Michmutters

The company ended the 2022 fiscal year with roughly the same amount of free cash flow as the previous year, of $US763.8 million.

In a shareholder letter, co-chief executives Scott Farquhar and Mike Cannon-Brookes said they had hired 634 new employees in the quarter, mostly in research and development roles and over 2,300 new staff members in the 2022 fiscal year.

“We firmly believe that Atlassian is uniquely positioned, having deep-seated momentum and a differentiated business model. This gives us the confidence to make incremental investments – despite the current environment,” the CEOs wrote.

“That will fuel even more durable growth over the long term and deepen our strategic advantages. We know this is an unconventional choice right now and want to be open with our investors about it.”

Atlassian’s bosses believe it is somewhat insulated from tightening economic conditions as its products are targeted at technology developers, who they say are typically the last roles businesses cut back when they are tightening their belts, especially with many companies working on digital transformation plans.

“While our products punch above their weight in terms of value, Atlassian is a relatively small line item in overall IT budgets and likely not where customers look to reduce costs,” the CEOs said.

New CFO

The company has flagged “line of sight” to $US10 billion in annual revenue and has a new executive in charge of marshalling the numbers in former Microsoft finance president Joe Binz, who will become chief financial officer in September.

Mr Farquhar had acted as an interim CFO for the current earnings period.

The company said Mr Binz was responsible for Microsoft’s financial planning and analysis, investor relations, acquisition integration, and procurement functions across a 20-year stint at the tech giant.

It is the second earnings call in a row where Atlassian has unveiled a new senior executive hire, having announced Rajeev Rajan as his chief technology officer – hired from Facebook parent Meta – in April.

In guidance for the next quarter, Atlassian forecast revenue in the range of $US795 million to $US810 million, and a widening loss per share of $US1.17 to $US1.16 – compared to a loss of $US0.41 in the fourth quarter.

“We believe our investments will propel us past this [$US10 billion revenue] milestone faster, while further strengthening our strategic position,” the CEOs said.

“History shows that turbulent economic environments offer a chance for companies to gain market share – to shake up the leaderboard. Atlassian intends to seize this moment.”

‘tech wreck’

With reference to the broader “tech wreck” that is seeing job losses and valuation mark-downs at tech companies around the globe, the co-founders reiterated remarks made by Scott Farquhar earlier this year about the current downturn and potential recession not being Atlassian’s “ first rodeo.”

“We seized opportunities during the economic turbulence of 2008-2009 to scoop up talent that wouldn’t have been available otherwise and broadened our customer base by offering $10 starter licenses for our products,” they wrote.

“Today we’re echoing that approach with free editions of our cloud products and ambitions to more than double our headcount over the next few years. Playing offense when others were throwing off their back foot worked for us then, and we’re confident it will work for us now.

From a commercial perspective, Atlassian said the ongoing transition of customers to its cloud-based products was continuing well, with a focus on driving a growth rate on sales of third-party cloud apps on its marketplace, greater than that of its own products.

It said it closed the financial year with over 200,000 cloud customers and cloud revenue growth in the fourth quarter of 55 per cent year-over-year.

Atlassian also confirmed that its parent holding company would shift from the United Kingdom to be domiciled in the United States, pending shareholder approval at two special shareholder meetings to be held on August 22. If shareholders agree the company will become based, as well as listed in the US from September 30.

“We believe moving our parent entity to the United States will increase our access to a broader set of investors, support inclusion in additional stock indices, improve financial reporting comparability with our industry peers, streamline our corporate structure, and provide more flexibility in accessing capital. ,” the co-CEOs wrote.

Regarding The Oaks and other big-ticket hotel offerings, Musca says these properties and businesses have benefited from decades of planning, licensing, gaming and capacity approvals in premier locations that would be almost impossible to replicate as new developments.

“Fundamentally the very best hotels in the premier locations are simply going to enjoy perpetual, unimpeded earnings growth without competition.”

$175m would set a record

Stuart Laundy, son of billionaire pub owner and Rich Lister Arthur Laundy, confirmed his family would be among those looking closely at The Oaks as a potential acquisition opportunity.

He said he couldn’t comment on whether it was worth $175 million as he had “no idea” yet of its turnover or other performance figures but said, “if someone paid $175 million tomorrow, it would not surprise me”.

“Pubs are a safe option. People have always enjoyed a drink and had a punt, it’s not a bad business to be in. Even during the Great Depression, pubs were still pouring beers,” he told AFR Weekend.

Whether The Oaks is worth as much as selling agent JLL is quoting will be determined by the market – should it fetch $175 million it would set a land rate record across both residential and commercial property on the Lower North Shore.

Generating about $23 million in annual revenue, The Oaks comes with multiple bars, including Taffy’s Sports Bar, the Bar & Grill restaurant, a gaming room with 30 poker machines, extensive first floor function spaces and high-end retail bottle shop. There’s also the potential for a five-storey development.

The Crossroads Hotel sold with 30 electronic gaming machines that bring in over $300,000 a week, a restaurant serving over 4000 meals a week and a large accommodation component across a 1.28-hectare site, six times as big as The Oaks.

“Assets such as Crossroads Hotel and Strathfield Hotel are frankly inimitable, and have separately enjoyed robust earnings platforms for decades,” said HTL Property’s Andrew Jolliffe, who brokered the record sale of both properties.

That does not mean the sector is immune to a crash, as occurred during the global financial crisis, when a mountain of debt brought down big pub giants like National Leisure and Gaming and the Hedley Group.

However, this time around owners are far less leveraged and good operators are generating healthy operating margins exceeding 20 per cent.

“When compared to other periods, loan-to-values ​​are actually at an industry low point, with the average sitting below 50 per cent. Accordingly, the capitalization of Australian pubs has rarely been more balanced,” says Jolliffe.

Private equity firm Adamantem Capital has locked in a deal to buy KKR-backed GenesisCare’s cardiology business, CardiologyCo, after about six weeks of exclusive talks.

Adamantem is understood to have paid between $200 million and $250 million. It would own the lion’s share of the CardiologyCo, while the doctors would keep a minority shareholding, under a deal that was signed this morning.

It gives the PE firm exposure to the aging thematic, while CardiologyCo gets to lighten its debt load.

CardiologyCo has more than 100 cardiologists and 700 odd technicians who see 200,000 plus patients a year. It would make two bolt-on acquisitions and expand into Sydney and diagnostics, concurrent to the Admantem deal.

Adamantem dealmakers Angus Stuart, Gunjan Goel and Georgina Varley led the investment for the firm. It joins its other healthcare bets like Zenitas and NZ aged care business Heritage Lifecare. It is the fourth investment in Adamantem’s $800 million Fund II after Climate Friendly, Linen Services and Nak Hair.

The PE firm used Grant Samuel, Skye Capital, EY and Gilbert + Tobin for advice. GenesisCare was advised by Record Point, Morgan Stanley, PwC and Herbert Smith Freehills.