. And the first question comes from Bhavan Suri with William Blair.

Murray you didn't provide a lot of color there on the gross margins front, you talked about moving third-party cloud providers, Just some color on sort of is that why the gross margins coming down or is it just because the cloud business is growing so fast. Can you start with that before we get into demand?

Yes in terms of gross margin being a little bit lower in '17 in terms of our target 16, it's related to the depreciation expense on our internal data center equipment. It's not related precisely going to third-party providers it's more on our internal data center depreciation expense.

And then one quick follow-up just on product obviously just great set of numbers there, but some of you guys have commented in the past that was the products going about the same rate, and then clearly it's feels Jira Service Desk is growing much, much faster -- I would love to just a get a little more color in terms of the scale of that business and sort of who you’re winning against and what does that look like from a size and growth perspective relative to Jira, but BitBucket compensates HipChat.

This is Jay, we did see good growth across products as we mentioned in the call we highlighted Jira service desk which is still relatively young product. I think we are proud of the 17,000 organization that's collected in its infancy with that particular product, we do see some competition around the traditional IT service desk use case but a lot of growth comes from Greenfield collaborative service applications that we're seeing kind of across the organizations into business teams. We’re typically replacing excel spreadsheets and whole bunch of clunky email.

And the next question comes from Michael Turits with Raymond James.

Two questions, first of all just back on the margin side, anything else you can tell us about expenditures and investments, I mean work through all the numbers but is there anything higher on OpEx investments you expect in terms of the guide for the fiscal '17 margin and then I have a follow-up question on the go to market

Michael, we continue like we continue to invest in obviously R&D it's the lifeblood of our company, we’re product company we will continue to invest there, and really across all the different organizations, within Atlassian, some of the things to kind of keep in mind between '16 and '17 is in '16 we did have again this pricing benefit looking particularly early in the year we had higher operating margins because we just really couldn't higher as fast as the revenue growth. And also there's probably an approximate 1% effect of the Aussie to US dollar exchange rate is higher in 2017 than 2016, so we're kind of losing approximately 1 point of margin related to FX and now that we are hedging a portion of our operating expenses we don't think we are going to have quite the volatility that we had in fiscal '16.

Okay. And then secondly can you talk a little bit about go to market is changing in any way as large enterprises being in state does and get more penetration there is everything still completely self-serve and or is three any push -- direct reps and have you are doing with technical account managers and premiums support in those areas?

No material changes from what we've done in the past and you've seen us to, and I think this quarter especially another good demonstration the effectiveness of the high velocity low touch approach to both reaching large volume of new customers but also expanding and growing our biggest ones. As we mentioned previously we’re always looking to evolve our model and approach in really smart ways, you know as you saw with the introduction of the data center offerings and the technical management program that you've mentioned, and we've seen I think good that acceleration and adoption of both of those that product in that level of service within our largest accounts as we reflected in the prepared remarks.

And the next question comes from Heather Bellini with Goldman Sachs.

I just had a couple of quick ones, first Murray, you might have said and maybe I missed it that but the impact was from the pricing change if you could just update us on that what it was in the quarter and then I had a question around Bitbucket I was just wondering how do you kind of assess the competitive landscape in that part of the business that you're going after, and also if you could share with us kind of have you -- I guess have you seen the change in the competitive landscape and why are you winning versus the competition where do you guys have the better positioning versus them. Thank you

Heather, in terms of the pricing benefit, we had 39% topline growth in Q4 approximately eight points of the benefit came from this -- eight points came from this pricing benefit. It was a little higher in the quarter than we might've expected we saw stronger sales of our server products to existing customers and in that case they are a paying a higher price than they would have and so we saw a little more benefit in the fourth quarter and that’s the kind of pricing benefit that of course would continue on any time customers paying a higher price than they would of really since inception of the day as a company, we would continue to see, but we're quite pleased with our server performance and overall results on top line of 39%.

And Scott here on your second point, Heather about the Bitbucket competitive landscape, firstly on the change of the landscape, and as you know we operate in huge markets and we had seen competitives come and go, and the non-material change in the competitive landscape, we've seen over the last few months, and the reason why we win is same reason why we won historically, with the quality of the products and investment we put in there, and we differentiated because we got against lot of the Point Solutions. We’re the only company that provides the whole solution to our customers, and also many of these small teams don’t apply a professional teams, we’re much better full professional teams and business where as many of these are sort of targeted very small consumer based end points.

And then Murray just to clarify is the pricing benefit does that go away in fiscal '17, you kind of said some of those people will be playing longer in perpetuity which I understand but do you expect that to still be a benefit in your upcoming fiscal year?

Yes, so in terms of the pricing benefit that’s lapping, it's not going to be material to fiscal '17, we'll see a little bit in the first quarter that I mentioned the prepared remarks, that we are sort of see kind of partially offset by some summer seasonality, but the benefits that we saw in the past those days are behind us.

And the next question comes from Richard Davis from Canaccord.

First off thanks for moving to the worldwide inter webs as we say and not reading the press releases to us next quarter so I appreciate that. You know one of the things I think about as you guys are seeing good progress in expanding kind of the multiple different teams, but one of the strengths and weaknesses of the model is you don't spend a lot of money on sales and marketing, you make great products that are there levers that you can push and pull to kind of make the expansion into other departments inside these firms that you're selling to, more than organic work kind of had you think about the knobs and buttons that you would pull to do that thanks

Our traditional lending and software teams, expanding into IT and then further into business teams, as a model doesn't change so one of the levers you have to say there is being very strongly thought up in software teams and in the IT teams because they take us into those other teams, quite a lot so we have an example that came up we talked previously about Sotheby's and we have an example of one of the largest museums in New York, that moves multiple millions of pieces art around their organization during Jira service. Now this is a replacement for paper and email based system that they hand beforehand but it came in because we landed in their software team, they were using us for software processes within the museum, and they were the recommended to the business of facilities teams to use this application so to the point that we can keep telling those stories to our customer base, it did really shows the power of the expansion model and then beyond that obviously our automated model the engine that we've built in terms of the engagement engine to talk to customers, to talk to end users, to illustrate the use cases and to help them spread throughout the organization that’s something we continue to invest in both on the R&D side and on the go to market marketing side to reduce the friction of the spreading across the organization.

And the next question comes from Sanjit Singh with Morgan Stanley.

Murray, can you talk back the pricing change one last question on that, if it was eight points this quarter, it sort of goes away beginning next quarter, it seems like a pretty steep drop-off I'm just trying to understand the dynamics of why you would go from eight to pretty immaterial that quickly?

So just a little complexity here, there is kind of two things that go into that eight points of growth, there is the pricing that's related to the higher price of the customers paying now than they would have if we hadn't done it and I comment on that earlier notes any kind of price change other price increases or decrease since inception the company's flowing through our revenue today that will sort of continue on and there's a whole bucket of those kind of things and we wouldn’t necessarily break any of that out, that’s just a normal course of the business, The piece has been going away is the piece that really where it sort of ended in November 2015, and some renewed at a higher price, we're getting that revenue coming from deferred revenue to the maintenance revenue over the 12 month so we'll see some of that in the first quarter of '17 and then we're done and then any kind of price benefit that we're getting it just really again lumped in with all the other pricing changes we've made since inception of the company. And as I said earlier the targets provided in Q1 they factor in the last of that sort of pricing benefit that's going to be going away and it's sort of being offset by some summer seasonality so again both of those are the factored into the targeted of sort of to 30% to 32% or 132 million to 134 million of revenue in Q1.

On HipChat a little less commentary on HipChat at least in the prepared remarks so just wanted to understand how you're feeling about that business as you come to the close of FY ‘16 and think about the prospects for HipChat going into next year whether you need to make any changes to the product or sort of ready to continue to scale?

It's hard to give commentary on all our products given the size of the portfolio, there's a clear -- we are big believers that there is a clear sort of secular shift in the way teams collaborate, where messaging is going to become a key piece of that overall portfolio of collaboration tools. We think it's still very early in the space and we're very confident in HipChat continue to expand, have great topline growth across FY ‘16. So you know we are excited about space and its ability to transform the way that teams collaborate.

And the last one for me, I wanted to see if you want to take the chance to maybe update some of the metrics that you guys provide around the time the IPO as it relates to maybe monthly active users what has that reached and maybe the percentage of Jira users outside of software any update on this two metrics?

At the moment we're not really commenting on this metric and we will as you know provide color and commentary on various metrics from time to time to give you an better understanding of the business but those two aren't ones that we are prepared to talk about today. We’re really happy with the growth of both of them but I don't have them in hand out today

And the next question comes from Brent Thill with UBS.

This is Michael Turner for Brent Thill. I wanted to talk a little bit more about the decision to shift to third-party cloud service providers, looking at the fiscal '17 guidance versus Q4 it looks like significant step down. I just want to talk about that decision process, any more color you are willing to provide are you planning to use one or multiple providers and anything else is greatly appreciated.

The way we think about it it's been a progression for a long time, last year we had a hybrid model using third-party data providers and our internal data centers where effectively the workloads made most economic sense, as third-party providers are getting better at providing type of workloads that we use. We're progressively moving more and more of those workloads into the cloud, that sort of the philosophy to get other people to run that rather than us having on our balance sheet and something we will run ourselves. So there's nothing specific that we are doing in terms of the change of strategy, it's really just the third-party provider that’s got to a level of sophistication capability that we can use more of them.

And I'd also add a comment on accelerated depreciation, so, as part of that transition we are incurring a little more depreciation expense than we otherwise would as part of that transition that's why you see the gross margin coming down in our fiscal '17 targets.

And then you talked a little bit about during the quarter, the increase in sales and marketing you referenced some additional advertising and sponsorship campaigns, is there any more detail or color you could provide there and then how should we think about that continuing into the next year as well?

I'll just say that first that was variable spend, it was not fixed spent per say. so it's something that we may decision to do in the fourth quarter, as far as any other specifics Jay if you would like to add anything more to it.

Nothing beyond you see that variability from time to time as we kind of run different broad-based experiments around demand acquisition for various products and markets that we're approaching.

And the next question comes from John DiFucci with Jefferies.

I guess I had a question for Mike or Scott and it has to do with the acquisition StatusPage, other acquisitions you bought in the past have been products and you bought a product and you sort of push that out through your vast distribution into your customer base, can you talk explain a little bit I'm quite sure is this one going to be a product or is this going to be technology that will be added on to things like Jira service desk and others and how should we think about your M&A philosophy going forward?

Just those that aren't familiar with StatusPage let's go through again what they do, if you look at the way most companies are these days most companies are software companies, and as a SaaS company you really becoming service company where you have to provide a service 24/7 to your customers and when you provide that service you need some way of communicating the status of that service to your customers and StatusPage is kind of like a cell phone signal bars on your cell phone, instead of explaining to you with something up or down in where to go for help. This is relatively new market, Greenfield opportunity for us and StatusPage is the leader in this market, and look at the customer base couple of thousand customers we're not sharing specific number but tens of thousands of customers, and so it's a huge opportunity because all of our [indiscernible] customers will need a StatusPage over time, in terms of how we will combine the products, there's a lot of product integrations we can do over time, for the moment it's going to be a stand-alone product inside of our portfolio with a separate SKU in pricing as it is today.

And should we -- so it sounds like at least initially it will be similar to previous acquisitions and is that the way we should be thinking continue to think the same way going forward when you do make acquisitions?

Yes John we've got a long history of doing small acquisitions successfully, we've done a couple of dozen of them now and you'll continue to see us do small acquisitions where they fit our pricing model and our go to market approach, and they sell in our customer base or adjacent to that, obviously due to our go to market model and our approach is very difficult for us to try something large we have the a lot of consideration to something like that so you continue to see us do some more acquisitions.

And the next question comes from Steve Ashley with Robert W Baird.

This is Jason [indiscernible] for Steve, thanks for taking my questions. First question, just wanted to ask about Europe it looked like there is a slight deceleration there although don’t have compare from last 4Q, just give how much of that is from kind of seasonal summer slowness versus the macro issues there, and just generally kind of how sensitive is kind of your spend to macro challenges.

So Jason so we haven't in terms of like Brexit or whatever we haven't seen anything in our business that would say that Brexit has led to any kind of softness in our business, what we have seen through -- looking through the data and just like in at least all the other software companies I've worked in, a little bit of summer seasonality in Europe, and we have some of that in our business and that's been factored in, but no sort of macro trends or Brexit, we’re seeing at this point and that’s certainly not factored into our targets just the normal summer seasonality is what's included.

And then just second question just sort about renewal rates and how that might vary by customer sites, just kind of curious how you expect renewal rates to trend as you may gain traction with larger enterprises and that's it for me

Renewal rates have been trending favorably, I think we see a higher renewal rate at the larger institutions you know companies that deploy up to thousands of users, as we mentioned, during the road show tend to have a higher kind of renewal rate and we have a really high logo retention rate but I think we are happy with retention kind of across the breadth of the customer base.

And the next question comes from [indiscernible] with JMP Securities.

I'm curious does the self-service model for go to market, work as well for legal HR finance as it does for IT and developers is that's something you're sort of monitoring as you are solutions appeals to broader and broader audiences?

As Mike mentioned remember kind of go to market model, I think it's effective in lending instead of software increasingly in IT, and then we use a lot of kind of engagement and growth tactics that you’re probably familiar with as a consumer of Amazon where three quarters I think of Amazon sales come from their in-store recommendation so we have the ability kind of in our products to recommend use cases of users that might be part of an IT project that get exposed to how a service desk could help their legal team. In addition the kind of attritional ways we might market those use cases the champion of our products inside of the business. So really is I think increasingly kind of and expand opportunity outside of the business, the business is also look to IT for recommendations of tools and products to basically help them do the work and so we see I think a lot of growth from strong recommenders outside people like legal, HR and finance.

[Operator Instructions]. And our next question comes from [indiscernible]. with Oppenheimer.

So just following up on those HR, finance, legal type abuse cases, right now where are you seeing the strongest interest and are you seeing any pressure to add new features to core to specialize in certain verticals.

George, Jira Core as a reminder for those listening we split Jira into three different offerings in October of last year, so about eight months ago, or maybe nine months ago, to build focused offerings for software teams IT teams and again for business teams. It's been a very good growth story for us so far, it performed extremely well, albeit off of very small base obviously compared to its software as service desk cousins. We think that the first thing we've done with Jira core is to reduce down some of the software and IT specific features such that the business teams get a cleaner experience of tracking work that they're trying to achieve, and then after that we are certainly listening to HR finance, marketing, legal facilities all the teams that are using core in our traditional way that we would listen to customers and we will continue to iterate the product and improve it over time, but at the moment there are no sort of glaring feature gaps for those teams in terms of getting their work done so we've been pretty happy with the reception so far given it's still inside its first year.

And just one other question how should we look at headcount additions as the year progresses?

George, we will continue to invest across all the different major expense categories, inside the company with OBA, the continued focus on investing in R&D that will be the primary area but we'll be investing across the company as we scale.

Thank you. And as there are no more questions. I would like to return the call to management for any closing comments.

It's Scott here. Thank you everyone for joining our call today. We really appreciate the time and look forward to keeping you updated on our progress. Thanks a lot.

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.