Cameron Deatsch: This is Cameron. Let me just address pricing directly on the cloud. As you mentioned, we did have filed price increases go out this October, very much in line with the previous cloud price increases that we rolled out in October. As you mentioned, for our customer base, this is largely granted no customers like price increases, but it is from all the purposes of non-event. Customers are, understand that these are a regular price increase that comes from Atlassian and relatively minimal at the, roughly, as you mentioned, 5% rate going forward. Of course, we have many customers. Our primary goal here is to continue to migrate many of our existing on-premises customers over to cloud. So it’s always allowed us, you’ve always been very considerate about whether that pricing dynamic on our cloud list prices, compared to on-premises customers.
As you already mentioned as well, as part of the last few years, we offered loyalty discounts, which basically discounts off of list price for cloud over the last few years, and customers are on, many of the customers are on one year or two year contracts in cloud. When those contracts come up for renewal, they will be coming up at list price, whatever list prices at that time. The good news of all of those customers understand that dynamic when we speak to them about the loyalty discounts and these programs. And more importantly, since most of them are on have plenty of, annual or two-year contracts. They have plenty of time to plan accordingly for what their renewal will be.
Joe Binz: And then thanks, Cam. The question in terms of the guidance. As Cam mentioned, the effective price increase is roughly 5% blended. That’s a good rule of thumb to use as you think about the impact that is built into the guidance. And do keep in mind, whenever we make these price changes, it takes a while for it to layer into the model simply because they’re effective when the agreements are signed and that happens over the course of time is for our annual multiyear agreements.
Operator: Your next question comes from Derrick Wood from Cowen. Please go ahead.
Derrick Wood: In the shareholder letter, you guys mentioned that cloud sales from your channel was up nearly 2 times year-over-year. And when I look at your total cloud growth of 27%, that suggests that your partners are really generating a tremendous amount of your cloud growth and perhaps your own channels are a bit softer. Has there been a shift in go-to-market strategy to call out that’s causing a higher mix of growth coming from your channel partners?
Cameron Deatsch: Yes, I’ll take that one. This is Cameron. So first off, we see that as a very, very good news. As all of you know, Atlassian’s channel, our solution partner network is a critical part of our overall go-to-market and has been for all 11-years I’ve been here and even longer than that. The dynamic you’re seeing with the partners’ cloud growth in the recent months largely comes downside with our enterprise business. We have, many of our enterprise customers have large enterprise migration needs. All of them usually when they take on a large migration are looking for some sort of technical or consulting health. And this is where our solution partners can provide direct access, plenty of expertise and honestly derisk the migration when it happens.
So we have very much tied much of our enterprise go-to-market, not just with our direct sales, but joint sales with our solution partners to make those migrations happen. And that’s why you’re seeing the outperformance in our channel cloud sales over the last couple of years. I also want to add, it’s not just the channel. It’s the reality is we’ve unlocked a ton of new capability in cloud as well as unblocked many customers because of the scale data privacy and compliance capabilities that we’ve released in the last few years, which only opens up our channel partners and the biggest customers that they are serving continue to open up those doors to have them sign up for new migrations contracts.
Derrick Wood: Makes sense. Thank you.
Operator: Your next question comes from Mark Cash from Raymond James. Please go ahead.
Mark Cash: Hey, thanks for taking the question. This is Mark on for Adam. I wanted to circle back to the consolidation trend and Atlassian together. We’re now a couple of quarters after announcing the offering. So could you first comment on the adoption if it’s helping drive cloud adoption? And if the plan of seeing organizations expand seats across buying centers is actually playing out so far. Thank you.
Cameron Deatsch: Okay. Yes. This is Cameron here. Apologies for the confusion there. Listen, Atlassian together is a key strategy to address what we see out there in the market of a variety of project management tools and used by different departments and different teams across the board. And we went to meet many of our customers, many of them are looking to try and standardize and consolidate on a single vendor to manage their teamwork needs. And when we looked out to the competitive offerings and what our customers are looking for, we realized we had a massive advantage with the broad suite of Atlassian products, not just Jira Work Management, including Confluence, new products like Atlas. To allow for customers to have a broad set of use cases supported by a variety of tools versus having, from a single vendor at a significantly lower cost.
We come out with many of those customers over the last year have made those decisions and are very happy migrating off of the other Federated sets of tools to the Atlassian Work Management Solutions. Now that’s it, we are still, as you mentioned, a few quarters into this. It’s still relatively early days in that offering, but we’re definitely resonating with the overall demand for consolidating on teamwork tools. and platforms and going at Atlassian has been a massive advantage there.
Operator: Your next question comes from Keith Weiss from Morgan Stanley. Please go ahead.
Keith Weiss: Excellent. Thank you guys for taking the question. I wanted to squeeze in two, if I can. On different topics. One on just overall customer count, it seems like another relatively smaller than what you’ve seen historically, customer ad quarter. Can you talk a little bit about kind of the trends that you’re seeing with customer accounts and into the free-to-pay migration. But also you took away the disclosure of actually like a point number of the number of customers. Just Atlassian has been like a price times quantity of like you add a lot of customers and then you make those customers bigger over time. Just wondering about like why to take away that disclosure. You’re only halfway to your 500,000 customer goal. Why not give the specificity on a go-forward basis?
Cameron Deatsch: This is Cameron, I’ll address the first-half of that and then hand off to Joe. So as you mentioned, as we saw over the last year or so, we saw the new customer number declining, largely as we saw free to paid conversion rates slow down. Now that said, we still continue to get plenty of customers coming in to our website, many are signing up for free instances and are using free versions of our products, and that only continues to grow year-on-year, but we just saw them being slower to get out their credit card or hit their 11 user mark into that paid cohort. Good news, as Joe had already mentioned earlier, we are starting to see stabilization in that overall impact. And actually, we saw increase from Q4 to Q1 in that net new customer number, largely due to improvements that we have made in our funnel, specifically around the commerce and conversion experience, just simply making it easier for these free customers to purchase our products.
Now that said, there’s still plenty of uncertainty out there in the market, but seeing that stabilization and slight improvement quarter-on-quarter, we see as largely positive in Q1. Joe, do you want to speak more to the numbers of those?
Joe Binz: Yes. Thanks, Cam. Keith, we will continue to provide the total customer number on a directional basis. So, that will continue to be provided. We are also adding a new KPI that really goes to our strategy, and we believe this will help investors track progress against that strategy. We are increasingly focused on moving customers, existing customers to the cloud and driving expansion within that massive base, and as we pointed out in the shareholder letter, this goes hand-in-hand with our strategy of driving breadth and that total customer number. So we are introducing an additional customer KPI for investors that we will report on a regular basis and to track our progress against this. And that’s specifically the number of customers with over $10,000 in cloud ARR.
At the end of Q1, as you read in the shareholder letter, we had over 40,000 customers that met that profile growing 18%. And the reason we think this is a valuable metric is because this represents over 75% of our cloud revenue. So giving investors both the breadth and the secondary metric around shift to cloud and expansion, we think, gives them a great picture holistically of our strategy and our execution against it.
