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Comments on Atlassian
I'm suspicious of Atlassian as a investment for a number of reasons.
- Even though they're a software company, none of their products are especially high tech. The products are not difficult to reproduce, and as you said, the company has a number of high-powered competitors.
- Even though Atlassian has been public for half a decade, and even though its revenue is closing in on $1billion, it's suspicious that they are still not profitable. That they have positive free cash flow doesn't mitigate this problem. Paying employees with stock instead of cash is simply a way of hiding expenses. They seems to be making virtually no progress in EBITA, net income. or EPS.
- Although a few years ago, TEAM had far more cash than debt, the ratio of deteriorated significantly.
- Over the past 5 years, shares outstanding has grown by about 20%. Even though that's a total over 5 years, it's still a lot of shareholder dilution.
- For the past year, stock-based compensation has been about equal to free cash flow. In other words, if there were no stock-based-compensation, there would be no free cash flow either.
- Expenses are growing at about the same rate as revenue. That shouldn't be the case for a software company. One of the presumed benefits of selling software is that the cost of reproduction is minimal. Yet, that doesn't seem to be the case for Atlassian.
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