In a different life we have been using products of Atlassian
Corporation Plc (TEAM) for many years. When they went IPO in December 2015 we
jumped at the opportunity to own shares of them.
Initially we didn’t get the timing right (who does?). We
bought some shares at USD 30.79 in December 2015 only to see the price drop
over the subsequent months. So in June 2016 we bought more at a price of USD
24.90 to improve the average costs per share. This worked out nicely and in
August 2016 we sold just enough shares so that the amount equaled what we paid
for our second buy. As a result we had an unrealized gain (+111% as of writing).
We continue to be very positive about Atlassian. Their most
recent quarterly results, published after market on 18 January 2018. Revenues
for the quarter were up by 43% year-over-year. Free cash flow improved by over
50%. The earnings per share (EPS) were heavily influenced by the tax reform in
the US. Because of a write-down of their deferred tax assets they took a one-time
charge of USD 47.3 million for the quarter. This charge is non-cash. Without
one-off charges their EPS would have been USD 0.13 compared to USD 0.09 in the same
quarter one year ago.
Despite these very good results, the market didn’t like them
and as a result next day, on 19 January, the share price declined by 5.29%. We
believe this is exaggerated. Long term we believe that TEAM’s share price will
continue to improve along with their revenues and earnings.
We still use their products. And we still like them and are
happy to recommend them. It appears as if other companies agree. TEAM’s
long-term liabilities are USD 8 million. Capital expenditures in the quarter
were USD 4.5 million. The free cash flow was USD 72.3 million which easily
covers both. Stock holders equity is 69.6% of Total liabilities and equities.
This ratio is very healthy.
While their IFRS result for the quarter is still negative we
believe that their success story will continue. We don’t expect the switch to a
new CFO will have a negative impact.
Bottom line: We believe that TEAM continues to be a very
good investment opportunity and therefore we will hold on to this position long
term. We may consider selling some of the position if their share in our
portfolio becomes too large.
TEAM as of 20 Jan 2018: USD 53.07
Disclosure: We own shares of TEAM. We have no plans to change this position in the next 48 hours.
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