Atlassian Corp (TEAM) 2017 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen.

Thank you for joining Atlassian's earnings conference call for the third quarter 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.

I will now hand the call over to Mr. Ian Lee, Atlassian's Head of Investor Relations.

Please go ahead.

Good afternoon, and welcome to Atlassian's Third Quarter Fiscal 2017 Earnings Conference Call.

On the call today, we have Atlassian's Co-Founders and CEOs, Scott Farquhar and Mike Cannon-Brookes in Sydney; and our Chief Financial Officer, Murray Demo; and our President, Jay Simons, in San Francisco.

Earlier today, we issued a press release and shareholder letter with our financial results and commentary for the third quarter of fiscal year 2017.

These items are also posted on the Investor Relations section of Atlassian's website at investors.atlassian.com.

On our IR website, there's 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&A.

Statements made on this call include forward-looking statements.

Forward-looking statements include known and unknown risks, uncertainties and other factors that may cause our 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 a number of limitations related to the use of these non-IFRS financial measures versus their nearest IFRS equivalents and may be different from non-IFRS measures used by other companies.

A reconciliation between IFRS and non-IFRS financial measures is available in our earnings release, our shareholder letter and 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 the 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-K.

A quick housekeeping note before we proceed with the rest of the call.

Many of you should have received the said e-mail for our main U.S. user conference Atlassian Summit, which is being held in San Jose from September 12 to 14.

The primary days of this event are September 13 and 14, when we'll host most of the open sessions and keynotes.

This year, we will also be holding our first investor and financial analyst session.

We'll provide more details in the near future, but please mark those dates on your calendars.

I will now turn the call over to Scott for his brief opening remarks before we move to Q&A.

Good afternoon.

Thanks, everyone, for joining today.

We had another great quarter.

We achieved revenue growth of 36% year-on-year and generated over $68 million of free cash flow, which is more than the annual free cash flow we recorded for fiscal 2014 or fiscal 2015.

Like last quarter, our performance was broad-based.

We achieved solid growth across our product families and across our cloud server and data center products.

We closed the acquisition of Trello in February, and we're tremendously excited to have Trello on board and part of the Atlassian family.

Including Trello, we finished the quarter with over 85,000 customers.

Now our goal was unleash the potential of teams in the Fortune 500,000.

While we still have a long way to go to reach that target, we're making great progress and have the target of 100,000 customers firmly in our sight.

In our shareholder letter, we noted that we just passed the 2,000 employee mark.

Mike and I never imagined we'll get to this size when we started the company in 2002, and it's been a privilege to work with so many talented colleagues over the years.

And the strong results we just announced were only possible because of the team around us.

A quick shout to every Atlassian everywhere.

You've been key to helping us get to where we are today, and you're the key to our future growth.

And with that, I'll turn the call over to our operator for Q&A.

(Operator Instructions) Our first question comes from Gregg Moskowitz of Cowen & Company.

Scott, just wanted to follow up on one of your brief comments regarding the contribution in the business from all the 3 areas.

And in Q2, you saw a really strong data center performance.

How would you characterize the data center business this quarter by comparison?

Is it a continuation of that trend?

Or any additional commentary will be helpful.

Gregg, this is Jay.

It's -- while we don't break it out, it was another great quarter for data center.

I think as we said last quarter and the quarter before, there had been high demand for this product when we introduced it.

We've expanded the data center offering to include nearly all of our key major products.

And I think we've been happy with the growth.

I think there's a lot of room for us to continue to reach out to customers that are looking to deploy our products with the capability of high availability and 0 downtime, upgrading things that are important for really big companies.

And I think we're really proud of what we've accomplished so far.

Okay, terrific.

And then in the shareholder letter, you alluded to upcoming price increases, and I know that it's certainly premature to discuss that in depth.

But just from a high level, can you say if this will pertain to some on-prem products, cloud products or both?

And then also, if you were able to just perhaps provide any color on the underlying rationale behind the price increases, that will be useful.

Gregg, yes.

In terms of the pricing, what we've gotten the shareholder letter, we have not communicated to customers.

And so that's why we're trying to provide information now to the financial community, but we don't want to get in front of our customer communications.

So we're leaving it the way it is right now and not signaling to any specific area of the business.

What we want to do is 2 things.

One is we want to make sure that all investors are aware of this.

They may miss in terms -- when the communication comes out, and we want to make sure everybody is aware of it when that happens at some point in the future.

And then two is obviously, everyone's trying to figure out, well, what does this mean in terms of the financials for fiscal 2018.

And we've provided that it will have an impact of low single-digit points of revenue growth.

I just want to underscore that low.

That will help everyone try to sort through what to make sense of that in terms of the revenue for fiscal 2018.

We'll have more to discuss on this topic on our next earnings call when we're in a position to talk more about it.

Okay.

Thanks, Murray.

And just one last one, if I could.

On Trello, you mentioned in the press release that Trello added almost 13,000 customers, paid customers on a net basis.

But about how many total Trello customers are there in your paid base?

I'm just trying to get some sense of customer overlap, if that were possible.

Mike here.

We haven't disclosed that.

We only disclosed the -- obviously, the net new contribution that Trello brings.

There's overlap as well underneath that.

But for people obviously looking at the customer number over time, we need to explain where it has a big jump up.

The only sort of extra steps we've put in there since the close of the acquisition this quarter where obviously it's now past 22 million users and was a 9 million, 10 million and change when we did the acquisition in January.

I'll just add one thing to that, Gregg, which is the number of customers that are overlap far smaller than the ones that are net new to us.

And even for those that maybe overlap, if it's like in one department of a large company in Europe and one department in North America, there's still a huge opportunity in those "overlap customers" in terms of just more seats and more products.

Our next question comes from Ittai Kidron of Oppenheimer.

Murray, just wanted to touch kind of going back to Trello over the impact in the quarter.

I think you were looking for $1 million in the quarter, and I think you got it for $4 million for the year.

Are you still on track for that?

Or are you running a little bit ahead of that?

We did note there it was one in Q3 and we achieved that one in Q3.

We're targeting 3 in Q4.

We are going through that whole thing with the deferred revenue.

We've noted that there was about $2 million of deferred revenue that we booked after the haircut.

So we did take a haircut there.

We were able to recognize some of that deferred revenue did go to revenue in Q3 and well in Q4.

But so far, we're on track, yes.

Quite pleased with the results.

That's great.

And then going back to the price increases that you alluded to that we'll get some more detail on.

I'm not going to ask you about the details about price increase, but maybe you can give us a little bit of the color why do you feel you need to do them here.

Are you not seeing any competitive pressures?

I'm just trying to kind of get into the drivers behind it, not necessarily the numbers but the logic.

We'd prefer to say more at a later date on that.

We don't take these things lightly.

We've put a lot of work into the analysis that went into this, and we're really thoughtful with it.

But at this point, we prefer not to talk about it and rather just kind of focus on our commercial operations and communication to customers.

And then when we're in a position to say more to the financial community, we well, but we did provide today the financial implications of our decision.

Our next question comes from Bhavan Suri of William Blair.

I guess let me dive in a little bit here.

As you look at the collaboration space, you added Trello.

But obviously, HipChat is pretty well integrated with JIRA and it seems Slack obviously with JIRA being a big integration.

Can you just talk a little bit how Trello fits into that?

And is HipChat made a part of that?

Or do you look at sort of a different collaboration products that fits with the Trello user base, sort of a posted, more integrated sort of collaboration, communication, chat, interface?

How should we think about how those 3 products will sort of interact going forward?

Yes, thanks, Bhavan.

It's Mike here.

Look, I think all of our products have various connections, parkways, integrations between them, right?

Trello comes into the family and works very well with HipChat, works very well with Confluence.

It actually works quite well with JIRA.

You've seen us in the quarter launch already integrations with Bitbucket, HipChat, Confluence and JIRA for Trello to allow those customers using both for different purposes to connect them in various different ways.

I think you'll see obviously some of the products appeal more to the broader all teams market.

Trello obviously has a huge broad penetration.

You can see that in the base of 22 million users around the world and the rapid growth that it's undergoing.

So I think you'll see that both drawing our products in.

But also, we have a huge customer base within which Trello is still, I think, relatively unknown.

So there's good opportunities in both directions.

I don't think there'll be sort of discrete sets of products as much as you described it as much as there'll be sort of a web of connected applications, both inside the Atlassian family and then outside the Atlassian family.

And we intend to be really good citizens in playing with all of those to put the customer need first, whichever way they want to connect products together.

Got it.

Got it.

Fair enough.

And then obviously, Trello's had pretty tremendous growth, right?

So 19 million users, which is growing 50%, now 22 million virtually in the quarter.

Is there something on the marketing viral side?

Because obviously, JIRA, with developers, when you think about sort of your approach to developers as forums and they all talk to each other and it drives this viral approach, what is the marketing?

Is that sort of this viral?

I use JIRA, it's great.

The next guy use JIRA, it's great.

And Trello obviously seems like it's doing really well.

But in the sort of fairly different market, how do you think about sort of bringing those 2 communities together?

Is it -- does it makes sense to bringing those communities together?

Is there any learnings you guys have picked up from one -- from Trello, that you could bring to sort of JIRA, Confluence, Bitbucket, HipChat, et cetera?

Look, I mean, I think the Trello team obviously did a fantastic job, and we're super excited to have them onboard.

There's certainly learnings we can take from how they've grown Trello around the world internationally, a lot of different markets and really tap on that end-user growth in all of small, medium enterprises around different parts of the world, different market segments.

So there's certainly a lot we can learn from them.

We obviously have a fantastic go-to-market model and marketing engine that we have our own strength that work pretty well.

So I think bringing the 2 together, there's certainly a lot of shared strengths we can get there.

But the opportunity of aligning both the existing Atlassian family and obviously the newest member in Trello is just massive, so we're very excited about that opportunity.

And 22 million against a billion knowledge workers on the planet, we've got some headroom.

So we're excited about that.

One last one quickly for me for Murray.

Murray, obviously R&D and then -- and I would never tell you to stop R&D, obviously, because technology companies live in R&D.

But at some point, you're going to get great scale out of that.

When should we think of R&D starting to ramp down as a percentage of revenue?

Just given scale more than anything else, what do you think, at least for foreseeable future, it kind of stays where it is as a percentage of revenue?

Yes, Bhavan, yes, we're going to continue to invest in R&D.

It's the lifeblood of the company.

Obviously, as time passes, we would expect to see some scale just because of the revenue growth as much as it really is on the expense side.

But for right now, we're going to continue to invest.

We've got a large market opportunity, and there's just a lot more for us to do to capture that.

And we think we've got a model that generates good profitability and tremendous cash flows.

And so we like the model.

We like our opportunity.

We're going to continue to invest.

Our next question comes from Michael Turits of Raymond James.

This is Austin Dietz calling in for Michael.

Just a question around the Atlassian stack bundle.

What's been the impact on your products?

Do you feel like you have it priced properly?

And would you say it's driving more revenue?

Michael (sic) [Austin], yes, I mean, it's basically -- it's a bundling of all products for customers that are looking in a single instance to kind of standardize across the portfolio.

I would say there's a small number of customers there that take everything.

We do think that there's been nominal discount when you buy multiple products at once.

And again, I think it's a relatively immaterial kind of impact because those are small customers that are going to choose everything all at once.

Our next question comes from Richard Davis of Canaccord.

It seems to me that if you guys are going to be -- get as big as I think you can, that you're going to have to be more than a gaggle of kind of one-off tools.

So how -- when you kind of sit down, how do you think about communicating that differentiation that you have over -- we all know the cool point solution, guys.

How do you different rate yourself there in terms of communication?

And then also, kind of what are you doing on the programming front to kind of make components of your platform kind of more connectivity and stuff like that?

The way I think about it is a little bit kind of like what Microsoft did when they unified the Office suite, you're trying to do it at a different layer.

Richard, yes, it's Mike here.

It's a great question.

We're constantly spending time on trying to make sure that our applications play better together.

At the same time, we've always been wary of building a sort of a walled garden suite approach.

I think the way that SaaS world is working, people will use lots and lots of different applications from lots and lots of different vendors.

So we need to play well with people outside the building much to -- I think it was Ittai's question earlier about connections in and out of different products.

So we certainly invested a lot in making them play together.

You can see that in the various different fronts, obviously, the design language that you've seen us implement over the last couple of years, bringing the products together.

So there's familiarity moving between them.

It's a big difference in the Office world.

You have shortcuts that were the same.

For example, you know how to operate Excel, you know how to operate PowerPoint, that sort of thing.

And you've also seen at summit last year we previewed the new home experience, for example, bringing a lot of the applications together to give you sort of a centralized dashboard and experience of moving across apps.

You saw the same sort of things on mobile.

So you'll see us continue to harmonize across the applications to allow better experiences, which customers quite obviously work at.

It gives us an advantage when they're picking a second or a third tool.

But at the same time, we're very cognizant of the need to play well with all of the other applications that they use outside of our stack.

So we're always balancing between those 2.

Our next question comes from Rob Oliver of Baird.

It's really a follow-up to Richard Davis' question.

As you guys land with more products at the enterprise level, can you talk a little bit about how you're leveraging the expert partner network to manage that expand, which I think addresses one of the concerns out there that you guys eventually are going to need sales force and things like that.

And so how you're managing that partner network would be great.

Rod, this is Jay.

Short answer is no differently than we've done for years.

I mean, we've got a number of different land points we can land with virtually any product, JIRA, Confluence, HipChat, Bitbucket, and then both expand with other products, expand with additional use cases as either we, through our marketing or our channel through kind of direct touch with the customer, expand a number of use cases that those products can be applied to.

And then we can also expand, in the case of the server products, through that data center upgrade path where as customers onboard, hundreds to thousands to tens of thousands of users on a particular product or multiple products, they seek to basically have a high-availability solution because the products have become mission-critical.

And again, the approach is no different than what we've done nearly since our inception.

We've got a great network of partners and hundreds of different countries that work with customers intimately in understanding kind of the expansion paths and what the products can apply to.

We try to make that also friction-free in the way that we market the products and expand kind of the use cases that they can apply.

And then the data center upgrade path is also a relatively friction-free path that they can understand, and when they're ready, move to it.

Our next question comes from Sanjit Singh of Morgan Stanley.

I want to actually ask a question about the marketplace business from 2 standpoints.

The first, from just a financial perspective.

It's a low base but we see growth accelerating year-over-year.

And I just wanted to get a sense of can you talk through some of the things that are driving momentum in the marketplace business?

And then secondly, from a more strategic standpoint about the openness of the Atlassian platform.

Do you see a situation where an Atlassian product or the Atlassian platform can provide a gateway to other common applications so that a user can essentially stay within the Atlassian environment but connect to common applications and just spend more time on the Atlassian platform?

Is that part of the product strategy here longer term?

Sanjit, look, the marketplace is doing very well.

We're very happy about how it's continuing to grow.

Obviously, it plays a really important role for our customers in fulfilling a lot of other use cases in and around our products that let us further fill out.

So when you see the marketplace growing, I think it's both a credit to all of the vendors in there that are really spending time with those customers and finding those use cases and building them on top of our applications.

But it's also a great example of the commerciality of the marketplace working really well attracting to get vendors.

So we see quite a lot of vendors now a growing their software businesses, significantly having a second product, a third product.

And that is such a really great virtuous cycle that we're in at the moment in terms of marketplace growth.

You see that for anyone who's been to summit for the last couple of years.

The size, professionalism and sophistication of the vendor community in the exhibit and their marketing is just continuing to grow as they build out great products around the Atlassian family, and that's a fantastic story for both sides.

I'll pass over to Scott for the second question.

The gateway to other applications, when you think about it, HipChat, JIRA, Trello, they're places where people often start their day and where a lot of work and movement work happens.

And that makes sense.

We have a lot of integration between those products and other third parties, and people use them as the launching pads.

So people will have conversations in things inside HipChat.

And more than just having a link to those applications, those applications can actually build rich experiences inside HipChat so that they don't need to leave for the casual use case, and it's a starting point for the third parties.

Now obviously, we had a huge identity system that captures a lot of users and their teams into our organization, and that's something that we're increasingly leveraging with third parties, make it easier to log into those third parties using Atlassian.

I just want to add one thing there, Sanjit, that I think is important that people sometimes miss.

If you think about both Confluence and Trello, they often play a really important coordination role across lots of other enterprise applications that the customer may be using.

So you'll often see Trello cards representing maybe work items in an HRIS system or software code or CRM sales customer records, and they use Trello to move across all those applications in a single bullet, right?

So they have a single kind of interface to lots of different applications where its card then link through to a further deeper enterprise application and vertical.

And that's a really powerful place because we're across a lot of different applications with their flexible way of working.

You can't do that inside an HRIS application or a CRM application.

You need a sort of layer, both of them.

And Confluence has the same aspects in terms of creating a piece of content and then pulling in lots of different third-party SaaS application content, first party from our family as well and then presenting a view or a document across that with link through.

But in both cases, we become a (inaudible) in that sort of starting point.

So I don't think that's an often given attribute, but both of those are really powerful in doing that.

That's great insight and context.

Just one follow-up.

At the Amazon event in San Francisco last week, they announced CodeStar.

And I guess just a question here and a topic just to revisit.

For product engineering teams, for product development teams, is there necessarily a strategic reason for your development platform, development suite to be next to the data strategically?

Does that make sense?

Or is it just -- is it something more along that they just want to be able to run at whatever -- wherever they feel most comfortable?

On the data storage side for developers, as we increasingly see storing bits in the cloud is lesser, is more of a commodity, as you've seen with other -- in other markets, what the actual proprietary in a bit that they will pay for is how people interact, the teamwork as that happens around that.

So where a bit is stored on a disk is less relevant.

And the team, like I say, is the area that Atlassian has a deep history of doing well at.

And so that is incumbent the disk storage process, but people will have to ask for how teamwork happens.

But in development of these workflows that we have built teams around.

And those workflows may start in Xero.

They make even go to Code.

They get to design.

Then they come back.

There's actually a lot of different applications involved in the developers' workflow, but it's Xero that coordinates that workflow for a large number of our customers.

Our next question comes from Ben McFadden of Pacific Crest securities.

Pardon me.

Our next question actually comes from Nate Cunningham of Guggenheim.

For Murray, I'm curious about the Q4 margin guidance.

It seems to imply a pretty small increase in sales and marketing spending.

Is that the right way to think about it?

And from a percentage of revenue perspective, should we expect to see that continue to come down to the levels we were seeing in 2013 and 2014?

No, we haven't really provided specific guidance around each of the OpEx categories, R&D, sales marketing and G&A.

Now in the fourth quarter, which we're in now, we have our European summit.

It's our first summit in Europe and AtlasCamp.

So there's going to be marketing spend that's going to happen this quarter in and around this major event.

So I wouldn't -- based on that, I wouldn't think of it along that somehow that's going to -- we're going to see more leverage there.

We are targeting approximately 14% in the fourth quarter.

We just did 15%.

So it's another quarter of investment for us.

But in the areas sales and marketing in particular, we've got a very exciting summit next week that we definitely are investing in to make sure it's a success.

Our next question comes from Ben McFadden of Pacific Crest Securities.

I wanted to start -- I know you're doing well with the data center offerings on the enterprise side.

I just wanted to start with sort of the cloud offering and the fact that it caps out as 2,000 users.

I'm just curious as to what degree you're seeing customers sort of reach fairly close to that 2,000 mark?

And to what degree do you plan on increasing the functionality on how many users can access the cloud option over time?

Or is it more about proving the value proposition as far as upgrading to something like the data center offerings?

Ben, this is Jay.

So the short answer is as we see increasing demand for larger instances in the cloud, we'll increase that capacity.

And we see that increasing today.

I think historically, larger customers have selected to choose the server products for various reasons.

And as we've mentioned with the success of data center, there's an upgrade path where for really large mission-critical usage, they have that as an option.

But back to, I think, what we've celebrated as a company is just customer choice.

And so whether you're a small company or a large company, we want to give you options that are preferable to you, whether you want to run it behind the firewall in your own infrastructure, whether you want to run it on our infrastructure in the cloud or even in a hybrid situation where you want might want a private cloud on AWS.

And so I think we're committed to all those options for companies of all shapes and sizes.

Great.

And then, Murray, I just wanted -- I think a lot of the questions on earnings calls this month had been around ASC 606.

I know you're tied to IFRS 15, I believe.

I was just curious as far as whether anything's changed as far as how you think about your rev rec going forward and how that could potentially be impacted by some of these new standards coming out.

Yes, of course, like in all commerce, we're looking with that.

We don't have a plan right now to go change how we operate.

Our cloud business, we're not going to see a change.

In our server plus maintenance business, we don't see there's going to be a change.

It will just be in this data center area where we might see some revenue moved to being recognized upfront and not totally on a subscription basis.

At this point, we're not looking to change how we operate.

It obviously could change in the future, but we're not in that position.

We're trying to retool our whole business so we can get some kind of revenue recognition treatment.

We don't just see it impacting us that greatly and with the model we have today we think works really well for customers.

So it has to be more customer-driven, and it's going to be sort of on the financial side.

Our next question comes from John DiFucci of Jefferies.

You got Zach for John here.

Could you comment on the, I think JIRA Core was released early last year, how you're seeing it progress versus the JIRA Software product?

And then kind of in that same vein, how are you seeing adoption outside of the traditional software user within customers?

It's Scott here.

We're quite pretty pleased by the launch of JIRA Core.

It's going really strong outside of our sort of core technical market.

And we said stats from last year is that some of our (inaudible) is based at some of new JIRA Core, which is in tremendous growth.

We haven't disclosed individual stats around that beyond saying that we're kind of still early in that progress outside the technical teams.

JIRA Core and Trello work hand-in-hand inside organizations for -- Trello is more when you don't need a workflow around things.

And JIRA Core is when you do a lot of workflow and more customizability.

And order trail is another things inside organizations.

So those 2 continue to work really well together.

And yes, so we're pleased with how JIRA Core was going.

Great.

And then if I could get one more.

On the competitive front, you've got the Slack and teams out there making at least some noise publicly.

I was just wondering if you've seen any changes or expect anything to materially change in the way you approach go-to-market or even at customers you talk to?

Zach, it's Jay.

No, not really.

And we've been in this market for 15 years, and so the competitive dynamics haven't really changed much in that time.

Some of the names have changed.

But at a high level, just -- it's a big market that we're continuing to grow into.

And I think one of our main advantages is the strength and kind of breadth of the team portfolio.

We're building kind of multiple products that fulfill really critical needs for teams to better manage work, create and share content, communicate through real-time messaging and video.

And so even in this situation where we're losing head to head against one particular competitor in a category, we still have an opportunity to sell around that competitor and we often do.

So I think naturally, it's -- in any market, it's sort of a one foot in front of the other, but we feel good about our footing.

(Operator Instructions) Our next question comes from Keith Bachman of BMO Capital Markets.

This is Michael Lilinshtein in for Keith Bachman.

I just have 2 questions.

One is continuing on the competition.

Microsoft recently acquired Intentional Software.

Their mission statement is similar to you guys, which is helping teams be more productive.

I'm curious, have you guys seen them in the past?

And do you see this trend moving forward with more Microsoft moving into similar product spaces that you're in?

It's Scott here.

Intentional isn't something we've come up with -- across in the past ever.

From the little I know, they're sort of more of a research house than shipping software.

And so I'm interested to see what Microsoft does with them, but we haven't come across them in the past or seen anything that they do.

Okay.

And then I guess on the last quarter, I feel like you guys mentioned channel partners had some pretty good influence on some of the sales.

I'm just curious, are you seeing more channel partner influence versus, I guess, the viral marketing moving forward or in this recent quarter?

Michael, not materially different.

I think they're both working hand-in-hand.

Remember, we're a word-of-mouth business that's chasing the Fortune 500,000.

The channel kind of complements that really high-volume automated focus with -- by removing additional friction for customers where they need it, especially in local markets where they don't speak English.

And I think they've had another positive impact on the company in this quarter but not materially different than they've had in the past.

I would just add, this is Murray, just on -- we had a high receivables last quarter because we did have that budget flush.

And some of that does tend to come through the channel.

And this quarter, receivables came down a little bit as they collected on that and kind of normalized in terms of where we are in kind of a seasonal basis, not being on a calendar year-end.

This concludes our question-and-answer session.

I would like to turn the conference back over to Mike Cannon-Brookes for any closing remarks.

Thanks, everyone, for joining the call today.

We really appreciate your time and look forward to keeping you updated on our progress as we go forward.

Thank you.

The conference has now concluded.

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