Further customized support and professional services are provided through Atlassian solution partners. We have over 400600 solution partners worldwide dedicated to handling specific needs of our customers, ranging fromsuch as translating documentation, providing on-site demos or training, building add-ons, tuning deployments, assisting with complex enterprise solutions, or providing-setupand providing setup or agile-based coaching. Our solution partners specialize in
environment integrations and customizations and work with some of our largest customers to conduct hand-onhands-on system integrations, deployments, and upgrades.
Our products serve teams of all shapes and sizes in every industry, from software and technical teams, to IT and service teams, to a broad array of business teams.
In most cases, due to the flexibility and breadth of our products, we co-exist alongside many of our competitors' products within our own customer base.
The principal competitive factors in our markets include product capabilities, flexibility, total cost of ownership, ease of access and use, performance and scalability, integration, customer satisfaction and global reach. Our product strategy, distribution model and company culture allow us to compete favorably on all these factors. Through our focus on research and development we are able to rapidly innovate, offer a breadth of products that are easy to use yet powerful, are integrated and delivered through multiple deployment options from cloud, to on-premises software to highly scalable data center solutions. Our high-velocity, low-friction online distribution model allows us to efficiently reach customers globally, without the need to invest in a traditional salesforce.and we complement this with our network solution partners and sales teams that focus on expansion within our largest customers. Our culture enables us to focus on customer success through superior products, transparent pricing and world-class customer support.
Our employees are our greatest asset and we strive to foster a collaborative, productive and fun work environment. As of June 30, 2018, 20172021, 2020 and 20162019 we had 2,638, 2,1936,433, 4,907, and 1,7603,616 employees, respectively.
C. Organizational Structure
D. Property, Plant and Equipment
Item 4A. Unresolved Staff Comments
Not applicable.
Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Our mission is to unleash the potential of every team.
Our products serve teams of all shapes and sizes, in virtually every industry. Our primary products include Jira Software and Jira Work Management for planning and project management, Confluence for content creation and sharing, Trello for capturing and adding structure to fluid, fast-forming work for teams, Jira Service Management for team service, management and support applications, Jira Align for enterprise agile planning, and Bitbucket for code sharing and management,management. Together, our products form an integrated system for organizing, discussing and Jira Service Desk for servicecompleting shared work, becoming deeply entrenched in how people collaborate and support applications.how organizations run.
We begin with a deep investment in product development to create and refine high-quality and versatile products that users love. By making our products affordable for organizations of all sizes and transparently sharing our pricing online for most of our products, we do not follow the common practice of opaque pricing and ad hoc discounting that is typical in the enterprise software industry. We pursue customer volume, targeting every organization, regardless of size, industry, or geography.
Our culture of innovation, transparency and dedication to customer service drives our success in implementing and refining this unique approach. We believe this approach creates a self-reinforcing effect that fosters innovation, quality, customer happiness, scale and profitability. As a result of this strategy, we invest significantly more in research and development activities than in traditional sales activities relative to other enterprise software companies.
A substantial majority of our sales are automated through our website, including sales of our products through our channelsolution partners and resellers. Our solution partners and resellers primarily focus on customers in regions that require local language support.support and other customized needs. Sales through indirect channels comprised approximately 33%40% of total revenuesrevenue for fiscal 2018.year 2021. We plan to continue to invest in our partner programs to help us enter and grow in new markets, complementing our automated, low-touch approach.
We generate revenues primarily in the form of subscriptions, maintenance, perpetual licenselicenses and other sources. Customers typically pay us 100%Subscription revenues consist primarily of fees earned from subscription-based arrangements for providing customers the right to use our software in a cloud-based-infrastructure that we provide. Subscription revenues also include the sale of on-premises term licenses, consisting of software licensed for a specified period and support and maintenance service that is bundled with the license for the term of the initial perpetual license fee as maintenanceperiod. From time to time, we make changes to our product offerings, prices and pricing plans for our products which may impact the growth rate of our revenue, annually, beginning in the first year. our deferred revenue balances, and customer retention.
We have successfully demonstrated a history of growing both our customer base and spend per customer through growth in users, purchase of new licenses and adoption of new products. We believe that our ability to attract new customers and grow our customer base drives our success as a business.
We define the number of customers at the end of any particular period as the number of organizations with unique domains that have at least one active and paid license or subscription of our products for which they paid approximately $10 or more per month. While a single customer may have distinct departments, operating segments, or subsidiaries with multiple active licenses or subscriptions of our products, if the product deployments share a unique domain name, we only include the customer once for purposes of calculating this metric. We define active licenses as those licenses that are under an active maintenance or subscription contract as of period end.
Our customers, as defined in this metric, have generated substantially all of our revenue in each of the periods presented. Including organizations who have only adopted our free or starter products, the active use of our products extends well beyond our 125,796236,118 customers.
Free cash flow is a non-IFRS financial measure that we calculate as net cash provided by operating activities less net cash used in investing activities for capital expenditures.expenditures, and net cash used in financing activities for payments of lease obligations.
A. Operating Results of Operations
Maintenance revenues represent fees earned from providing customers unspecified future updates, upgrades and enhancements and technical product support for perpetual license products on an if and when available basis. The first year of maintenance is purchased concurrently with the purchase of our perpetual licenses, and subsequent renewals extend for an additional year in most cases. Maintenance services are priced as a percentage of the total product sale, and a substantial majority of customers elect to renew software support contracts annually at our standard list maintenance renewal pricing for their software products. Maintenance revenue is recognized ratably over the term of the support period.
Our cost of revenues also includes amortization of acquired intangible assets, such as the amortization of the cost associated with an acquired company’s developed technology.
Gross profit is total revenues less total cost of revenues. Gross margin is gross profit expressed as a percentage of total revenues. Gross margin can fluctuate from period to period as a result of changes in product and services mix.
Our operating expenses are classified as research and development, marketing and sales, and general and administrative. For each functional category, the largest component is employee and labor-relatedcompensation expenses, which include salaries and bonuses, share-based payment expense, employee benefit costs, and contractor costs. We allocate overhead such as information technology infrastructure, rent, and occupancy charges in each expense category based on headcount in that category.
We adhere to the accelerated method of expense recognition for share-based awards subject to graded vesting (i.e., when portions of the award vest at different dates throughout the vesting period). For example, for a grant vesting over four years, we treat the grant as multiple awards (sometimes referred to as “tranches”) and recognize the cost on a straight-line basis separately for each tranche. This results in the majority of the grant’s share-based payment expense being recognized in the first year of the grant rather than equally per year under a straight-line expense methodology.
We began granting RSUs in 2014. Prior to our IPO,initial public offering (“IPO”), we granted RSUs with both a time-based service condition and a liquidity condition. The time-based service condition for substantially all of these awards is satisfied over four years. The liquidity condition was satisfied upon the effectiveness of the registration statement related to our IPO. Pursuant to IFRS, we estimate the fair value of each award at the date of grant and recognize expense over the service period rather than starting expense recognition upon a liquidity event, as is the case under GAAP.U.S. Generally Accepted Accounting Principles.
Income taxes primarily consist of income taxes in the United Kingdom, Australia and the United States, as well as income taxes in certain other foreign jurisdictions.
We generally conduct our international operations through wholly-owned subsidiaries and report our taxable income in various jurisdictions.
|
| | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2018 | | 2017 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Subscription | $ | 403,214 |
| | $ | 242,128 |
| | $ | 161,086 |
| | 67 | % |
Maintenance | 325,898 |
| | 265,521 |
| | 60,377 |
| | 23 |
|
Perpetual license | 85,481 |
| | 74,565 |
| | 10,916 |
| | 15 |
|
Other | 59,357 |
| | 37,722 |
| | 21,635 |
| | 57 |
|
Total revenues | $ | 873,950 |
| | $ | 619,936 |
| | $ | 254,014 |
| | 41 |
|
Total revenues increased $254.0$475.0 million, or 41%29%, in the fiscal year ended June 30, 20182021 compared to the fiscal year ended June 30, 2017.2020. Growth in total revenues was primarily attributable to increased demand for our products from both new and existing customers.customers and accelerated short-term demand for on-premises products as a result of customers purchasing ahead of both the discontinuation of new perpetual license sales and price changes for on-premises products during the third quarter of fiscal year 2021. Of total revenues recognized in the fiscal year ended June 30, 2018,2021, over 90% was attributable to sales to customer accounts existing on or before June 30, 2017.2020. Our number of total customers increased to 125,796236,118 at June 30, 20182021 from 89,237174,097 at June 30, 2017.2020.
Subscription revenues increased $161.1$392.6 million, or 67%42%, in the fiscal year ended June 30, 20182021 compared to the fiscal year ended June 30, 2017.2020. The increase in subscription revenues was primarily attributable to additional subscriptions from our existing customer base.base and accelerated short-term demand for data center products as result of customers purchasing ahead of price changes during the third quarter of fiscal year 2021. As customers increasingly adopt cloud-based subscription services and term-based licenses offor our on-premisesdata center products forto meet their business needs, we expect our subscription revenues to continue to increase at a rate higher than the rate of increase of our perpetual license revenues in future periods.
Maintenance revenues increased $60.4$53.6 million, or 23%11%, in the fiscal year ended June 30, 20182021 compared to the fiscal year ended June 30, 2017.2020. The increase in maintenance revenues was primarily attributable to a growing customer base renewingaccelerated short-term demand of software maintenance contracts from our customers related to our perpetual license software offerings.
Perpetual license revenues increased $10.9decreased $10.4 million, or 15%(11)%, in the fiscal year ended June 30, 20182021 compared to the fiscal year ended June 30, 2017. A substantial majority of the increase2020. Beginning in February 2021, we are no longer selling new perpetual licenses for our products, or upgrades to these products starting in February 2022, and plan to end maintenance and support for these products in February 2024. As a result, we expect perpetual license revenues was attributable to additional licenses to existing customers.decline in future periods.
Other revenues increased $21.6$39.1 million, or 57%33%, in the fiscal year ended June 30, 20182021 compared to the fiscal year ended June 30, 2017. 2020. The increase in other revenues was primarily attributable to an increase in revenue from sales of third-party apps through our Atlassian Marketplace.Marketplace, mostly related to the increased sales of perpetual license and data center products during the third quarter of fiscal year 2021.
Total revenues by geography were as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2021 | | 2020 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Americas | $ | 1,028,481 | | | $ | 802,499 | | | $ | 225,985 | | | 28 | % |
EMEA | 826,445 | | | 633,735 | | | 192,710 | | | 30 | |
Asia Pacific | 234,206 | | | 177,939 | | | 56,264 | | | 32 | |
Total revenues | $ | 2,089,132 | | | $ | 1,614,173 | | | $ | 474,959 | | | 29 | |
|
| | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2018 | | 2017 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Americas | $ | 435,471 |
| | $ | 312,514 |
| | $ | 122,957 |
| | 39 | % |
Europe | 346,362 |
| | 242,496 |
| | 103,866 |
| | 43 |
|
Asia Pacific | 92,117 |
| | 64,926 |
| | 27,191 |
| | 42 |
|
| $ | 873,950 |
| | $ | 619,936 |
| | $ | 254,014 |
| | 41 |
|
Cost of Revenues
|
| | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2018 | | 2017 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Cost of revenues | $ | 172,690 |
| | $ | 119,161 |
| | $ | 53,529 |
| | 45 | % |
Gross profit | 80 | % | | 81 | % | | |
| | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2021 | | 2020 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Cost of revenues | $ | 336,021 | | $ | 268,807 | | $ | 67,214 | | | 25 | % |
Gross margin | 84 | % | | 83 | % | | | | |
Cost of revenues increased $53.5$67 million, or 45%25%, in the fiscal year ended June 30, 20182021 compared to the fiscal year ended June 30, 2017.
2020. The overall increase was primarily due to an increase in compensation expense for employees and contractors of $26.8 million (which includes an increase of $5.1$31.3 million in share-based payment expense), an increase inhosting fees paid to third-party hosting costs of $19.4 million, an increase of $6.6 million in amortization of intangible assets,providers and an increase of $4.8$27.2 million in facilities and related overhead to support ourcompensation expenses for employees. These increases were offset by a decrease in depreciation expense of $12.1 million due to certain of our self-managed data center assets reaching the end of their useful lives as we transitioned to our third-party hosted cloud infrastructure.
We increased our headcount during the period to meet the higher demand for services from our customers. We expect to continue to invest in additional personnel as we scale. Over time, we expect the revenue from our cloud subscription business to grow as a percentage of total revenues. As a result, we intend to continue to invest in our cloud infrastructure, which we expect to lead to an increase in cost of revenues in absolute dollars.
Operating Expenses
Research and development | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2021 | | 2020 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Research and development | $ | 963,326 | | | $ | 763,188 | | | $ | 200,138 | | | 26 | % |
|
| | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2018 | | 2017 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Research and development | $ | 415,776 |
| | $ | 310,168 |
| | $ | 105,608 |
| | 34 | % |
Research and development expenses increased $105.6$200.1 million, or 34%26%, in the fiscal year ended June 30, 20182021 compared to the fiscal year ended June 30, 2017. 2020. The overall increase was primarily a result of an increase of $157.9 million in compensation expenseexpenses for employees and contractors of $79.9 million (which includes an increase of $19.2$49.2 million in share-based payment expense)expenses), an increase of $16.0 million in consulting and contractors costs and an increase of $13.1$16.5 million in facilities and related overhead to support ourhosting fees.
employees. We increased our research and development headcount during the period in order to enhance and extend our service offerings and develop new technologies. We expect that research and development expenses will increase in absolute dollars and may increase as a percentage of revenues in future periods as we continue to invest in additional personnel and technology to support the development, improvement and integration of technologies. We have not capitalized any research and development costs during fiscal years 2021 and 2020.
Marketing and sales | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2021 | | 2020 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Marketing and sales | $ | 372,909 | | | $ | 299,683 | | | $ | 73,226 | | | 24 | % |
|
| | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2018 | | 2017 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Marketing and sales | $ | 187,990 |
| | $ | 134,908 |
| | $ | 53,082 |
| | 39 | % |
Marketing and sales expenses increased $53.1increased $73.2 million, or 39%24%, for the fiscal year ended June 30, 2018,2021, compared to the fiscal year ended June 30, 2017. 2020. Marketing and sales expenseexpenses increased primarily due to an increase of $34.4 million in compensation expenseexpenses for employees, and contractors of $21.0 million (which includes an increase of $6.2$28.2 million in share-based payment expense, online product advertisement expenses and an increase of $20.8$13.8 million in amortizationconsulting and contractors costs, offset by lower travel expenses due to the impacts of acquired intangible assets, and an increase of $4.7 million in facilities and related overhead to support our employees.COVID-19. Our marketing and sales headcount increased during the period as a result of hiring additional personnel to expand our relationshiprelationships with our existing customers and to attract new customers. We expect marketing and sales expenses to increase in absolute dollars as we continue to invest in marketing and sales personnel, expand our global promotional activities, build brand awareness, expand our relationship with existing customers, attract new customers and sponsor additional marketing events.
General and administrative | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2021 | | 2020 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
General and administrative | $ | 315,242 | | | $ | 268,409 | | | $ | 46,833 | | | 17 | % |
|
| | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2018 | | 2017 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
General and administrative | $ | 151,242 |
| | $ | 118,785 |
| | $ | 32,457 |
| | 27 | % |
General and administrative expenses increased $32.5increased $46.8 million, or 27%17%, in the fiscal year ended June 30, 2018,2021 compared to the fiscal year endedJune 30, 2017. 2020. The increase was primarily due to an increase of $24.1$39.0 million in facilities and related overhead to support ourcompensation expenses for employees (which includes an increase of $13.9$13.2 million in professional and outside services,share-based payment expenses) and an increase of $11.6$13.7 million in compensation for employeesconsulting and contractors.contractors costs, offset by lower travel expenses and office-related expenses due to the impacts of COVID-19. Our general and administrative headcount increased during the period as we added personnel to support our growth. We expect that general and administrative expenses will increase in absolute dollars as we continue to invest in additional personnel and our infrastructure and incur additional professional fees to support the growth of our business.
Other non-operating income (expense),expense, net | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2021 | | 2020 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Other non-operating expense, net | $ | (620,759) | | | $ | (338,486) | | | $ | (282,273) | | | 83 | % |
|
| | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2018 | | 2017 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Other non-operating income (expense), net | $ | (15,157 | ) | | $ | (1,342 | ) | | $ | (13,815 | ) | | 1,029 | % |
Other non-operating income (expense),expense, net increased $13.8 $282.3 million or 1,029%, in the fiscal year ended June 30, 2018,2021, compared to the fiscal year endedJune 30, 2017. 2020. The increase was primarily due to $322.3 million of charges related to the Notes and capped calls settled during the fiscal year ended June 30, 2021, partially offset by a decrease of $41.8 million in the net impact from the mark to fair value of our exchangeable notesthe exchange feature of the Notes and the related capped calls outstanding at period end.
Finance costs | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2021 | | 2020 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Finance costs | $ | (122,713) | | | $ | (49,610) | | | $ | (73,103) | | | 147 | % |
Finance costs increased $73.1 million in the fiscal year ended June 30, 2021 compared to the fiscal year ended June 30, 2020. The increase was primarily due to an acceleration of $12.4 million.amortization of debt discount and issuance cost related to the Notes.
Income tax benefit (expense)expense | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2021 | | 2020 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Income tax expense | $ | (61,651) | | | $ | (4,445) | | | $ | (57,206) | | | ** |
Effective tax rate | ** | | ** | | | | |
|
| | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2018 | | 2017 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Income tax benefit (expense) | $ | (53,507 | ) | | $ | 17,148 |
| | $ | (70,655 | ) | | (412 | )% |
Effective tax rate | * |
| | * |
| | |
| | |
|
_______________________
** Not meaningful
We reported aan income tax expense of $53.5$61.7 million on pretax loss of $65.8$634.7 million for the fiscal year ended June 30, 2018,2021, as comparedcompared to aan income tax benefitexpense of $17.1$4.4 million on pretax loss of $59.7$346.2 million for the fiscal year endedJune 30, 2017.2020. Our effective tax rate substantially differed from the United KingdomU.K. statutory income tax rate of 19.0% primarily due to different tax rates in foreign jurisdictions such as the U.S. and Australia, the recognition of significant permanent differences during the fiscal years ended June 30, 20182021 and 20172020, high taxable income in Australia and non-cash charges to reduceadjust the carrying value of our U.S. and Australian deferred tax assets due to other comprehensive income movement in marketable securities. Our assessment of the reduced statutory rate in therecoverability of Australian and U.S. Tax Cuts and Jobs Act and duedeferred tax assets will not change until there is sufficient evidence to changes in oursupport their realizability. Our assessment of the realizability of thoseour Australian and U.S. deferred tax assets is based on all available positive and negative evidence. Such evidence includes, but is not limited to, recent cumulative earnings or losses, expectations of future taxable income by taxing jurisdiction, and the carry-forward periods available for the utilization of deferred tax assets.
Significant permanent differences included a non-assessable non-operating item, foreign tax credits not utilized,non-deductible charges related to the Notes, nondeductible share-based payment expense and research and development incentives and taxesincentives.
In March 2021, the UK announced an increase in foreign jurisdictions with athe main corporate tax rate different thanfrom 19% to 25%, effective for financial years beginning after April 1, 2023. Due to the United Kingdom statutory rate (primarily Australia andmagnitude of UK operations, this change does not have a material impact to the United States).Company.
See Note 8, “Income“Income Tax,” to the Notesnotes to the Consolidated Financial Statementsour consolidated financial statements for our reconciliation of loss before income tax benefitexpense to income tax benefit. A changeexpense. Changes in our global operations or local tax laws could result in changes to our effective tax rates, future cash flows and overall profitability of our operations.
Fiscal Year Ended June 30, 2017 and 2016
Revenues
|
| | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2017 | | 2016 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Subscription | $ | 242,128 |
| | $ | 146,659 |
| | $ | 95,469 |
| | 65 | % |
Maintenance | 265,521 |
| | 218,848 |
| | 46,673 |
| | 21 |
|
Perpetual license | 74,565 |
| | 65,487 |
| | 9,078 |
| | 14 |
|
Other | 37,722 |
| | 26,064 |
| | 11,658 |
| | 45 |
|
Total revenues | $ | 619,936 |
| | $ | 457,058 |
| | $ | 162,878 |
| | 36 |
|
Total revenues increased $162.9 million, or 36%, in the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016. Growth in total revenues was attributable to increased demand for our products from both new and existing customers. Of total revenues recognized in the fiscal year ended June 30, 2017, over 90% was attributable to sales to customer accounts existing on or before June 30, 2016. Our number of total customers increased to 89,237 at June 30, 2017 from 60,950 at June 30, 2016. This included an increase in customers of 12,789 as a result of our acquisition of Trello in February 2017.
Subscription revenues increased $95.5 million, or 65%, in the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016. The increase in subscription revenues was primarily attributable to additional subscriptions from our existing customer base. As customers increasingly adopt cloud-based, subscription services and term-based licenses of our on-premises products for their business needs, we expect our subscription revenues to continue to increase at a rate higher than the rate of increase of our perpetual license revenues in future periods.
Maintenance revenues increased $46.7 million, or 21%, in the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016. The increase in maintenance revenues was attributable to a growing customer base renewing software maintenance contracts related to our perpetual license software offerings.
Perpetual license revenues increased $9.1 million, or 14%, in the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016. A substantial majority of the increase in perpetual license revenues was attributable to additional licenses to existing customers.
Other revenues increased $11.7 million, or 45%, in the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016.
Total revenues by geography were as follows:
|
| | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2017 | | 2016 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Americas | $ | 312,514 |
| | $ | 232,793 |
| | $ | 79,721 |
| | 34 | % |
Europe | 242,496 |
| | 178,087 |
| | 64,409 |
| | 36 |
|
Asia Pacific | 64,926 |
| | 46,178 |
| | 18,748 |
| | 41 |
|
| $ | 619,936 |
| | $ | 457,058 |
| | $ | 162,878 |
| | 36 |
|
Cost of Revenues
|
| | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2017 | | 2016 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Cost of revenues | $ | 119,161 |
| | $ | 75,783 |
| | $ | 43,378 |
| | 57 | % |
Gross profit | 81 | % | | 83 | % | | |
| | |
|
Cost of revenues increased $43.4 million, or 57%, in the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016. The overall increase was primarily due to an increase in depreciation expense and other hosting costs associated with our data centers of $18.0 million, an increase in compensation expense for employees and contractors of $10.2 million, which included an increase of $1.5 million in share-based payment expense, and an increase in amortization of acquired intangible assets of $7.2 million. The increase in depreciation expense in fiscal 2017 was due a change in the useful life for our self-managed data center assets, as a result of our continued investment in cloud infrastructure.
Operating Expenses
Research and development
|
| | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2017 | | 2016 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Research and development | $ | 310,168 |
| | $ | 208,306 |
| | $ | 101,862 |
| | 49 | % |
Research and development expenses increased $101.9 million, or 49%, in the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016. The overall increase was primarily a result of an increase in compensation expense for employees and contractors of $78.2 million, which included an increase of $43.6 million in share-based payment expenses, and an increase of $7.7 million in internal hosting costs for development. We increased our research and development headcount during the period in order to enhance and extend our service offerings and develop new technologies.
Marketing and sales
|
| | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2017 | | 2016 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Marketing and sales | $ | 134,908 |
| | $ | 93,391 |
| | $ | 41,517 |
| | 44 | % |
Marketing and sales expenses increased $41.5 million, or 44%, for the fiscal year ended June 30, 2017, compared to the fiscal year ended June 30, 2016. Marketing and sales expenses increased primarily due to an increase of $20.2 million in employee-related costs, which included an increase of $5.4 million in share-based payment expenses, and an increase of $15.1 million in amortization of acquired intangible assets. Our marketing and sales headcount increased during the period as a result of hiring additional marketing personnel and support personnel to expand our relationship with our existing customers and to attract new customers.
General and administrative
|
| | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2017 | | 2016 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
General and administrative | $ | 118,785 |
| | $ | 85,458 |
| | $ | 33,327 |
| | 39 | % |
General and administrative expenses increased $33.3 million, or 39%, in the fiscal year ended June 30, 2017, compared to the fiscal year endedJune 30, 2016. The increase was primarily due to an increase of $21.0 million in compensation expense for employees and contractors, which included an increase of $11.4 million in share-based payment expenses, and an increase of $7.1 million in professional and outside services. Our general and administrative headcount increased during the period as we added personnel to support our growth. We also incurred additional expense related to being a publicly-traded company, including higher legal, corporate insurance and accounting costs as well as costs of achieving and maintaining compliance with public company regulations.
Income tax benefit
|
| | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, | | | | |
| 2017 | | 2016 | | $ Change | | % Change |
| (U.S. $ in thousands) | | |
Income tax benefit | $ | 17,148 |
| | $ | 9,280 |
| | $ | 7,868 |
| | 85 | % |
Effective tax rate | * |
| | * |
| | |
| | |
|
_______________________
* Not meaningful
We reported a tax benefit of $17.1 million on pretax loss of $59.7 million for the fiscal year ended June 30, 2017, as compared to a tax benefit of $9.3 million on pretax income of $4.9 million for the fiscal year endedJune 30, 2016. Our effective tax rate substantially differed from the United Kingdom income tax rate of 19.8% primarily due to the recognition of significant permanent differences during the fiscal years ended June 30, 2017 and 2016. Significant permanent differences included a non-assessable non-operating item, foreign tax credits not utilized, nondeductible share-based payment expense, research and development incentives and taxes in foreign jurisdictions with a tax rate different than the United Kingdom statutory rate (Australia and the United States).
B. Liquidity and Capital Resources
During 2018 we issued cash exchangeable senior notes in the aggregate principal amountAs of $1.0 billion. At June 30, 2018,2021, we had cash and cash equivalents totaling $1.4 billion,$919.2 million, short-term investments totaling $323.1$313.0 million and trade receivables totaling $46.1$173.5 million. Since our inception, we have primarily financed our operations through cash flows generated by operations.
Our cash flows from operating activities, investing activities, and financing activities for the fiscal years ended June 30, 2018, 20172021, 2020 and 20162019 were as follows:
|
| | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2018 | | 2017 | | 2016 |
| (U.S. $ in thousands) |
Net cash provided by operating activities | $ | 311,456 |
| | $ | 199,381 |
| | $ | 129,542 |
|
Net cash used in investing activities | (51,696 | ) | | (224,573 | ) | | (489,510 | ) |
Net cash provided by financing activities | 906,789 |
| | 9,438 |
| | 432,784 |
|
Effect of exchange rate changes on cash and cash equivalents | (630 | ) | | 465 |
| | (201 | ) |
Net increase (decrease) in cash and cash equivalents | $ | 1,165,919 |
| | $ | (15,289 | ) | | $ | 72,615 |
|
We expect to increase our capital expenditures during the fiscal year ending June 30, 2019 to support the growth in our business and operations, such as new office facilities. We believe that our existing cash and cash equivalents, together with cash generated from operations, will be sufficient to meet our anticipated cash needs for at least the next 12 months. Our future capital requirements will depend on many factors including our growth rate, the timing and extent of spend on research and development efforts, employee headcount, marketing and sales activities, acquisitions of additional businesses and technologies, the introduction of new software and services offerings, enhancements to our existing software and services offerings and the continued market acceptance of our products. | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 | | 2019 |
| (U.S. $ in thousands) |
Net cash provided by operating activities | $ | 841,330 | | | $ | 574,210 | | | $ | 466,342 | |
Net cash provided by (used in) investing activities | 256,644 | | | (318,931) | | | (604,198) | |
Net cash used in financing activities | (1,654,805) | | | (42,575) | | | (3,187) | |
Effect of exchange rate changes on cash and cash equivalents | 5,406 | | | (1,176) | | | (855) | |
Net increase (decrease) in cash and cash equivalents | $ | (551,425) | | | $ | 211,528 | | | $ | (141,898) | |
Cash provided by operating activities has historically been affected by the amount of net income (loss)loss adjusted for non-cash expense items such as depreciation and amortization, depreciation of right-of-use assets, non-coupon impact related to the Notes and capped calls and expense associated with share-based awards, the timing of employee-related costs such as bonus payments, collections from our customers, which is our largest source of operating cash flows, income tax payment and changes in other working capital accounts.
Accounts impacting working capital consist of trade receivables, prepaid expenses and other current assets, trade and other payables, current provisions, and other non-current liabilities.current deferred revenue. Our working capital may be impacted by various factors in future periods, such as billings to customers for subscriptions, licenses and maintenance services and the subsequent collection of those billings or the amount and timing of certain expenditures.
Net cash provided by operating activities was $311.5$841.3 million for the fiscal year endedJune 30, 2018,2021, as a result of $65.8$634.7 million in loss before income tax expense adjusted by charges including the net loss adjusted by non-cash charges including depreciation and amortization of $79.4 million and share-based payment expense of $162.9 million. Net cash provided by operating activities was also impacted by our exchangeable senior notes and the amount of net loss adjusted for non-cash expense items such as $12.4 million related to the markmarking to fair value of the exchange feature of the Notes and related capped calls and the partial settlements of the Notes and capped calls and $7.5of $616.4 million, related to amortization of the debt discount and issuance costs."
cost amortization of $109.5 million, share-based payment expense of $385.7 million, depreciation and amortization of $55.3 million, and depreciation of our right-of-use assets of $37.6 million. The net increase of $120.8$44.9 million from our operating assets and liabilities was primarily attributable to a $104.2$294.4 million increase in our deferred revenue as a result of increased sales of subscriptions and renewals of maintenance contracts and a $43.5$64.9 million increase in our trade and other payables, provisions and other non-current liabilities, offset by a $19.6$61.3 million increase in trade receivables and a $7.3$13.1 million increase in prepaid expenses and other current and non-current assets. Net cash provided by operating activities was also impacted by interest received of $12.5 million and income taxestax paid, net of tax refunds of $4.2 million and interest received, of $8.7$50.3 million.
Net cash provided by operating activities was $199.4$574.2 million for the fiscal year endedJune 30, 2017,2020, as a result of $346.2 million in loss before income tax of $59.7 millionexpense adjusted by non-cash charges including the net loss of marking to fair value of the exchange feature of the Notes and related capped calls of $336.0 million, debt discount and issuance cost amortization of $35.6 million, share-based payment expense of $313.4 million, depreciation and amortization of $61.5$62.3 million, and share-based payment expensedepreciation of $137.4our right-of-use assets of $35.1 million. The net increase of $67.7$38.1 million from our operating assets and liabilities was primarily attributable to a $72.6$131.5 million increase in our deferred revenue as a result of increased sales of subscriptions and renewals of maintenance contracts and a $10.9$51.5 million increase in our trade and other payables, provisions and other non-current liabilities, offset by a $10.2$29.4 million increase in trade receivables and a $5.6$10.6 million increase in prepaid expenses and other current and non-current assets. Net cash provided by operating activities was also impacted by interest received of $29.2 million and income taxestax paid, net of tax refunds of $9.0 million and interest received, of $6.5$17.9 million.
Net cash provided by operating activities was $129.5 million for the fiscal year ended June 30, 2016, as a result of loss before income tax of $4.9 million adjusted by non-cash charges including a net increase of $48.4 million from our operating assets and liabilities, depreciation and amortization of $21.9 million and share-based
payment expense of $75.5 million. The increase in our operating assets and liabilities was primarily attributable to a $44.5 million increase in our deferred revenue as a result of increased sales of subscriptions and renewals of maintenance contracts, a $11.6 million increase in trade and other payables, provisions and other non-current liabilities, offset by a $4.2 million decrease in prepaid expenses and other current and non-current asset and a $3.5 million increase in trade receivables. Net cash provided by operating activities was also impacted by income taxes paid, net of refunds of $12.4 million and interest received of $2.8 million.
Net cash used in investing activities for the fiscal years ended June 30, 2018, 2017 and 2016 were $51.7 million, $224.6 million and $489.5 million, respectively. Net cash used in investing activities during the fiscal year ended June 30, 20182021 was $256.6 million. This was primarily related to purchases of investments totaling $347.8 million and purchases of property and equipment totaling $30.2 million to support the growth of our business, including hardware, equipment and leasehold improvements, offset by cash received from the maturing of investments which totaled $206.1$455.0 million and proceeds from sales of investments of $123.9$48.8 million, offset by purchases of investments totaling $119.4 million, cash paid for business combinations, net of cash acquired, totaling $91.6 million and capital expenditures totaling $31.5 million.
Net cash used in investing activities during the fiscal year ended June 30, 20172020 was $318.9 million. This was primarily related to purchases of investments totaling $985.9 million, cash paid for business combinations, net of cash acquired, totaling $381.1 million, purchases of investments totaling $423.5$53.2 million and purchases of property and equipmentcapital expenditures totaling $15.1$35.7 million, to support the growth of our business, including hardware, equipment and leasehold improvements, offset by cash received from the maturing of investments which totaled $111.4$513.3 million and proceeds from sales of investments of $488.7$245.5 million.
Net cash used in investing activities during the fiscal year ended June 30, 2016 was primarily related to purchases of investments totaling $569.1 million and capital expenditures totaling $34.2 million to support the growth of our business, including hardware, software, equipment and leasehold improvements, offset by cash received from the maturing of investments which totaled $65.3 million and proceeds from sales of investments of $49.5 million.
Net cash provided by financing activities was $906.8 million for the fiscal year endedJune 30, 2018, which consisted of proceeds from the issuance of our exchangeable senior notes of $990.5 million offset by the purchase of the capped calls for $87.7 million. Net cash provided by financing activities was $9.4 million for the fiscal year endedJune 30, 2017, which consisted of proceeds from exercises of employee share options. Net cash provided by financing activities was $432.8 million for the fiscal year ended June 30, 2016, which consisted2021 was $1,654.8 million and was primarily related to settlement of $431.4the Notes for an aggregate consideration of $1,803.2 million in cash, payments of lease obligations of $44.9 million, coupon interest payments on the Notes of $6.5 million, payments of issuance
costs for the Credit Facility of $4.4 million, offset by net proceeds from settling the issuancecorresponding portion of Class A ordinary shares from our IPO, net of offering costs,existing capped calls for $203.1 million and $6.7 million of proceeds from exercises of employee share options of $1.2 million.
Net cash used by financing activities for the fiscal year ended June 30, 2020 was $42.6 million and was primarily related to payments of lease obligations of $38.1 million, coupon interest payments on the Notes of $6.3 million, offset by taxes paidproceeds from exercises of employee share options of $1.8 million.
Liquidity and Material Cash Requirements
We have access to a $1 billion senior unsecured delayed-draw term loan facility (the “Term Loan Facility”) and a $500 million senior unsecured revolving credit facility (the “Revolving Credit Facility,” and together with the Term Loan Facility, the “Credit Facility”). We will use the net proceeds of the Credit Facility for general corporate purposes, including repayment of existing indebtedness. The Credit Facility matures in October 2025 and bears interest, at our option, at a base rate plus a margin up to 0.50% or LIBOR rate plus a spread of 0.875% to 1.50%, in each case with such margin being determined by our consolidated leverage ratio. We may draw from the Term Loan Facility up to five times within a 12-month period from the closing of the Term Loan Facility. The Revolving Credit Facility may be borrowed, repaid, and re-borrowed until its maturity, and we have the option to request an increase of $250 million in certain circumstances. The Credit Facility may be repaid at our option without penalty. As of June 30, 2021, no amounts have been drawn under the Credit Facility, and we are in compliance with all related covenants. Please refer to Note 16, “Debt,” to the net share settlementnotes to our consolidated financial statements for details of equity awardsthe Credit Facility.
We believe that our existing cash and cash equivalents, together with cash generated from operations, and borrowing capacity from the Credit Facility will be sufficient to meet our anticipated cash needs for at least the next 12 months. Our future cash requirements will depend on many factors including our growth rate, the timing and extent of $5.4 million.spend on research and development efforts, employee headcount, marketing and sales activities, acquisitions of additional businesses and technologies, the timing and extent of settlements of the Notes for cash payments, the introduction of new software and services offerings, enhancements to our existing software and services offerings and the continued market acceptance of our products.
Critical Accounting Polices and Estimates
We prepare our consolidated financial statements in accordance with IFRS, which includes all standards issued by the IASB and related interpretations issued by the IFRS Interpretations Committee. The preparation of the consolidated financial statements requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, contingent liabilities, revenues, and expenses. We base our judgments and estimates on historical experience and on other various factors we believe to be reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions and conditions and may materially affect the financial results or the financial position reported in future periods.
While our significant accounting policies are more fully described in Note 2, in “Summary of Significant Accounting Policies” to the notes to theour consolidated financial statements, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the accounting policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.
Revenue Recognitionrecognition
We primarily derive revenues from subscription, maintenance, perpetual license, and training and other services.
We recognize revenue when evidenceRevenues are generally recognized upon the transfer of an arrangement exists, delivery has occurred, the risks and rewardscontrol of ownership have been transferredpromised products or services provided to the customer,our customers, reflecting the amount of revenue and associated costs can be measured reliably, and collection of the related receivable is probable.
If, at the outset of an arrangement, revenue cannot be measured reliably,consideration we defer the recognition of revenue until the arrangement fee becomes due and payable by the customer. Additionally, if, at the outset of an arrangement, we determine that collectability is not probable, we defer the recognition of revenue until the earlier of when collectability becomes probableexpect to receive for those products or payment is received.services. We enter into arrangementscontracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. The revenue recognition policy is consistent for sales generated directly with end users
as well ascustomers and sales generated indirectly through solution partners and resellers.
Revenues are recognized upon the application of the following steps:
1.Identification of the contract or contracts with a customer;
2.Identification of the performance obligations in the contract;
3.Determination of the transaction price;
4.Allocation of the transaction price to the performance obligations in the contract; and
5.Recognition of revenue when, or as, the performance obligation is satisfied.
The timing of revenue recognition may differ from the timing of billing our customers. We receive payments from customers based on a billing schedule as established in our contracts. Contract assets are recognized when performance is completed in advance of scheduled billings. Deferred revenue is recognized when billings are in advance of performance under the contract. Our revenue arrangements include standard warranty provisions that our products and services will perform and operate in all material respects, with the applicable published specifications, the financial impacts which have historically been and are expected to continue to be insignificant. Our contracts do not include a significant financing component.
Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require judgment.
We allocate the transaction price for each contract to each performance obligation based on the relative standalone selling price (“SSP”) for each performance obligation. We use judgment in determining the SSP for products and services. We typically determine an SSP range for our products and services which is reassessed on a periodic basis or when facts and circumstances change. For all performance obligations other than perpetual and term licenses, we are able to determine SSP based on the observable prices of products or services sold separately in comparable circumstances to similar customers. In instances where performance obligations do not have observable standalone sales, we utilize available information that may include market conditions, pricing strategies, the economic life of the software, and other observable inputs to estimate the price we would charge if the products and services were sold separately.
Our products are generally sold with a right of return, we may provide other credits or incentives, and in certain instances we estimate customer usage of our services, which are accounted for as variable consideration when determining the amount of revenue to recognize. Returns and credits are estimated at contract inception and updated at the end of each reporting period if additional information becomes available. Variable consideration was not material for the periods presented.
Recognition of revenue
Revenue recognition for indirectrecognized from contracts with customers is disaggregated into categories that depict how the same asnature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. We report our revenues in four categories: (i) subscription, (ii) maintenance, (iii) perpetual license, and (iv) other. In addition, we present revenue by geographic region in Note 15, “Revenue,” to the notes to our consolidated financial statements.
Subscription revenues
Subscription revenues consist primarily of fees earned from subscription-based arrangements for directproviding customers as the termsright to use our software in a cloud-based-infrastructure that we provide. We also sell on-premises term license agreements for our Data Center products, which are software licensed for a specified period, and includes support and maintenance service that is bundled with the license for the term of salethe license period. Subscription revenues are substantially the same.
In the absence of industry-specific software revenue recognition guidance under IFRS, we look to U.S. GAAP when establishing policies related to revenue recognition. Our revenue recognition policy considers the guidance provideddriven primarily by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 985-605, Software Revenue Recognition,number and FASB ASC Subtopic 605-25, Multiple-Element Arrangements, where applicable, as authorized by International Accounting Standard (“IAS”) 8, Accounting Policies, Changes in Accounting Estimatessize of active licenses, the type of product and Errors.
Subscription revenue
Subscriptionthe price of the licenses. Our subscription-based arrangements generally have a contractual term of one to twelve months, with a majority being one month. For cloud-based services, subscription revenue is recognized ratably as services are performed, commencing with the date ourthe service is made available to customerscustomers. For on-premises term-based licenses, we recognize revenue upfront for the portion that relates to the delivery of the term license and all otherthe support and related revenue recognition criteria have been satisfied.is recognized ratably as the services are delivered over the term of the arrangement.
Maintenance revenuerevenues
Maintenance revenues represent fees earned from providing customers unspecified future updates, upgrades and enhancements and technical product support for perpetual license products on an if and when available basis. Maintenance revenue is recognized ratably over the term of the support period.
Perpetual license revenue
Perpetual license revenue is recognizedrevenues
Perpetual license revenues represent fees earned from the license of software to customers for use on the datecustomer’s premises other than data denter products. Software is licensed on a perpetual basis. Perpetual license revenues consist of product delivery forthe revenues recognized from sales of licenses to new customers and additional licenses to existing customers. We typically recognize revenue on the license portion of perpetual license arrangements.arrangements once the customer obtains control of the license, which is generally upon delivery of the license.
Other revenuerevenues
Other revenues primarily include fees received for sales of third-party apps in the Atlassian Marketplace. Technical account management, consulting and training services are also included in other revenues. Revenue from the sale of third-party vendor products on ourapps via Atlassian Marketplace is recognized net of the vendor liability portion as we function as an agent in the relationship. Our portion of revenue is recognized at the date of product delivery given that all of our obligations have been met at that time and on a net basis as we do not have any future obligations.function as the agent in the relationship. Revenue from technical account management is recognized over the time period that the customer has access to the service. Revenue from consulting and training is recognized as delivered orover time as the rights to receive training expire.services are performed.
Multiple-element arrangementsBusiness combinations
ManyWe include the results of operations of the businesses that we acquire beginning from the acquisition date. We allocate the purchase price of our arrangements include purchasesacquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of both software related productsthe purchase price over the fair values of these identifiable assets and services. For these software related multiple-element arrangements, we applyliabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the residual methodbusiness combination and are expensed as incurred.
We use our best estimates and assumptions to determineaccurately assign fair value to the amountintangible assets acquired at the acquisition date. The estimation is primarily due to the judgmental nature of new software license revenuethe inputs to be recognized. We first allocatethe valuation models used to measure the fair value of each elementthese intangible assets, as well as the sensitivity of the respective fair values to the underlying significant assumptions. Our estimates are inherently uncertain and subject to refinement. We use a software related multiple-element arrangement based on itsdiscounted cash flow method of the income approach to measure the fair value as determined by vendor specific objective evidence (“VSOE”), with any remaining amount allocatedof these intangible assets. Assumptions used to estimate the software license. We determine VSOE based on our historical pricing for a specific product or service when sold separately and when a substantial majority of the selling prices for these services fall within a narrow range.
Cloud-based arrangements may be purchased alongside other services that are intended to be used with the cloud offering. These arrangements are considered to be non-software multiple-element arrangements. Accordingly, we allocate revenue to each element considered to be a separate unit of accounting using the relative selling prices of each unit.
The relative selling price for each element is based upon the following selling price hierarchy: VSOE if available, third-party evidence (“TPE”) if VSOE is not available, or estimated selling price if neither VSOE nor TPE are available. Historically, we have established VSOE for all non-software elements using the same methodology applied to software-related elements, as a substantial majority of the selling prices for these elements fall within a narrow range when sold separately. The application of VSOE methodologies requires judgment, including the determination of when to account for deliverables separately and how to allocate the total arrangement fee to its individual elements. Changes to the elements in our arrangements and our ability to establish VSOE for those elements may impact the timing of revenue recognition, which may result in a material change to the amount of revenue recorded in a given period.
If we enter into an arrangement with both software and non-software deliverables, we will first allocate the total arrangement consideration based on the relative selling prices of the software group of elements as a whole and the non-software elements. We then further allocate consideration within the software group in accordance with the residual method described above.
The revenue amounts allocated to each element are recognized when the revenue recognition criteria described above have been met for the respective element.
Share-based Payments
We recognize share-based payment expense for our equity-settled transactions, including employee and non-employee director share option and RSU awards based on fair value of the award atintangible assets include revenue growth rates, technology migration curve, customer attrition rates and discount rates. These assumptions are forward-looking and could be affected by future economic and market conditions.
During the grant date. We recognizemeasurement period, which may be up to one year from the expense over the period in which service conditions are fulfilled, with each portiondate of an award that vests on a different date (i.e., each tranche) being accounted for separately, which requires separate measurement and attribution. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which actual vesting has occurred along with our best estimate of the number of equity instruments that will ultimately vest. The share-based payment expense for each reporting period reflects the movement in cumulative expense recognized at the beginning and end of that period. We do not recognize expense for shares that do not ultimately vest. As required under IFRS,acquisition, we follow the accelerated method of expense recognition for share-based awards, as the awards vest in tranches over the vesting period.
We measure share-based payment expense by referencemay record adjustments to the fair value of the equity instruments at the date at which they are granted. The accounting estimates and assumptions relating to share-based payments may impact expenses, equity and the carrying amounts of liabilities within a given period.
We estimate a forfeiture rate in calculating the amount of share-based payment expense we recognize in our consolidated statements of comprehensive income. We estimate our forfeiture rate based on an analysis of our actual forfeitures and we will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors. Changes in the estimated forfeiture rate can have a significant impact on our share-based payment expense as the cumulative effect of adjusting the rate is recognized in the period the forfeiture estimate is changed. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the share-based payment expense recognized in our financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the share-based payment expense recognized in our financial statements.
As part of our acquisition of Trello, we exchanged unvested stock options held by Trello employees for unvested share options of the company. Prior to our IPO, we granted share options to certain employees as part of their compensation package. We estimate the fair value of share options using the Black-Scholes option-valuation model.
Our Black-Scholes option-valuation model requires the input of highly subjective assumptions and estimates, which involve inherent uncertainties and the application of management's judgment. If factors change and different assumptions are used, our share-based payment expense could be materially different in the future. The following assumptions were used as inputs for the option-valuation model:
Fair value of underlying shares—Prior to our IPO, there was no active external or internal market for our shares at the date of the grant. In order to determine the fair value of our restricted shares prior to our IPO, we enlisted the assistance of a third-party valuation firm. The valuations of our shares were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Following our IPO, we refer to the closing stock price on the grant date to determine the fair value of the underlying Class A ordinary shares.
Expected volatility—As there was no active external or internal market for our shares prior to our IPO, we estimated the expected volatility for our shares by taking the average historic price volatility for a group of publicly traded industry peers. Our industry peers consist of several public companies in the technology industry that are similar to us in size and stage of life cycle. Following our IPO, we estimate expected future volatility based on the historical volatility of our stock price.
Expected term—We determined the expected term based on the average period the share options are expected to remain outstanding.
Risk-free interest rate—We based the risk-free interest rate on the implied yield available on zero-coupon government issued securities in the country in whose currency the exercise price was expressed over the expected term of the option.
Dividend yield—Prior to our IPO, the restricted shares underlying our share options were not entitled to dividends. As such, we used an expected dividend yield of zero. Following our IPO, we do not anticipate
paying any cash dividends in the foreseeable future and therefore use an expected dividend yield of zero in the option pricing model.
Business Combinations
Accounting for business combinations requires us to make significant estimates, assumptions, and judgments at the acquisition date with respect tothese tangible and intangible assets acquired and liabilities assumed based on additional information obtained affecting the fair value of those assets and liabilities, with the corresponding offset to goodwill. In addition, uncertain tax positions are initially established in connection with a business combination as of the acquisition date. We continue to collect information and reevaluate these provisional estimates and assumptions as deemed reasonable by management. We record any adjustments to these provisional estimates and assumptions against goodwill provided they arise within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.
Goodwill
Goodwill is the excess of the aggregate of the consideration transferred over the identifiable assets acquired and liabilities assumed. These estimatesGoodwill is tested for impairment annually during the fourth quarter of our fiscal year and when circumstances indicate that the carrying value may be impaired. We perform our annual goodwill impairment test at the level of our operating segment as there are no lower levels within the Group at which goodwill is monitored. Impairment is determined for goodwill by assessing the recoverable amount of the operating segment. When the recoverable amount of the operating segment is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in valuing certainfuture periods.
Intangible assets
We acquire intangible assets separately or in connection with business combinations. Intangible assets are measured at cost initially. All of our intangible assets are subject to amortization and goodwillare amortized over their estimated useful life using the straight-line method. The amortization expense on intangible assets is recognized in the consolidated statements of operations in the expense category, consistent with the function of the intangible asset.
The estimated useful lives for each intangible asset class are as follows: | | | | | |
Patents, trademarks and other rights | 5 - 12 years |
Customer relationships | 3 - 10 years |
Acquired developed technology | 4 - 6 years |
Intangible assets with finite lives are assessed for impairment whenever there is an indication that the intangible asset may be impaired. When the recoverable amount of an intangible asset is less than its carrying amount, an impairment loss is recognized.
Impairment of non-financial assets
At the end of each reporting period, we have acquired include butassess whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, we estimate the asset’s recoverable amount. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are not limited to:largely independent of those from other assets or groups of assets. An asset’s recoverable amount is the higher of an asset’s or cash generating unit (“CGU”)’s fair value less costs of disposal and its value in use. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future expected cash flows from sales, other customer contracts and acquired developed technologies;
the acquired company’s trade name, trademark and existing customer relationships, as well as assumptions about the useful livesare discounted to their present value using a pre-tax discount rate that reflects current market assessments of the acquired trade name, trademarktime value of money and customer relationships;the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.
Leases
uncertain tax positions;Group as lessee
We determine if an arrangement is a lease at inception. Our lease agreements generally contain lease and non-lease components. Lease payments under our lease arrangements are primarily fixed. Non-lease components primarily include payments for maintenance and utilities and are expensed as incurred.
discount ratesLease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated future cash flows.to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We generally use the base, non-cancelable, lease term when determining lease liabilities. We reassess the lease term if and when a significant event or change in circumstances occurs within the control of the Group.
Unanticipated eventsRight-of-use assets are recognized at cost at the lease commencement date. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct cost incurred, any prepaid lease payments less lease incentives and circumstances may occur that may affectan estimate of restoration cost. Right-of-use assets are depreciated on a straight-line basis over the accuracy or validityshorter of such assumptions, estimates or actual results.
Goodwill, Intangibles,the lease term and Other Long-Lived Assetsthe estimated useful lives of the assets.
We make significant estimates, assumptions,apply the short-term lease recognition exemption for our short-term leases and judgments when valuing goodwillleases of low-value assets. Short-term leases are leases with a lease term of 12 months or less. Low-value assets are primarily comprised of office equipment. Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis over the lease term.
Taxation
Current tax
Current income tax assets and/or liabilities comprise amounts expected to be recovered or paid to Her Majesty's Revenue & Customs (“HMRC”), the Australian Taxation Office, the United States Internal Revenue Service (“IRS”) and other intangible assets in connection withfiscal authorities relating to the initial purchase price allocation of an acquired entity, as well as when evaluating impairment of goodwill and other acquired intangible assets on an ongoing basis. These estimatescurrent or prior reporting periods, which are based upon a number of factors, including historical experience, market conditions, and information obtained from the management of the acquired company. Critical estimates in valuing certain intangible assets include, but are not limited to, cash flows that an asset is expected to generate in the future, discount rates, the time and expense that would be necessary to recreate the assets, and the expected use of the acquired assets. The amounts and useful lives assigned to identified intangible assets impacts the amount and timing of future amortization expense.
We assess impairment of all assetsunpaid at each reporting datedate. Current tax is payable on taxable income that differs from the consolidated statements of operations in the financial statements due to permanent and temporary timing differences. The calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by evaluating conditions specific to us and to the particular asset that may lead to impairment. These include product performance, technology, economic and political environments, and future product expectations. If an impairment trigger exists, the recoverable amountend of the asset is determined. No indicators of impairment existed that were significant enough to warrant such assets to be tested for impairment in the fiscal years ended June 30, 2018, 2017 and 2016.reporting period.
Deferred tax
We use the liability method of accounting for income taxes. Deferred income tax assets and liabilities represent temporary differences between the carrying amounts of assets and liabilities in ourthe consolidated financial statements and their corresponding tax basis used in the computation of taxable income. Deferred tax however is not recognized on the initial recognition of goodwill, or the initial recognition of an asset or liability (other than in a business combination) in a transaction that affects neither tax nor accounting income.
We recognize deferredDeferred tax liabilities are recognized for taxable temporary differences associated with our investments in our subsidiaries and associates, except where we are able to control the reversal of the temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax liabilities are generally provided for in full.
We recognize deferredDeferred tax assets are recognized to the extent that they are expected to reverse in the foreseeable future and it is probable that they will be able to be utilized against future taxable income, based on our forecast of future operating results.results of operations. Deferred tax assets are adjusted for significant non-taxable income, expenses and specific limits on the use of any unused tax loss or credit. Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable income will allow the deferred tax asset to be recovered.
We calculate deferredDeferred tax assets and liabilities are calculated, without discounting, at the tax rates and in accordance with laws that we expectare expected to apply to their respective period of realization, provided the tax rates and laws are enacted or substantively enacted by the end of ourthe reporting period. The carrying amount of deferred tax assets are reviewed at each
reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred tax asset to be utilized.
Deferred tax liabilities and assets are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and we intend to settle our current tax assets and liabilities on a net basis. Changes in deferred tax assets or liabilities are recognized as a component of tax income or expense (benefit) in ourthe consolidated statements of comprehensive income,operations, except where they relate to items that are recognized in other comprehensive income (loss) or directly in equity, in which case the related deferred tax is also recognized in other comprehensive income (loss) or equity, respectively. Where deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
Our corporate structureDeferred tax assets are recognized for deductible temporary differences for which management considers it is probable that future taxable income will be available to utilize those temporary differences. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and intercompany arrangements alignthe level of future taxable income, together with our expanding internationalfuture tax-planning strategies. Assumptions about the generation of future taxable income depend on management’s estimates of future cash flows, future business activities. Theexpectations, capital expenditures, dividends, and other capital management transactions. Management judgment is also required in relation to the application of theincome tax lawslegislation, which involves complexity and an element of various jurisdictionsuncertainty. Where management judgment is found to our international business activities is subject to interpretation. The taxing authoritiesbe misplaced, some or all of the jurisdictions in which we operaterecognized deferred tax asset and liability carrying amounts may challenge our methodologies for valuing developed technology or intercompany arrangements, including our transfer pricing, or determine the manner in which we operate our business is not consistent with the manner in which we report our income to the jurisdictions. If such a disagreement were to occur, and our positions were not sustained, we could be required to pay additional taxes, interest and penalties,require adjustment, resulting in higher effective tax rates, reduced cash flows and lower overall profitability of our operations.
New accounting standards not yet adopted
IFRS 15, Revenue from Contract with Customers, was issued in May 2014, and amended in April 2016, and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goodscorresponding credit or services to customers.
The new revenue standard supersedes all current revenue recognition requirements under IFRS. Either a full retrospective application or modified retrospective application is required for annual periods beginning on or after January 1, 2018. The standard is applicable for our fiscal year ending June 30, 2019. We have assessed the new standard, including completing our contract reviews and evaluation of the incremental costs of obtaining a contract. Based on our assessment, we will be adopting the requirements of the new standard in the first quarter of fiscal 2019, utilizing the full retrospective method of transition.
The primary impact of adopting the new standard relates to our on-premises term-based licenses, as under IFRS 15, the requirement to have vendor specific objective evidence (VSOE) for undelivered elements is eliminated. Our term-based licenses include the delivery of software and support services as well as unspecified future updates. Under our current policies, we recognize revenue for these contracts ratably over the life of the service period. In contrast, under IFRS 15, we will estimate the standalone selling price associated with the software license and the support services separately and recognize license revenue upon delivery of the initial software at the outset of the arrangement. Upon adoption, unused maintenance upon server product upgrades will be allocated between maintenance, perpetual license and other revenue. Under our current policy it is allocated in-full to perpetual license revenue.
The impact of adopting the new standard as it relatescharge to the incremental costs of obtaining a contract was not material to our fiscal 2018 and fiscal 2017 financial statements.
Select consolidated statements of operations line items whichoperations.
The Company assesses uncertainty over a tax treatment in accordance with International Financial Reporting Interpretations Committee (“IFRIC”) 23. When the Company concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the Company will reflect the adoptioneffect of uncertainty by using either of the following methods, depending on which method the Company expects to better predict the resolution of the uncertainty:
•The most likely amount: the single most likely amount in a range of possible outcomes.
•The expected value: the sum of the probability-weighted amounts in a range of possible outcomes.
New Standards, Interpretations and Amendments Not Yet Adopted in Fiscal Year 2021
The IASB has issued other amendments resulting from improvements to IFRS 15 are as follows:
|
| | | | | | | | | | | |
| Year ended June 30, 2018 |
| As Reported | | IFRS 15 Adjustment | | As Adjusted |
| (U.S. $ in thousands)
|
Revenues: | | | | | |
Subscription | $ | 403,214 |
| | $ | 7,480 |
| | $ | 410,694 |
|
Maintenance | 325,898 |
| | 613 |
| | 326,511 |
|
Perpetual license | 85,481 |
| | (2,310 | ) | | 83,171 |
|
Other | 59,357 |
| | 1,245 |
| | 60,602 |
|
Total revenues | 873,950 |
| | 7,028 |
| | 880,978 |
|
Total operating expenses | 755,008 |
| | (675 | ) | | 754,333 |
|
Operating loss | (53,748 | ) | | 7,703 |
| | (46,045 | ) |
Income tax expense | (53,507 | ) | | (1,794 | ) | | (55,301 | ) |
Net loss | $ | (119,341 | ) | | $ | 5,909 |
| | $ | (113,432 | ) |
|
| | | | | | | | | | | |
| Year ended June 30, 2017 |
| As Reported | | IFRS 15 Adjustment | | As Adjusted |
| (U.S. $ in thousands)
|
Revenues: | | | | | |
Subscription | $ | 242,128 |
| | $ | 7,695 |
| | $ | 249,823 |
|
Maintenance | 265,521 |
| | (1,068 | ) | | 264,453 |
|
Perpetual license | 74,565 |
| | (507 | ) | | 74,058 |
|
Other | 37,722 |
| | 628 |
| | 38,350 |
|
Total revenues | 619,936 |
| | 6,748 |
| | 626,684 |
|
Total operating expenses | 563,861 |
| | (504 | ) | | 563,357 |
|
Operating loss | (63,086 | ) | | 7,252 |
| | (55,834 | ) |
Income tax benefit | 17,148 |
| | (2,197 | ) | | 14,951 |
|
Net loss | $ | (42,504 | ) | | $ | 5,055 |
| | $ | (37,449 | ) |
Select consolidated statements ofthat management considers do not have any impact on the accounting policies, financial position line items, which reflect the adoption of IFRS 15 are as follows: |
| | | | | | | | | | | |
| As of June 30, 2018 |
| As Reported | | IFRS 15 Adjustment | | As Adjusted |
| (U.S. $ in thousands)
|
Current assets: | | | | | |
Prepaid expenses and other current assets | $ | 28,219 |
| | $ | 1,576 |
| | $ | 29,795 |
|
Non-current assets: | | | | | |
Deferred tax assets | 64,662 |
| | (5,442 | ) | | 59,220 |
|
Other non-current assets | 112,221 |
| | 1,180 |
| | 113,401 |
|
Current liabilities: | | | | | |
Deferred revenue | 340,834 |
| | (16,440 | ) | | 324,394 |
|
Non-current liabilities: | | | | | |
Deferred tax liabilities | 12,051 |
| | 109 |
| | 12,160 |
|
Deferred revenue | 19,386 |
| | (909 | ) | | 18,477 |
|
Equity | | | | | |
Accumulated deficit | $ | (142,570 | ) | | $ | 14,554 |
| | $ | (128,016 | ) |
|
| | | | | | | | | | | |
| As of June 30, 2017 |
| As Reported | | IFRS 15 Adjustment | | As Adjusted |
| (U.S. $ in thousands) |
Current assets: | | | | | |
Prepaid expenses and other current assets | $ | 23,317 |
| | $ | 822 |
| | $ | 24,139 |
|
Non-current assets: | | | | | |
Deferred tax assets | 188,239 |
| | (3,341 | ) | | 184,898 |
|
Other non-current assets | 9,269 |
| | 778 |
| | 10,047 |
|
Current liabilities: | | | | | |
Deferred revenue | 245,306 |
| | (10,541 | ) | | 234,765 |
|
Non-current liabilities: | | | | | |
Deferred tax liabilities | 43,950 |
| | 416 |
| | 44,366 |
|
Deferred revenue | 10,691 |
| | (261 | ) | | 10,430 |
|
Equity | | | | | |
Accumulated deficit | $ | (23,229 | ) | | $ | 8,645 |
| | $ | (14,584 | ) |
Adoptionor performance of the standard relatedGroup. We do not expect them to revenue recognition had nohave a material impact to cash provided by or used in operating, financing, or investing activities on our consolidated cash flows statements. accounting policies.
In January 2016, the IASB issued IFRS 16, Leases, which supersedes the existing leases standard, IAS 17, Leases, and related interpretations. The standard introduces a single lessee accounting model and requires a lessee to recognize all leases with a term of more than 12 months, as assets and liabilities on its statement of financial position. The standard also contains enhanced disclosure requirements for lessees and is effective for us beginning for our fiscal year ending June 30, 2020, though early adoption is permitted for companies that early adopt IFRS 15. We are currently evaluating the impact of adopting the standard on our consolidated financial statements.
C. Research and Development, Patents and Licenses, etc.
Research and Development
Our research and development organization is primarily responsible for design, development, testing and delivery of our products and platform. It is also responsible for our customer services platforms, including billing and support, our Marketplace platform, and marketing and sales systems that power our automated distribution model.
As a company, we prioritize research and development above all other operating investments. Over the last threetwo fiscal years, we invested $720.5$1,269.0 million in research and development activities, excluding share-based compensation, translating to 36.9%34.3% of the revenue generated over the same period. During this period, we successfully launched severalreleased new innovations including the introduction of three purpose-built versions, of Jira (Jira Software, Jira Service Deskfeatures, and Jira Core)cloud platform capabilities to drive existing customer success and Data Center products for Jira, Confluence, and Bitbucket.expansion as well as attract new customers to our products.
As of June 30, 2018,2021, over 50% of our employees were involved in research and development activities. Our research and development organization is globallyprimarily distributed across fiveseven locations: Sydney, Australia, the San Francisco Bay Area, California, New York, New York, Austin, Texas, Bengaluru, India, Gdansk, Poland, and Bengaluru, India. In addition, we conduct research and development activities at our partner location in Gdansk, Poland.Ankara, Turkey.
Our research and development organization consists of flexible and dynamic teams that follow agile development methodologies to enable rapid product releases across our various platforms: Cloud, Servercloud, server and Data Center.data center. In addition to investing in our internal development teams, we invest heavily in our developer ecosystem to enable external software developers to build features and solutions on top of our platform. Given our relentless focus on the customer, we work closely with our customers to develop our products, and have designed a development process that incorporates the feedback that matters most—most from our users. From maintaining an active online community to measuring user satisfaction for our products, we are able to address our users’ greatest needs.
Intellectual Property
We protect our intellectual property through a combination of trademarks, domain names, copyrights, trade secrets and patents, as well as contractual provisions and restrictions governing access to our proprietary technology.
We registered ‘‘Atlassian’’ as a trademark in the United States, Australia, the European Union,EU, Russia, China, Japan, Switzerland, Norway, Singapore, Israel, Korea, and Canada. We have also haveregistered or filed otherfor trademark applicationsregistration of product-related trade names and logos in the United States, Australia, the European Union,EU, Brazil, Russia, India, and China, and certain other jurisdictions, and will pursue additional trademark registrations to the extent we believe it would be beneficial and cost effective.
As of June 30, 2018,2021, we had 21219 issued patents and 70have over 261 applications pending in the United States. We had no issued patents oralso have a number of patent applications pending in jurisdictions outside ofbefore the United States.European Patent Office. These patents and patent applications seek to protect proprietary inventions relevant to our business. We intend to pursue additional patent protection to the extent we believe it would be beneficial and cost effective.
We are the registered holder of a variety of domain names that include ‘‘Atlassian’’ and similar variations.
In addition to the protection provided by our registered intellectual property rights, we protect our intellectual property rights by imposing contractual obligations on third parties who develop or access our technology. We enter into confidentiality agreements with our employees, consultants, contractors and business partners. Our employees, consultants and contractors are also subject to invention assignment agreements, pursuant to which we obtain rights to technology that they develop for us. We further protect our rights in our proprietary technology and intellectual property through restrictive license and service use provisions in both the general and product-specific terms of use on our website and in other business contracts.
D. Trend Information
We operate with a long-term mindset to drive durable growth measured over decades.
We introduced free cloud editions across our core products - Jira Software, Confluence and Jira Service Management - to make it easier for teams to try and use our products. We also introduced Atlassian Cloud Enterprise, to provide enhanced capabilities to fit the needs of customers of any size. These editions are the direct result of our multi-year investment in our cloud platform.
Migrating our larger customers to the cloud is one of our most important priorities over the next several years. Consistent with our strategy, our server business is expected to contract. As a result, we expect perpetual license revenue to continue to decline. Maintenance revenue is expected to decline as server customers migrate to our cloud and data center offerings. Subscription revenue is expected to increase and continue to be our primary driver of revenue growth.
While COVID-19 did not have a material adverse impact on our financial condition or results of operations during the fiscal year ended June 30, 2021, the extent to which COVID-19 ultimately impacts our business, results of operations, and financial position will depend on future developments, which are uncertain and cannot be predicted at this time. For example, while our diverse customer base is a competitive advantage for us and helps fuel our low-friction flywheel sales model, we have revenue exposure to customers who are small- and medium-sized businesses and to industries that may be disproportionately impacted by COVID-19. Also, a majority of our cloud customers choose to be billed on a monthly basis and many of these customers are small and medium-sized businesses that may be adversely impacted by COVID-19. In addition, we may experience elongated sales cycles and extended payment terms and concessions as the economic and social impacts of COVID-19 become more fully realized.
We will continue investing to pursue the large market opportunities ahead of us, despite macroeconomic headwinds and slower revenue growth. We expect to invest in additional personnel as we scale, with the majority in research and development. Effective April 2021, we removed the one-year cliff for our ongoing RSU grants to existing employees, which will vest evenly over four years on a quarterly basis. We expect our share-based payment expenses to increase in the fiscal year ending June 30, 2022 as we continue to invest in our team and additional personnel. We plan to continue to invest in our platform, cloud services, migration tools, new product initiatives, and enhancements across the cloud portfolio. We expect our operating income and operating cash flow to decrease in the fiscal year ending June 30, 2022.
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the current fiscal year that are reasonably likely to have a material effect on our revenues, income, profitability, liquidity or capital reserves, or that caused the disclosed financial information to be not necessarily indicative of future operating results of operations or financial conditions.
E. Off-Balance Sheet ArrangementsCritical Accounting Estimates
At June 30, 2018, 2017The Group based its assumptions and 2016,estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
Determining the SSP for products and services requires estimates and assumptions. We typically determine a SSP range for our products and services which is reassessed on a periodic basis or when facts and circumstances change. For all performance obligations other than perpetual and term licenses, we didare able to determine SSP based on the observable prices of products or services sold separately in comparable circumstances to similar customers. In instances where performance obligations do not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entitiesobservable standalone sales, we utilize available information that may include market conditions, pricing strategies, the economic life of the software, and other observable inputs to estimate the price we would have been established forcharge if the purpose of facilitating off-balance sheet arrangements or other purposes. Other than operating leases for office space, we have not engaged in off-balance sheet financing arrangements.products and services were sold separately.
F. Contractual Obligations and Commitments
Our principal contractual commitmentsobligations primarily consist of obligations under our long-term debt relating to principal and interest payments, minimum lease payments relating to operatingNotes, leases for office space, and contractual commitments for hosting services. services and capital purchase obligations for the construction or purchase of property and equipment.
At June 30, 20182021, contractual obligations were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payments Due by Period |
| Total | | Less than 1 year | | 1 to 3 years | | 3 to 5 years | | After 5 years |
| (U.S. $ in thousands) |
Exchangeable senior notes (1) | $ | 1,109,593 | | | $ | 1,109,593 | | | $ | — | | | $ | — | | | $ | — | |
Lease obligations (2) | 282,423 | | | 48,297 | | | 77,768 | | | 65,227 | | | 91,131 | |
Obligations for leases that have not yet commenced | 88,855 | | | $ | 1,438 | | | 12,432 | | | 14,224 | | | 60,761 | |
Purchase obligations | 114,060 | | | 57,393 | | | 56,667 | | | — | | | — | |
Capital purchase obligations | 11,076 | | | 11,076 | | | — | | | — | | | — | |
Total | $ | 1,606,007 | | | $ | 1,227,797 | | | $ | 146,867 | | | $ | 79,451 | | | $ | 151,892 | |
(1) As of June 30, 2021, the closing price exchange condition of the Notes was met and the Notes and exchange derivative liability are classified as current on our consolidated statements of financial position and may be due in less than one year. The amount related to the Notes represent the if-exchanged value using stock price as of June 30, 2021. Refer to Note 16, “Debt” to the notes to our consolidated financial statements for more details on the Notes. |
| | | | | | | | | | | | | | | | | | | |
| Payments Due by Period |
| Total | | Less than 1 year | | 1 to 3 years | | 3 to 5 years | | After 5 years |
| (U.S. $ in thousands) |
Long-term debt | $ | 1,031,319 |
| | $ | 6,319 |
| | $ | 18,750 |
| | $ | 1,006,250 |
| | $ | — |
|
Operating lease obligations | 328,185 |
| | 32,530 |
| | 105,242 |
| | 53,202 |
| | 137,211 |
|
Purchase obligations | 25,000 |
| | 25,000 |
| | — |
| | — |
| | — |
|
Other obligations | 753 |
| | 753 |
| | — |
| | — |
| | — |
|
Total | $ | 1,385,257 |
| | $ | 64,602 |
| | $ | 123,992 |
| | $ | 1,059,452 |
| | $ | 137,211 |
|
(2) Lease obligations represent undiscounted lease payments excluding certain low-value and short-term leases. For further information, refer to Note 12, “Leases,” to the notes to our consolidated financial statements.
G. Safe Harbor
See “Special Note Regarding Forward-Looking Statements.”
Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The following table sets forth information for our directors and executive officers, andincluding their ages as of June 30, 2018.2021. Unless otherwise stated, the address for our non-employee directors and executive officers, other than Messrs. Cannon-Brookes and Farquhar, is 1098 Harrison350 Bush Street, Floor 13, San Francisco, California 94103.94104. The address for Messrs. Cannon-Brookes and Farquhar is Level 6, 341 George Street, Sydney, NSW, 2000, Australia.
|
| | | | | | | |
Name | Age | Age | | Position |
Executive Officers and Employee DirectorsDirectors: | | | | |
Michael Cannon-Brookes | 41 | 38 | | Co-Founder, Co-Chief Executive Officer and Director |
Scott Farquhar(1) | 41 | 38 | | Co-Founder, Co-Chief Executive Officer and Director |
Jay Simons | | 45 | | President |
James Beer(2) | 60 | 57 | | Chief Financial Officer |
Tom KennedyErika Fisher | 36 | 44 | | Chief LegalAdministrative Officer and General Counsel |
Helen Russell | | 50 | | Chief People Officer |
Sri Viswanath | 46 | 43 | | Chief Technology Officer |
Cameron Deatsch | 40 | | | Chief Revenue Officer |
Non-Employee Directors: | | | | |
Non-Employee Directors: | | |
Shona L. Brown(1) (3) | 55 | 52 | | Director and Chair |
Heather Mirjahangir Fernandez(4)(5) (2)(3) | 45 | 42 | | Director |
Sasan Goodarzi(3)(6)(7) (1) | 53 | 50 | | Director |
Jay Parikh(3) (1) | 48 | 45 | | Director |
Enrique Salem(4)(5) (2)(3) | 55 | 52 | | Director |
Steven Sordello(4) (2) | 52 | 49 | | Director |
Richard P. Wong(5)(6) (3) | 52 | 49 | | Director |
(1) Mr. Farquhar was chair of our board of directors until April 2018. Dr. Brown has served as chair of our board of directors since April 2018.
(2) Mr. Beer was appointed Chief Financial Officer of the Company February 20, 2018, following the resignation of Murray Demo on January 29, 2018.
(3(1) Member of the compensationCompensation and leadership development committee.Leadership Development Committee.
(4)(2) Member of the audit committee.Audit Committee.
(3) Member of the nominatingNominating and corporate governance committee.Corporate Governance Committee.
(6) Mr. Wong was a member of the compensation and leadership development committee until April 2018. Mr. Goodarzi has been a member of the compensation and leadership development committee since April 2018.
(7) Mr. Goodarzi joined our board of directors in April 2018.
Each executive officer serves at the discretion of our board of directors and holds office until his or hertheir successor is duly elected and qualified or until his or hertheir earlier resignation or removal. There are no family
relationships among any of our directors or executive officers and no arrangement or understanding with major shareholders, customers, suppliers or others, pursuant to which any directors or executive officers were selected as a director or member of senior management.
Executive Officers and Employee Directors
Michael Cannon-Brookes co-founded Atlassian and has served as our Co-Chief Executive Officer and as a member of our board of directors since October 2002. Mr. Cannon-Brookes has also served as an adjunct professor of computer science & engineering at the University of New South Wales, Australia since April 2014. Mr. Cannon-Brookes holds a Bachelor of Commerce in information systems from the University of New South Wales, Australia.
Scott Farquhar co-founded Atlassian and has served as our Co-Chief Executive Officer and as a member of our board of directors since October 2002 and as chair of our board of directors from December 2016 to April 2018. Mr. Farquhar holds a Bachelor of Science in business information technology from the University of New South Wales, Australia.
Jay Simons has served as our President since August 2011. From June 2008 to August 2011, Mr. Simons served as our Vice President of Sales and Marketing. From October 2005 to May 2008, Mr. Simons served in various roles, including Vice President, Marketing, at BEA Systems, Inc. an enterprise software company, which was acquired by Oracle Corporation in 2008. From 1998 to 2005, Mr. Simons served in various roles, including Vice President, Product Marketing & Strategy, at Plumtree Software, Inc., a web software company, which was acquired by BEA Systems, Inc. in 2005. Mr. Simons is currently a director of HubSpot, Inc., a cloud-based marketing and sales software platform company. Mr. Simons holds a Bachelor of Arts in political science and environmental science from the University of Washington.
James Beer has served as our Chief Financial Officer since February 2018. Before joining Atlassian, Mr. Beer served as Executive Vice President and Chief Financial Officer of McKesson Corporation, a Fortune 10 healthcare services and information technology company. Between 2006 and 2013, Mr. Beer was Executive Vice President and Chief Financial Officer of Symantec Corporation, a cybersecurity company, where he managed the worldwide finance organization. Previous to his work at Symantec, Mr. Beer was Chief Financial Officer of AMR Corp. and American Airlines, AMR’s principal subsidiary. Mr. Beer holds a Bachelor of Science degree in Aeronautical Engineering from Imperial College, London University, and a Master of Business Administration from Harvard Business School. Mr. Beer currently serves on the board of directors for Alaska Air Group, parent company of Alaska Airlines, and Virgin America, and ForeScout Technologies,DocuSign, Inc., an internet of things (IoT) securitye-signature solutions company. Mr. Beer is also a member of the Federal Reserve Bank of San Francisco's Economic Advisory Council.
Tom KennedyErika Fisher has served as our Chief LegalAdministrative Officer since October 2011. From July 2010 to July 2011, Mr. Kennedy servedSeptember 2020 and as a Transition Executive at IBM Corporation, a global technology company. From July 2007 to July 2010, Mr. Kennedy served as Senior Vice President andour General Counsel since July 2019. Ms. Fisher joined Atlassian in April 2016 and has served in several leadership roles during that time, including commercial and product counsel, as well as Head of BigFix, Inc., a security software company, which was acquired by IBM CorporationPrivacy. She also sits on the board of the Business Software Alliance. Prior to joining Atlassian, Ms. Fisher spent several years in 2010. From November 1999 to May 2007, Mr. Kennedy was an attorneyprivate practice at CooleyWeil, Gotshal & Manges LLP and Goodwin Procter LLP. Mr. KennedyHer practice focused on advising early stage, high growth companies in licensing and technology transactions. Ms. Fisher holds a Juris Doctor degreeDoctorate from the University of California, Los AngelesPennsylvania where she was awarded the Silverman-Rodin merit scholarship, a Certificate in Business and Public Policy from the Wharton School, and a Bachelor of Artsbachelor’s degree in art history and political science from the University of California, Berkeley.Miami, where she was awarded the Foote Fellows merit scholarship.
Helen Russell has served as our Chief People Officer since October 2016. From July 2014 to August 2016, Ms. Russell served as Chief Human Resources Officer of Sonos, Inc., a provider of home sound systems. From August 2010 to June 2014, Ms. Russell served as Global Head of Human Resources Officer of Kantar Group, a research, data and insight consultancy. From 2005 to 2010, Ms. Russell served as Vice President Human Resources EMEA for Yahoo Inc., a web services provider, which was acquired by Verizon in 2017, and from 2000 to 2005 as Vice President Human Resources EMEA for Siebel CRM Systems, Inc., an enterprise software company, acquired by Oracle Corporation in 2005. Ms. Russell holds a Bachelor of Arts in sociology and bio-mechanics from the University of Liverpool, England.
Sri Viswanath has served as our Chief Technology Officer since January 2016. From April 2013 to December 2015, Mr. Viswanath served as Chief Technology Officer and Senior Vice President of Product and Engineering at Groupon, Inc., a global local commerce company. From September 2012 to April 2013, Mr. Viswanath was the Vice President of Research and Development for mobile computing at VMware, a provider of cloud and virtualization software and services. From September 2009 to November 2011, Mr. Viswanath served as Senior Vice President of Engineering at Ning, Inc., an online SaaS platform company, which was acquired in November 2011 by Glam Media, a media company, where he became Senior Vice President of Engineering and
General Manager of publisher products from November 2011 to August 2012. From 1999 to July 2008, Mr. Viswanath led the development of a number of open-source and business-to-business products at Sun Microsystems. Mr. Viswanath is currently a director of Splunk Inc., a company that produces software for searching, monitoring, and analyzing machine-generated big data. Mr. Viswanath holds a Master of Science in computer science from Clemson University and a Master of Science in management from Stanford University.
Cameron Deatsch has served as our Chief Revenue Officer since March 2020. From October 2012 to March 2020, Mr. Deatsch served multiple roles at Atlassian, including Senior Director of Advocacy, Head of Server Business, Head of Corporate Development, Head of Server and Enterprise Marketing and Head of Growth and Online Sales. From June 2008 to August 2010, Mr. Deatsch served as a Product Marketing Manager at Jive Software and became their Senior Director of Marketing from June 2010 to October 2012. Mr. Deatsch holds a Master of Business Administration from the University of Montana and a Bachelor of Science in Electrical Engineering from University of California, Davis.
Non-Employee Directors
Shona L. Brown has served on our board of directors since November 2015 and as chair of our board of directors since April 2018. Dr. Brown is currently an independent advisor. She served as a senior advisor to Google Inc., an Internet search and technology company, from January 2013 until November 2015. From April 2011 to December 2012, Dr. Brown served as Senior Vice President of Google.org, Google's charitable organization. From 2003 to 2011, Dr. Brown served as Vice President and later as Senior Vice President, Business Operation of Google Inc. From 20001995 to 2003, Dr. Brown was a consultant at McKinsey & Company, where she served as a partner at McKinsey & Company.from 2000 to 2003. Dr. Brown is currently a director of PepsiCo, Inc., a food and beverage company, and DoorDash, Inc., a logistics company, as well as several private companies and non-profit organizations. Dr. Brown holds a Bachelor of Computer Systems Engineering from Carleton University, a Master of Arts in philosophy and economics from Oxford University, and a Ph.D. in industrial engineering and industrial management from Stanford University.
Heather Mirjahangir Fernandez has served on our board of directors since November 2015. Ms. Mirjahangir Fernandez is the Chief Executive Officer and co-founder of Solv., an early stage private company in the digital health space. From January 2014 to August 2015, Ms. Mirjahangir Fernandez served as Senior Vice President and General Manager of Business Services at Trulia, Inc., an online residential real estate site, which was acquired by Zillow, Inc. in 2015. From August 2006 to January 2014, Ms. Mirjahangir Fernandez served in various other senior management positions in sales and marketing at Trulia, Inc. Prior to Trulia, Inc., Ms. Mirjahangir Fernandez was an advisor at Morgan Stanley and Director of the Impact Group at Blanc & Otus. Ms. Mirjahangir Fernandez holds a Bachelor of Arts in political science from University of California, Berkeley and a Master inof Business Administration from Stanford University Graduate School of Business.
Sasan Goodarzi has served on our board of directors since April 2018. Mr. Goodarzi ishas served as Chief Executive Officer (CEO) of Intuit, Inc., a financial software company, since January 2019. During his 14 years with Intuit, Mr. Goodarzi has successfully led each of Intuit’s largest businesses. From May 2016 to January 2019, Mr. Goodarzi was Executive Vice President and General Manager of Intuit, Inc. Small Business Group, a roleGroup. From 2004 to which he was appointed in May 2016, From 2004-2010,2010, Mr. Goodarzi was Senior Vice President and General Manager for Intuit’s ProTax division and Intuit Financial Services. From 2011 to 2013, Mr. Goodarzi served as Intuit’s Chief Information Officer. From 2013 to 2016, Mr. Goodarzi served as the Executive Vice President and General Manager of Turbo Tax. Prior to Intuit, Mr. Goodarzi worked for Invensys, a global provider of industrial automation, transportation and controls technology, serving as global presidentGlobal President of the productsProducts group. He also held a number of senior leadership roles in the automation control division at Honeywell and served as the Chief Executive Officer and co-founder of a technology startup, Lazer Cables Inc. Mr. Goodarzi earned his bachelor'sBachelor of Science degree in electrical engineering at the University of Central Florida and a master's in business administrationMaster of Business Administration from the Kellogg School of Management at Northwestern University.
Jay Parikh has served on our board of directors since July 2013. Mr. Parikh has served as the co-Chief Executive Officer of Lacework, Inc., a cloud security company, since August 2021. Mr. Parikh previously served as Vice President of Global Engineering and Infrastructure Engineering ofat Facebook, Inc. since, a social media and social networking service company, from November 2009.2009 till February 2021. From October 2007 to October 2009, Mr. Parikh served as Senior Vice President, Engineering & Operations at Ning, Inc., a social networking company. From April 1999 to October 2007, Mr. Parikh served as Vice President of Engineering at Akamai Technologies, Inc., a cloud services provider. Mr. Parikh holds a Bachelor of Science in mechanical engineering from Virginia Tech.
Enrique Salem has served on our board of directors since July 2013. Mr. Salem has served as a Managing Director of Bain Capital Ventures since July 2014. From April 2009 to July 2012, Mr. Salem served as President, Chief Executive Officer and a director of Symantec Corporation, a cybersecurity company. From June 2004 to April 2009, Mr. Salem served in various other senior management positions at Symantec Corporation. From April 2002 to June 2004, Mr. Salem served as the President and Chief Executive Officer of Brightmail, Inc., an email filtering company, which was acquired by Symantec Corporation in 2004. Mr. Salem is currently a director of FireEye, Inc., a publicly-traded network security company, ForeScout Technologies, Inc., an internetInternet of things (IoT) security company, and DocuSign, Inc., an e-signature solutions company, and several private companies. Mr. Salem holds a Bachelor of Arts degree in computer science from Dartmouth College.
Steven Sordello has served on our board of directors since November 2015. Since July 2007, Mr. Sordello has served as the Senior Vice President and Chief Financial Officer Emeritus of LinkedIn Corporation, an online business-oriented social networking service, which was acquired by Microsoft in 2016. From August 2006 to July 2007, Mr. Sordello served as Chief
Financial Officer of TiVo, Inc., a manufacturer of digital video recorders. From May 1999 to October 2005, Mr. Sordello served in several roles, including as Chief Financial Officer, at Ask Jeeves, Inc., an Internet search engine company, which was acquired by IAC in 2005. Prior to that, Mr. Sordello served in various finance roles at Adobe Systems Incorporated, a software company, and Syntex Corporation, a pharmaceuticals company, which was acquired by Roche Pharmaceuticals in 1994. Mr. Sordello also serves as a Director at Compass, a real estate technology company. Mr. Sordello is currently a directormember of Cloudera, Inc., a publicly traded software company.the board of trustees of Santa Clara University. Mr. Sordello holds a Master inof Business Administration and a Bachelor of Science in business from Santa Clara University.
Richard P. Wong has served on our board of directors since July 2010. Mr. Wong has served as a General Partner to Accel Partners, a venture capital firm, since December 2006. From January 2001 to November 2006, Mr. Wong held a number of executive roles at Openwave Systems Inc., a mobile software company, including Senior Vice President of Products and Chief Marketing Officer. Mr. Wong is currently a director of several private companies. Mr. Wong holds a Master inof Management from the MIT Sloan School of Management and a Bachelor of Science in materials science and engineering from the Massachusetts Institute of Technology.
B. Compensation
Executive Officers’ Compensation
For the fiscal year ended June 30, 2018,2021, we paid an aggregate of $3,089,691$2,977,009 in cash compensation and benefits to our executive officers, including our Co-Chief Executive Officers who also served as employee directors. We paid our executive officers a base salary and annual cash bonus and made contributions to their retirement funds,funds; however, Messrs. Cannon-Brookes and Farquhar each opted not to participate in our bonus for fiscal 2018.year 2021.
Directors’ Compensation
Employee Directors
For the fiscal year ended June 30, 2018,2021, we did not pay our employee directors any compensation for their services as directors. The table below sets forth the compensation paid to our employee directors for their services as executive officers for the fiscal year ended June 30, 2018:2021:
Fiscal Year Ended June 30, 20182021 Employee Directors’ Compensation (U.S. $) (1) | | | | | | | | | | | | | | | | | | | | |
Name | Salary/Fees(2) | Benefits | Annual Bonus(3) | Long-Term Incentive | Retirement Benefits(4) | Total |
Michael Cannon-Brookes | $ | 55,722 | | $ | 408 | | $ | — | | $ | — | | $ | 5,332 | | $ | 61,462 | |
Scott Farquhar | $ | 55,433 | | $ | 446 | | $ | — | | $ | — | | $ | 5,308 | | $ | 61,187 | |
(1)For the fiscal year ended June 30, 2021, the cash compensation for our employee directors were set, and paid, in Australian dollars. Currency received by our employee directors in Australian dollars have been converted into U.S. dollars using a monthly average exchange rate for fiscal year 2021 of USD $1.00 to AUD $1.3467.
(2)Messrs. Cannon-Brookes and Farquhar each opted for their salaries to be reduced to AUD $74,653.20, the annualized statutory minimum wage in Australia, effective July 1, 2019. In accordance with Company policy, Mr. Cannon-Brookes received a patent bonus in connection with his role in a successfully filed patent application.
(3)Messrs. Cannon-Brookes and Farquhar each opted not to participate in our bonus plan during the fiscal year ended June 30, 2021.
(4)These amounts represent our contributions to each employee director's retirement fund, as required by applicable jurisdictional law.
|
| | | | | | | | | | | | |
Name | Salary/Fees | Benefits | Annual Bonus(2) | Long-Term Incentive | Retirement Benefits(3) | Total |
Michael Cannon-Brookes | $ | 297,291 |
| - | - | - | $ | 28,243 |
| $ | 325,534 |
|
Scott Farquhar | $ | 297,291 |
| - | - | - | $ | 28,243 |
| $ | 325,534 |
|
| |
(1) | For the fiscal year ended June 30, 2018, the cash compensation for our employee directors were set, and paid, in Australian dollars. Currency received by our employee directors in Australian dollars have been converted into U.S. dollars using a monthly average exchange rate for fiscal year 2018 of AUD 1.35 to USD 1.00. |
| |
(2) | Messrs. Cannon-Brookes and Farquhar each opted not to participate in our bonus plan during the fiscal year ended June 30, 2018. |
| |
(3) | These amounts represent our contributions to each employee director's retirement fund, as required by applicable jurisdictional law. |
Non-Employee Directors
In connection withOn December 4, 2019 our IPO in December 2015, we implementedshareholders approved a formalnew policy (the “Director Compensation Policy”), effective as of December 4, 2019, pursuant to which our non-employee directors are eligible to receive the following cash retainers and equity awards (U.S. $):
|
| | | |
Annual Retainer for Board Membership | | | |
Annual service on the board of directors | | $ | 50,000 |
Additional retainer for annual service as chair of the board of directors | | $ | 35,000 |
| | | |
Additional Annual Retainer for Committee Chairs | | | |
Annual service as chair of the audit committee | | $ | 20,000 |
Annual service as chair of the compensation and leadership development committee | | $ | 15,000 |
Annual service as chair of the nominating and corporate governance committee | | $ | 10,000 |
Our Director Compensation Policy provides that, upon initial election to our
| | | | | |
Annual Retainer for Board of Directors Membership | |
Annual service on the board of directors | $ | 55,000 | |
Additional retainer for annual service as chair of the board of directors | $ | 50,000 | |
| |
Additional Annual Retainer for Committee Chairs | |
Annual service as chair of the Audit Committee | $ | 20,000 | |
Annual service as chair of the Compensation and Leadership Development Committee | $ | 15,000 | |
Annual service as chair of the Nominating and Corporate Governance Committee | $ | 10,000 | |
On the date of each annual general meeting (“AGM”), each non-employee director who continues as a non-employee director following the AGM is granted RSUs on the date of such AGM having a value of $250,000 (the “Annual Grant”). Effective July 1, 2021, the value of new Annual Grants to each non-employee director will be granted RSUs having a fair market value of $250,000 (the "Initial Grant") based on the closing trading price of a Classincreased to $265,000. A ordinary share on the date of grant. In addition, on the date of each annual meeting of shareholders, eachnew non-employee director who will continue as a non-employee directorjoins other than at an AGM (on the first eligible grant date following such meeting will be granted an annual award of RSUs having a fair market value of $225,000 (the "Annual Grant"). If a new non-employee director joinstheir appointment to our board of directors on a date other than the date of our annual meeting of shareholders, such non-employee director will bedirectors) is granted a pro-rata portionproportion of thean Annual Grant based on the time between his or hertheir appointment and ourthe next annual meeting of shareholders.AGM. The InitialAnnual Grant will vest according tovests in full on the following schedule: 25% will vest onearlier of: (i) the one-year anniversary of the grant datedate; and the remaining 75% will vest in equal quarterly installments over(ii) the next three years,AGM, subject to continued service as a director through the applicable vesting dates. The Annual Grant will vest in full ondate, unless the earlierCompensation and Leadership Development Committee determines that circumstances warrant continuation of (i) the one-year anniversary of the grant date or (ii) the next annual meeting of shareholders, subject to continued service as a director through the applicable vesting date.
vesting.
All awards granted to our non-employee directors are subject to full100% accelerated vesting upon the sale of the company.
We reimburse all reasonable out-of-pocket expenses incurred by non-employee directors in attending meetings of the board of directors or any committee thereof, or otherwise in connection with their service on our board of directors. This would include expenses incurred for attending board or committee meetings, or we may alternatively provide a travel allowance for such purpose. We may reimburse reasonable expenses for items which, for tax purposes, would be treated as a taxable benefit, in which case we may also pay any such tax on behalf of the exercise of their powersnon-employee director or provide a tax gross-up. In addition, we provide liability-related insurance and responsibilities asindemnification benefits to our directors.
Each of our non-employee directors is required, within four years following his or hertheir first election to our board of directors (or, if later, from the effective date of our Director Compensation Policy), to own Class A ordinary shares having an aggregate value of at least $250,000.
For the fiscal year ended June 30, 2018,2021, we paid our non-employee directors in accordance with our Director Compensation Policy. The table below sets forth the compensation paid to our non-employee directors for the fiscal year ended June 30, 2018:2021:
Fiscal Year Ended June 30, 20182021 Non-Employee Directors’ Compensation (U.S. $) | | | | | | | | | | | | | | | | | | | | | | | |
Name | Salary/Fees | Benefits | Annual Bonus | Long-Term Incentives(5) | | Retirement Benefits | Total |
Shona Brown (1) | $ | 105,000 | | — | | — | | $ | 250,166 | | (6) | — | | $ | 355,166 | |
Heather Mirjahangir Fernandez | $ | 55,000 | | — | | — | | $ | 250,166 | | (6) | — | | $ | 305,166 | |
Sasan Goodarzi (2) | $ | 70,000 | | — | | — | | $ | 250,166 | | (6) | — | | $ | 320,166 | |
Jay Parikh | $ | 55,000 | | — | | — | | $ | 250,166 | | (6) | — | | $ | 305,166 | |
Enrique Salem | $ | 55,000 | | — | | — | | $ | 250,166 | | (6) | — | | $ | 305,166 | |
Steven Sordello (3) | $ | 75,000 | | — | | — | | $ | 250,166 | | (6) | — | | $ | 325,166 | |
Richard P. Wong (4) | $ | 65,000 | | — | | — | | $ | 250,166 | | (6) | — | | $ | 315,166 | |
(1) Dr. Brown was the chair of the board of directors.
(2) Mr. Goodarzi was the chair of the Compensation and Leadership Development Committee.
|
| | | | | | | | | | | | | | | | |
Name | Salary/Fees | Benefits | Annual Bonus | Long-Term Incentives(4) | | Retirement Benefits | Total |
Shona Brown (1) | $ | 72,000 |
| — |
| — |
| $ | 225,000 |
| (5) | — |
| $ | 297,000 |
|
Heather Mirjahangir Fernandez | $ | 50,000 |
| — |
| — |
| $ | 225,000 |
| (5) | — |
| $ | 275,000 |
|
Sasan Goodarzi | $ | 10,000 |
| — |
| — |
| $ | 393,000 |
| (6) | — |
| $ | 403,000 |
|
Jay Parikh | $ | 50,000 |
| — |
| — |
| $ | 225,000 |
| (5) | — |
| $ | 275,000 |
|
Enrique Salem | $ | 50,000 |
| — |
| — |
| $ | 225,000 |
| (5) | — |
| $ | 275,000 |
|
Steven Sordello (2) | $ | 70,000 |
| — |
| — |
| $ | 225,000 |
| (5) | — |
| $ | 295,000 |
|
Richard P. Wong(3) | $ | 60,000 |
| — |
| — |
| $ | 225,000 |
| (5) | — |
| $ | 285,000 |
|
(3) Mr. Sordello was the chair of the Audit Committee.
| |
(1) | Dr. Brown was the chair of the compensation and leadership development committee and chair of the board of directors since April 2018. |
| |
(2) | Mr. Sordello was the chair of the audit committee. |
(3)(4) Mr. Wong was the chair of the nominatingNominating and corporate governance committee.Corporate Governance Committee.
(5) The equity awards are not subject to performance measures, so the value of the equity awards have been included in full, notwithstanding that the equity awards are subject to outstanding service-based vesting conditions.
| |
(4) | The equity awards are not subject to performance measures, so the value of the equity awards have been included in full, notwithstanding that the equity awards are subject to outstanding service-based vesting conditions. |
| |
(5) | (6) Each continuing non-employee member of our board of directors received an Annual Grant. |
(6) Mr. Goodarzi joined our board of directors as a non-employee director during the third quarter of fiscal year 2018. As a result, he received an Initial Grant and a pro-rata portion of the Annual Grant based upon the time between his appointment and our next annual meeting of shareholders.
Grant.
Director Agreements
We entered into director agreements with each of Messrs. Parikh and Salem, each dated July 30, 2013. The director agreements for Messrs. Parikh and Salem each provided the non-employee director with an option to purchase 200,000 shares of restricted stock (automatically converted into the right to receive Class A ordinary shares upon our IPO), in each case at an exercise price of USDU.S. $2.92. The options vest in 48 equal monthly installments from their respective grant dates (each on July 30, 2013). Messrs. Parikh and Salem each early exercised his option and received shares subject to the company’s right of repurchase if the applicable director terminates his service for any reason prior to the applicable vesting dates. As of June 30, 2018, noAll early-exercised shares for each of Messrs. Parikh and Salem remain unvestedhave vested and are no longer subject to the company’s right of repurchase.
We also entered into director agreements with Dr. Brown, Ms. Mirjahangir Fernandez and Mr. Sordello in November 2015, and with Mr. Goodarzi in April 2018, and each were eligible to receive cash retainers and equity awards in accordance with the terms of our Director Compensation Policy.
We have not entered into a director agreement with Mr. Wong. In addition, we have not entered into a director agreement or employment agreement with either Mr. Cannon-Brookes or Mr. Farquhar.
In addition, pursuant our Director Compensation Policy, Messrs. Wong, Parikh and Salem each were eligible to receive cash retainers and an Annual Grant in accordance with the terms of our Director Compensation Policy.
We do not have service contracts with any of our non-employee directors that provide for benefits upon a termination of service.
Executive Severance Plan
In December 2014,September 2020, we adopted an amended and restated executive severance plan (the "Executive"New Executive Severance Plan"), under which replaced our prior executive severance plan. Under the terms of the New Executive Severance Plan, certain of our executive officers, excluding Messrs. Cannon-Brookes and Farquhar, may participate. The New Executive Severance Plan provides for a severance payment equal to six months or nine months of base salary upon a termination by us without "cause" (as defined in the New Executive Severance Plan) or a resignation by the executive officer for "good reason" (as defined in the New Executive Severance Plan) or, following a "change in control" (as defined in the New Executive Severance Plan), a severance payment equal to twelve months of base salary, plus 100% of the covered executive’s annual target bonus in effect immediately prior to the “date of termination” (as defined in the New Executive Severance Plan). In addition, upon such a termination within 12 months following a "change in control" (as defined in the Executive Severance Plan) in which outstanding equity awards of the company will be assumed, continued or substituted by the successor entity, an executive officer will generally receive 100% (or such lower percentage as may be determined by our board of directors or the compensationCompensation and leadership development committee)Leadership Development Committee) accelerated vesting of all unvested and outstanding equity awards held by such executive officer at such time; provided, that any equity awards subject to performance conditions will be deemed satisfied at the target levels specified in the applicable award agreements. Notwithstanding the foregoing, if the outstanding equity awards of the company will not be assumed, continued or substituted by the successor entity in connection with the change in control, then each executive officer will receive 100% accelerated vesting of all unvested and outstanding equity awards held by such executive officer at such time; provided, that any equity awards subject to performance conditions will be deemed satisfied at the target levels specified in the applicable award agreements.
Executive Bonus Plan
We paid cash incentive bonuses to our executive officers for the fiscal year ended June 30, 20182021 pursuant to our annual executive bonus plan (the "FY18“FY21 Bonus Plan"Plan”). Messrs. Cannon-Brookes and Farquhar each opted not to participate in the FY18FY21 Bonus Plan.
The FY18FY21 Bonus Plan provided our executive officers with an opportunity to earn an annual bonus payment with a target equal to 40% or 60%, as applicable, of their base salary and a maximum payout equal50% to 60% or 90%, as applicable, of their base salary, based on company performance. The Company’s performance was measured(measured by revenue and achieved arevenue). In fiscal year 2021, payout to our executive officers pursuant to the FY21 Bonus Plan was equal to 50% to 75%103% of sucheach executive officers base salary, as applicable.
officer’s bonus target amount.
Retirement Benefits
For the fiscal year ended June 30, 2018,2021, we contributed approximately $72,770 approximately AUD $14,330into retirement funds on behalf of our executive officers in Australia (as required by applicable jurisdictional law), and approximately $42,234 USD $50,281 into a tax qualified retirement plan (“the 401(k)(the “401(k) Plan”) on behalf of our executive officers in the United States. Amounts received by our executives in Australian dollars have been converted into U.S. dollars based on the U.S. Department of Treasury reporting rates of exchange [as of June 30, 2018, which provides an exchange rate of USD 1.00 to AUD 1.35.
401(k) Plan
We maintain a 401(k) Plan that provides all regular U.S. employees, including U.S. executive officers, with an opportunity to save for retirement on a tax-advantaged basis. Under our 401(k) Plan, participants may elect to defer a portion of their eligible compensation on a pre-tax and Roth after-tax, and voluntary after-tax basis and have it contributed to the plan401(k) Plan subject to applicable annual Internal Revenue Code limits. The 401(k) Plan allows for matching contributions to be made by us. Currently, we make a safe harbor match of eachbased on the participant's contributionpre-tax and Roth after-tax contributions up to a maximum of 4% of the participant's base salary, bonus and commissions paid during the applicable contribution period. Employee elective deferrals and safe harbor matching contributions are 100% vested at all times.
Health and Welfare Benefits
Our executive officers are eligible to participate in all of our employee benefit plans, including our medical, dental, life and disability insurance plans, to the same extent as other employees generally in the jurisdiction each executive officer resides. In addition, we generally do not provide our executive officers or directors with material perquisites or other personal benefits.
Outstanding Equity Awards, Grants and Options
We periodically grant options and RSUs to our employees, directors and consultants to enable them to share in our successes and to reinforce a corporate culture that aligns their interests with those of our shareholders.
During the fiscal year ended June 30, 2018,2021, we granted 274,647132,257 RSUs in the aggregate under our 2015 Share Incentive Plan (the “2015 Plan”) to our non-employee directors and executive officers. Our non-employee directors were granted equity awards during such fiscal year in accordance with the Director Compensation Policy.
As of June 30, 2018,2021, our executive officers held options to purchase 1,029,646 Class A ordinary shares, and 733,785289,992 RSUs. As of June 30, 2018,2021, our directors held 52,0128,750 RSUs.
Equity Compensation Plans
Prior to our IPO in December 2015, we granted equity awards under three main equity plans, our UK Employee Share Option Plan (the “Share Option Plan”), our 2013 U.S. Share Option Plan (the “2013 Plan”) and our 2014 Restricted Share Unit Plan (the “2014 Plan”). Following our IPO in December 2015, we no longer grant equity awards under these equity plans. All equity awards have since been granted under our 2015 Plan.
2015 Share Incentive Plan
Our 2015 Plan was adopted by our board of directors in October 2015 and approved by our shareholders in November 2015 and became effective immediately prior to our IPO in December 2015. The 2015 Plan replaced the Share Option Plan, the 2013 Plan and the 2014 Plan. The 2015 Plan allows the compensationCompensation and leadership development committeeLeadership Development Committee to make equity-based incentive awards to our officers, employees, directors and consultants; provided, that awards to non-employee directors and consultants will be made under a subplansub-plan to the 2015 Plan.
We initially reserved 20,700,000 Class A ordinary shares for the issuance of awards under the 2015 Plan. The 2015 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each July 1, beginning on July 1, 2016, by 5% of the outstanding Class A ordinary shares on the immediately preceding June 30th or such lesser number of Class A ordinary shares as determined by the compensationCompensation and leadership development committeeLeadership Development Committee in its discretion. This number is subject to adjustment in the event of a share split, share dividend or other change in our capitalization. As of June 30, 2018, 8,416,879 RSUs,816,5042021, 5,541,748 RSUs, 5,785 restricted Class A ordinary shares, and 477,24266,643 options to purchase Class A ordinary shares at a weighted-average exercise price of approximately $0.75$0.72 remained outstanding under the 2015 Plan.
The shares we issue under the 2015 Plan will be newly created shares or shares that we reacquire. The Class A ordinary shares underlying any awards that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by us prior to vesting, satisfied without the issuance of shares, expire or are otherwise terminated (other than by exercise) under the 2015 Plan or our other equity plans will be added back to the Class A ordinary shares available for issuance under the 2015 Plan.
Options and share appreciation rights with respect to no more than 5,000,000 shares may be granted to any one individual in any one calendar year and the maximum “performance-based award” payable to any one “covered employee” during a performance cycle under the 2015 Plan is 5,000,000 shares or $5,000,000 in the case of cash-based performance awards. The maximum number of shares that may be issued as incentive share options may not exceed 20,700,000 cumulatively increased on July 1, 2016 and on each July 1st thereafter by the lesser of the annual increase for such year or 10,350,000 shares. The value of all awards issued under the 2015 Plan and all other cash compensation paid by us to any non-employee director in any calendar year cannot exceed $1,500,000.
The 2015 Plan is administered by our compensationCompensation and leadership development committee.Leadership Development Committee. Our compensationCompensation and leadership development committeeLeadership Development Committee has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants, and to determine the specific terms and conditions of each award, subject to the provisions of the 2015 Plan. Persons eligible to participate in the 2015 Plan will be those full- or part-time officers, employees, non-employee directors and consultants as selected from time to time by our compensationCompensation and leadership development committeeLeadership Development Committee in its discretion. Our compensationCompensation and leadership development committeeLeadership Development Committee may also delegate to our Chief Executive Officers, the chair of our compensationCompensation and leadership development committee,Leadership Development Committee, or a committee including either of such individuals, the power to grant awards to individuals (other than individuals subject to Section 16 of the Exchange Act or Section 162(m) of the Internal Revenue Code of 1986 (the “Code”).
Code.
The 2015 Plan permits us to grant options that are intended to qualify as incentive share options under Section 422 of the Code and options that do not so qualify. The per share exercise price of each option will be determined by our compensationCompensation and leadership development committeeLeadership Development Committee but may not be less than 100% of the fair market value of a Class A ordinary share on the date of grant. An incentive share option that is granted to an employee who owns more than 10% of the combined voting power of all classes of our shares, or a 10% owner, must have a per share exercise price of not less than 110% of the fair market value of a Class A ordinary share on the date of grant. The term of each option will be fixed by our compensationCompensation and leadership development committeeLeadership Development Committee and may not exceed ten years from the date of grant (five years in the case of an incentive share option held by a 10% owner). Our compensationCompensation and leadership development committeeLeadership Development Committee will determine at what time or times each option may be exercised. To the extent required for incentive share option treatment under Section 422 of the Code, the aggregate fair market value (determined as of the time of grant) of the shares that first become exercisable by an option holder during any calendar year must not exceed $100,000. To the extent that any option exceeds this limit, it will constitute a nonqualifiednon-qualified share option.
Our compensationCompensation and leadership development committeeLeadership Development Committee may award share appreciation rights subject to such conditions and restrictions as it may determine. Share appreciation rights entitle the recipient to Class A ordinary shares, or cash, equal to the value of the appreciation in our share price over the exercise price. The per share exercise price may not be less than 100% of fair market value of a share on the date of grant. The term of a share appreciation right may not exceed ten years.
Our compensationCompensation and leadership development committeeLeadership Development Committee may award restricted Class A ordinary shares and RSUs to participants subject to such conditions and restrictions as it may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with us through a specified vesting period. Our compensationCompensation and leadership development committeeLeadership Development Committee may also grant Class A ordinary shares that are free from any restrictions under the 2015 Plan. Unrestricted Class A ordinary shares may be granted to participants in recognition of past services or for other valid consideration and may be issued in lieu of cash compensation due to such participant.
Our compensationCompensation and leadership development committeeLeadership Development Committee may grant performance share awards to participants that entitle the recipient to receive awards of Class A ordinary shares upon the achievement of certain performance goals and such other conditions as our compensationCompensation and leadership development committeeLeadership Development Committee shall determine. Our compensationCompensation and leadership development committeeLeadership Development Committee may grant dividend equivalent rights to participants that entitle the recipient to receive credits for dividends that would be paid if the recipient had held a specified number of Class A ordinary shares.
Our compensationCompensation and leadership development committeeLeadership Development Committee may grant cash bonuses under the 2015 Plan to participants, subject to the achievement of certain performance goals.
Our compensationCompensation and leadership development committeeLeadership Development Committee may grant awards of restricted shares, RSUs, performance shares or cash-based awards under the 2015 Plan that are intended to qualify as "performance-based compensation" under Section 162(m) of the Code. These awards will only vest or become payable upon the attainment of performance goals that are established by our compensationCompensation and leadership development committeeLeadership Development Committee and related to one or more performance criteria. The performance criteria that could be used with respect to any such awards include: total shareholder return, earnings before interest, taxes, depreciation and amortization, net income (loss) (either before or after interest, taxes, depreciation and/or amortization), changes in the market price of our shares, economic value-added, funds from operations or similar measure, sales or revenue or bookings, acquisitions or strategic transactions, operating income (loss), cash flow (including, but not limited to, operating cash flow and free cash flow), return on capital, assets, equity, or investment, return on sales, gross or net profit levels, productivity, expense, margins, operating efficiency, customer satisfaction, working capital, earnings (loss) per share of our shares, sales or market shares, number of customers and number of average users, any of which may be measured in absolute terms, as compared to any incremental increase or as compared to results of a peer group.
The 2015 Plan provides that upon the effectiveness of a “sale event,” as defined in the 2015 Plan, an acquirer or successor entity may assume, continue or substitute for the outstanding awards under the 2015 Plan. To the extent that awards granted under the 2015 Plan are not assumed or continued or substituted by the successor entity, all unvested and/or unexercisable awards with time-based vesting, conditions or restrictions granted under the 2015 Plan shall fully accelerate, and all awards with conditions and restrictions relating to the attainment of performance goals may become vested and nonforfeitable in the plan administrator's discretion or to the extent specified in the applicable award agreement, in each case prior to the effectiveness of the sale event and then shall terminate. In the event of such termination, individuals holding options and share appreciation rights will be permitted to exercise such options and share appreciation rights (to the extent exercisable) prior to the sale event. In addition, in connection with the termination of the 2015 Plan upon a sale event, we may make or provide for a cash payment to participants holding vested and exercisable options and share appreciation rights equal to the difference between the per share cash consideration payable to shareholders in the sale event and the exercise price of the options or share appreciation rights.
Our board of directors may amend or discontinue the 2015 Plan and our compensationCompensation and leadership development committeeLeadership Development Committee may amend or cancel outstanding awards for purposes of satisfying changes in law or any other lawful purpose, but no such action may adversely affect rights under an award without the holder's consent. Certain amendments to the 2015 Plan require the approval of our shareholders.
No awards may be granted under the 2015 Plan after the date that is ten years from the date of shareholder approval of the 2015 Plan.
Atlassian UK Employee Share Option Plan
The Share Option Plan was adopted in November 2013. Following our IPO in December 2015, we no longer grant any equity awards under this plan and any shares remaining available for issuance were cancelled. The Share Option Plan will continue to govern outstanding awards granted thereunder. As of June 30, 2018, options to purchase 808,799 Class A ordinary shares remained outstanding under the Share Option Plan at a weighted-average exercise price of approximately $2.47 per share.
The Share Option Plan allowed for the grant of options to our eligible employees, consultants or directors.
The Share Option Plan is administered by our compensation and leadership development committee. The administrator has full power to select, from among the individuals eligible for options, the individuals to whom options will be granted, determine the specific terms and conditions of each option, administer the Share Option Plan and delegate functions and powers as it may consider appropriate to administer the Share Option Plan to any person or persons capable of performing those functions and exercising those powers.
An option, whether vested or unvested, lapses on the earliest to occur on the date: (i) specified in the offer to participate in the Share Option Plan; (ii) on which a “cessation event” (as defined in the Share Option Plan) occurs; (iii) on which the option otherwise lapses under the terms of the Share Option Plan; (iv) on which any lapsing event occurs as specified in the offer to participate in the Share Option Plan; and (v) if no date is specified and the option has not otherwise lapsed, June 30, 2017. We may elect to purchase options, whether vested or not, from an option holder prior to the options being exercised.
Upon the occurrence of an “exit event” (as defined in the Share Option Plan), each option will either be (i) assumed or an equivalent option or right will be substituted by such successor corporation or a parent or subsidiary of such successor operation or (ii) terminated in exchange for a payment of cash, securities and/or other property equal to the excess of the fair market value of the portion of the options that are vested and exercisable immediately prior to the consummation of the exit event over the per share exercise price thereof.
Our board of directors may amend the Share Option Plan at any time; however, such amendment must not adversely affect the rights of option holders, without their consent, unless such amendment is required by applicable law.
2013 U.S. Share Option Plan
The 2013 Plan was adopted in November 2013. Following our IPO in December 2015, we no longer grant any equity awards under this plan and any shares remaining available for issuance were cancelled. The 2013 Plan will continue to govern outstanding awards granted thereunder. As of June 30, 2018,2021, options to purchase 1,437,141729 Class A ordinary shares remained outstanding under the 2013 Plan at a weighted-average exercise price of approximately $2.93$3.18 per share.
The 2013 Plan allowed for the grant of options to our employees, directors and consultants.
The 2013 Plan is administered by our compensationCompensation and leadership development committee.Leadership Development Committee. The administrator has full power to select, from among the individuals eligible for options, the individuals to whom options will be granted, to implement an option exchange program, to determine the specific terms and conditions of each option and to construe and interpret the terms of the 2013 Plan and any award agreements thereunder.
The 2013 Plan permitted the granting of both options to purchase restricted shares intended to qualify as incentive share options under Section 422 of the Code and options that do not so qualify. Incentive share options were only granted to employees and were required to meet certain other requirements. The per share option exercise price of each option was determined by our compensationCompensation and leadership development committeeLeadership Development Committee but were not be less than 100% of the fair market value of a restricted share on the date of grant. The term of each option did not exceed seven years from the date of grant (five years in the case of an incentive share option held by a 10% owner). The administrator determines at what time or times each option may be exercised.
The 2013 Plan provides that upon the effectiveness of a “corporate transaction,” as defined in the 2013 Plan, each outstanding option will either be (i) assumed or an equivalent award will be substituted by the successor corporation or a parent or subsidiary of such successor corporation or (ii) terminated, in exchange for payment of cash, securities and/or other property for vested and exercisable options.
Our board of directors may amend or discontinue the 2013 Plan at any time; however, such amendment must not adversely affect the rights of option holders without their consent. Certain amendments to the 2013 Plan require the approval of our shareholders.
2014 Restricted Share Unit Plan
The 2014 Plan was adopted in March 2014. Following our IPO in December 2015, we no longer grant any equity awards under this plan and any shares remaining available for issuance were cancelled. The 2014 Plan will continue to govern outstanding awards granted thereunder. As of June 30, 2018,1,184,794 RSUs remained outstanding under the 2014 Plan.
The 2014 Plan allowed for the grant of RSUs to our officers, employees, directors and consultants.
The 2014 Plan is administered by our compensation and leadership development committee. The administrator has full power to select, from among the individuals eligible for RSUs, the individuals to whom RSUs will be granted, accelerate the vesting of all or any portion of the RSUs, administer the 2014 Plan and determine the specific terms and conditions of each RSU, subject to the provisions of the 2014 Plan.
The 2014 Plan permitted the granting of RSUs subject to such conditions and restrictions as the compensation and leadership development committee determine. These conditions and restrictions may have included the achievement of certain performance goals and/or continued employment with us through a specified vesting period.
The 2014 Plan provides that upon the effectiveness of a “sale event,” as defined in the 2014 Plan, each unvested RSU will be forfeited immediately prior to such sale event, unless assumed or continued by the successor entity, or awards of the successor entity or parent thereof are substituted therefor. In addition, in the event of a sale event, we may make a cash payment to holders of RSUs in exchange for the cancellation thereof.
Our board of directors may amend or discontinue the 2014 Plan but no such actions may adversely affect the rights of an RSU holder without consent.
2015 Employee Share Purchase Plan
The 2015 Employee Share Purchase Plan (“ESPP”) was adopted by our board of directors in October 2015 and approved by our shareholders in November 2015. We may, but have not yet elected to, implement the ESPP.
The ESPP initially reserves and authorizes up to a total of 5,700,000 Class A ordinary shares to participating employees. The ESPP provides that the number of shares reserved and available for issuance will automatically increase each July 1st, beginning on July 1, 2016, by the lesser of (i) 2,850,000 Class A ordinary shares, (ii) 1% of the outstanding number Class A ordinary shares on the immediately preceding June 30th, or (iii) such lesser number of Class A ordinary shares as determined by the plan administrator. The share reserve is subject to adjustment in the event of a share split, share dividend or other change in our capitalization.
The ESPP is administered by our compensationCompensation and leadership development committee.Leadership Development Committee. The administrator has the authority to make all determinations for administration of the ESPP.
All employees employed by us or by any of our designated affiliates whose customary employment is for more than 20 hours a week (unless this exclusion is not permitted by applicable law) are eligible to participate in the ESPP. Any employee who owns 5% or more of the total combined voting power or value of all classes of our shares is not eligible to purchase Class A ordinary shares under the ESPP.
Offerings to our employees to purchase Class A ordinary shares under the ESPP may be made at such times as determined by the administrator. Offerings will continue for such period, referred to as offering periods, as the administrator may determine, but may not be longer than 27 months. Each eligible employee may elect to participate in any offering by submitting an enrollment form before the applicable offering date.
Each employee who is a participant in the ESPP may purchase Class A ordinary shares by authorizing payroll deductions of up to 10% of his or hertheir eligible compensation during an offering period. Unless the participating employee has previously withdrawn from the offering, his or hertheir accumulated payroll deductions will be used to purchase Class A ordinary shares on the last business day of the applicable offering period equal to the lower of (i) the accumulated payroll deductions divided by either a per share price equal to 85% of the fair market value of a share of our Class A ordinary shares on the first business day or the last business day of the offering period, whichever is lower, (ii) 2,500 Class A ordinary shares, or (iii) such other lesser maximum number of Class A ordinary shares as shall have been established by the administrator in advance of the offering. Under applicable tax rules, an employee may purchase no more than $25,000 worth of Class A ordinary shares, valued at the start of the purchase period, under the ESPP in any calendar year.
The accumulated payroll deductions of any employee who is not a participant on the last day of an offering period will be refunded. An employee's rights under the ESPP terminate upon voluntary withdrawal from the plan or when the employee ceases employment with us for any reason.
The ESPP may be terminated or amended by our compensationCompensation and leadership development committeeLeadership Development Committee or board of directors at any time. An amendment that increases the number of our Class A ordinary shares that are authorized under the ESPP and certain other amendments require the approval of our shareholders. The plan administrator may adopt subplans under the ESPP for employees of our non-U.S. subsidiaries and may permit such employees to participate in the ESPP on different terms, to the extent permitted by applicable law.
C. Board of Directors Practices
Composition of our Board of Directors
Our board of directors currently consists of nine members, all of whom were elected pursuant to the board composition provisions of our articles of association. Under our amended and restated articles of association, the appointment of directors is determined by a majority of our board of directors and there are no contractual rights for any shareholder to appoint a director to the board of directors.
Director Independence
Our board of directors has undertaken a review of the independence of each director. Based on information provided by each director concerning his or hertheir background, employment and affiliations, our board of directors has determined that Dr. Brown, Messrs. Goodarzi, Parikh, Salem, Sordello and Wong, Dr. Brown and Ms. Mirjahangir Fernandez do not have relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is "independent" as that term is defined under the NASDAQNasdaq listing standards. In making these determinations, our board of directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our shares by each non-employee director and the transactions described in "Related Party Transactions."
Committees of the Board of Directors
Our board of directors has established an audit committee,Audit Committee, a compensationCompensation and leadership development committeeLeadership Development Committee and a nominatingNominating and corporate governance committee.Corporate Governance Committee. The composition and responsibilities of each of the committees of our board of directors are described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors. Our board of directors may establish other committees as it deems necessary or appropriate from time to time.
Audit Committee
Messrs. Salem and Sordello and Ms. Mirjahangir Fernandez, each of whom is a non-employee director, comprise our audit committee.Audit Committee. Mr. Sordello is the chair of our audit committee.Audit Committee. Our board of directors has determined that each of the members of our audit committeeAudit Committee satisfies the requirements for independence and financial literacy under the listing standards of NASDAQNasdaq and SEC rules and regulations. Our board of directors has determined that Mr. Sordello qualifies as an “audit committee financial expert” as defined in the SEC rules and satisfies the financial sophistication requirements of the NASDAQNasdaq listing standards. Our audit committeeAudit Committee is responsible for, among other things:
•selecting and hiring our independent registered public accounting firm;
•evaluating the performance and independence of our independent registered public accounting firm
and the performance of the company’s internal audit function;
•approving the audit and pre-approving any non-audit services to be performed by our independent registered public accounting firm;
•reviewing our financial statements and related disclosures and reviewing our critical accounting policies and practices;
•reviewing the adequacy and effectiveness of our internal control policies and procedures and our disclosure controls and procedures;
•overseeing and reviewing our guidelines and policies that govern the process by which our exposure to risk is assessed and managed by management
•overseeing procedures for the treatment of complaints on accounting, internal accounting controls, or audit matters;
•reviewing and discussing with management and the independent registered public accounting firm the results of our annual audit and the financial statements included in our publicly filed reports; and
•reviewing and approving any proposed related person transactions.
Our audit committeeAudit Committee operates under a written charter that satisfies the applicable rules and regulations of the SEC and the NASDAQNasdaq listing standards.
Compensation and Leadership Development Committee
Dr. Brown and Messrs. Goodarzi and Parikh, and Dr. Brown, each of whom is a non-employee director, comprise our compensationCompensation and leadership development committee.Leadership Development Committee. Mr. Wong resigned from our compensation and leadership development committee in April 2018, and was concurrently replaced by Mr. Goodarzi. Dr. BrownGoodarzi is the chair of our compensationCompensation and leadership development committee.Leadership Development Committee. Although the rules of NASDAQNasdaq do not require the compensationCompensation and leadership development committeeLeadership Development Committee to be comprised entirely of independent directors for as long as we remain a foreign private issuer, our board of directors has determined that each member of our compensationCompensation and leadership development committeeLeadership Development Committee satisfies the requirements for independence under the NASDAQNasdaq listing standards and the applicable rules and regulations of the SEC. Each member of our compensationCompensation and leadership development committeeLeadership Development Committee is also a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act. Our compensationCompensation and leadership development committeeLeadership Development Committee is responsible for, among other things:
•reviewing and evaluating our Co-Chief Executive Officers' and other executive officers' compensation, incentive compensation plans, including the specific goals and amounts, equity compensation, employment agreements, severance arrangements and change in control agreements, and any other benefits, compensation or arrangements;
•administering our equity and cash compensation plans;plans, and other material benefit programs; and
•overseeing our overall compensation philosophy, compensation plans, and benefits programs.
Our compensationCompensation and leadership development committeeLeadership Development Committee operates under a written charter that satisfies the applicable rules and regulations of the SEC and the NASDAQNasdaq listing standards.
Nominating and Corporate Governance Committee
Ms. Mirjahangir Fernandez and Messrs. Salem and Wong, and Ms. Mirjahangir Fernandez, each of whom is a non-employee director, comprise our nominatingNominating and corporate governance committee.Corporate Governance Committee. Mr. Wong is the chair of our nominatingNominating and corporate governance committee.Corporate Governance Committee. Our board of directors has determined that each member of our nominatingNominating and corporate governance committeeCorporate Governance Committee satisfies the requirements for independence under the NASDAQNasdaq listing standards. Our nominatingNominating and corporate governance committeeCorporate Governance Committee is responsible for, among other things:
•evaluating and making recommendations regarding the composition, qualification, organization and governance of our board of directors and its committees;
•evaluating and making recommendations regarding the creation of additional committees or the change in mandate or dissolution of committees; and
•reviewing and making recommendations with regard to our corporate governance guidelines.
Our nominatingNominating and corporate governance committeeCorporate Governance Committee operates under a written charter that satisfies the NASDAQNasdaq listing standards.
D. Employees
We have made significant investments in our business to support future growth, including a substantial increase in our global employee base. As of June 30, 2018, 20172021, 2020 and 2016,2019, we had 2,638, 2,193,6,433, 4,907, and 1,7603,616 employees, respectively.
E. Share Ownership
For information regarding the share ownership of our directors and executive officers, please refer to “Item 6.B. Compensation” and “Item 7.A. Major Shareholders.Shareholders and Related Party Transactions.”
Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
The following table sets forth information with respect to the beneficial ownership of our shares as of June 30, 20182021 by:
•each executive officer;
•our directors;
•our directors and executive officers as a group; and
•each person or entity known by us to own beneficially more than 5% of any class of our outstanding shares (by number or by voting power).
We have determined beneficial ownership in accordance with the rules and regulations of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power with respect to all shares that they beneficially own, subject to applicable community property laws.
Applicable percentage ownership is based on 106,199,671137,307,769 Class A ordinary shares and 129,942,506114,609,645 Class B ordinary shares outstanding as of June 30, 2018.2021. In computing the number of shares beneficially owned by a person and the percentage ownership of such person, we deemed to be outstanding all shares subject to options held by the person that are currently exercisable or exercisable within 60 days of June 30, 2018. 2021 or issuable upon the vesting of RSUs held by the person within 60 days of June 30, 2021.
However, except as described above, we did not deem such shares outstanding for the purpose of computing the percentage ownership of any other person.
|
| | | | | | | | | | | | | | |
| | Shares Beneficially Owned | |
| | Class A | Class B | | % of Total Voting Power (1) |
Name of Beneficial Owner | | Shares | | % | Shares | | % | |
5% Shareholders: | | | | | | | | | |
Entities affiliated with Artisan Partners Limited Partnership (2) | | 10,026,239 |
| | 9.44 | % | - |
| | - |
| | * |
|
Entities affiliated with Baillie Gifford & Co. (3) | | 8,896,841 |
| | 8.38 | % | - |
| | - |
| | * |
|
Entities affiliated with FMR LLC (4) | | 7,227,202 |
| | 6.81 | % | - |
| | - |
| | * |
|
Entities affiliated with Janus Henderson Group PLC (5) | | 7,224,883 |
| | 6.80 | % | - |
| | - |
| | * |
|
Entities affiliated with Wellington Management Group LLC (6) | | 5,854,316 |
| | 5.51 | % | - |
| | - |
| | * |
|
Entities affiliated with T. Rowe Price Associates, Inc. (7) | | 17,783,268 |
| | 16.75 | % | - |
| | * |
| | 1.27 | % |
| | | | | | | | | |
Directors and Executive Officers: | | | | | | | | | |
Michael Cannon-Brookes (8) | | - |
| | - |
| 64,265,003 |
| | 49.46 | % | | 45.72 | % |
Scott Farquhar (9) | | - |
| | - |
| 64,265,003 |
| | 49.46 | % | | 45.72 | % |
Jay Simons (10) | | 1,401,000 |
| | 1.31 | % | 333,000 |
| | * |
| | * |
|
James Beer | | - |
| | * |
| - |
| | - |
| | - |
|
Tom Kennedy (11) | | 153,646 |
| | * |
| - |
| | - |
| | * |
|
Sri Viswanath (12) | | 123,715 |
| | * |
| - |
| | - |
| | * |
|
Helen Russell (13) | | 17,825 |
| | - |
| - |
| | - |
| | * |
|
Shona Brown (14) | | 30,882 |
| | * |
| - |
| | - |
| | * |
|
Heather Mirjahangir Fernandez (15) | | 13,156 |
| | * |
| - |
| | - |
| | * |
|
Jay Parikh (16) | | 200,000 |
| | * |
| - |
| | - |
| | * |
|
Enrique Salem (17) | | 120,803 |
| | * |
| - |
| | - |
| | * |
|
Steven Sordello (18) | | 30,882 |
| | * |
| - |
| | - |
| | * |
|
Sasan Goodarzi | | - |
| | - |
| - |
| | - |
| | - |
|
Richard P. Wong (19) | | 181,013 |
| | * |
| - |
| | - |
| | * |
|
All directors and executive officers as a group (14) persons) (20) | | 2,272,922 |
| | 2.12 | % | 128,863,006 |
| | 98.92 | % | | 91.77 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Shares Beneficially Owned | |
| | Class A | Class B | | % of Total Voting Power (1) |
Name of Beneficial Owner | | Shares | | % | Shares | | % | |
5% Shareholders: | | | | | | | | | |
Entities affiliated with T. Rowe Price Associates, Inc. (2) | | 13,379,591 | | | 5.31 | % | — | | | — | | | * |
| | | | | | | | | |
Directors and Executive Officers: | | | | | | | | | |
Michael Cannon-Brookes (3) | | — | | | — | | 56,954,822 | | 49.69 | % | | 44.38 | % |
Scott Farquhar (4) | | — | | | — | | 56,954,822 | | 49.69 | % | | 44.38 | % |
Cameron Deatsch (5) | | 11,616 | | * | — | | | — | | | * |
James Beer (6) | | 40,852 | | * | — | | | — | | | * |
Sri Viswanath (7) | | 335,967 | | * | — | | | — | | | * |
Erika Fisher (8) | | 10,433 | | * | — | | | — | | | * |
Shona Brown (9) | | 30,870 | | * | — | | | — | | | * |
Heather Mirjahangir Fernandez (10) | | 13,500 | | * | — | | | — | | | * |
Jay Parikh (11) | | 19,650 | | * | — | | | — | | | * |
Enrique Salem (12) | | 130,457 | | * | — | | | — | | | * |
Steven Sordello (13) | | 44,884 | | * | — | | | — | | | * |
Sasan Goodarzi (14) | | 10,228 | | * | — | | | — | | | * |
Richard P. Wong (15) | | 145,860 | | * | — | | | — | | | * |
All directors and executive officers as a group (13 persons) (16) | | 794,317 | | 0.58 | % | 113,909,644 | | 99.39 | % | | 88.81 | % |
_________
*Represents beneficial ownership of less than 1%
(1) Percentage of total voting power represents voting power with respect to all shares of our Class A ordinary shares and Class B ordinary shares as a single class. Holders of Class A ordinary shares are entitled to one vote per share and holders of Class B ordinary shares are entitled to ten votes per share.
(2) Based on information reported by Artisan Partners Limited Partnership (“Artisan”), Artisan Investments GP LLC, Artisan Partners Holdings LP, and Artisan Partners Asset Management Inc. on Schedule 13G filed with the SEC on May 9, 2018. Of the shares of Class A ordinary shares beneficially owned, Artisan, Artisan Investments GP LLC, Artisan Partners Holdings LP, and Artisan Partners Asset Management Inc. each reported that it has shared dispositive power with respect to 10,026,239 shares, and shared voting power with respect to 9,152,413 shares. Entities affiliated with Artisan listed their address as 875 East Wisconsin Avenue, Suite 800, Milwaukee, WI 53202.
(3) Based on information reported by Baillie Gifford & Co (“Baillie Gifford”) on Schedule 13G filed with the SEC on January 10, 2018. Of the shares of Class A ordinary shares beneficially owned, Baillie Gifford reported that it has sole dispositive power with respect to 8,896,841 shares, and sole voting power with respect to 4,457,238 shares. Baillie Gifford listed their address as Calton Square, 1 Greenside Row, Edinburgh EH1 3AN, Scotland, UK.
(4) Based on information reported by FMR LLC. ("FMR") and Abigail P. Johnson on Schedule 13G filed with the SEC on February 13, 2018. Of the shares of Class A ordinary shares beneficially owned, FMR reported that it has sole dispositive power with respect to 7,227,202 shares, and sole voting power with respect to 885,900 shares. Of the shares of Class A ordinary shares beneficially owned, Abigail P. Johnson reported that it has sole dispositive power with respect to 7,227,202 shares. Entities affiliated with FMR listed their address as 245 Summer Street, Boston, Massachusetts 02210.
(5) Based on information reported by Janus Henderson Group PLC (“Janus Henderson Group”) and Janus Henderson Enterprise Fund on Schedule 13G filed with the SEC on February 13, 2018. Of the shares of Class A ordinary shares beneficially owned, Janus Henderson Group reported that it has shared dispositive power and shared voting power with respect to 7,224,883 shares. Of the shares of Class A ordinary shares beneficially owned, Janus Henderson Enterprise Fund reported that it has sole dispositive power and sole voting power with respect to 5,128,645 shares. Janus Henderson Group listed their address as 201 Bishopsgate EC2M 3AE, United Kingdom. Janus Henderson Enterprise Fund listed their address as 151 Detroit Street, Denver, Colorado 80206.
(6) Based on information reported by Wellington Management Group LLP ("Wellington Management"), Wellington Group Holdings LLP, and Wellington Investment Advisors Holdings LLP on Schedule 13G filed with the SEC on February 8, 2018. Of the shares of Class A ordinary shares beneficially owned, Wellington Management, Wellington Group Holdings LLP, and Wellington Investment Advisors Holdings LLP each reported that is has shared dispositive power with respect to 5,854,316 shares, and shared voting power with respect to 3,887,510 shares. Entities affiliated with Wellington Management listed their address as 280 Congress Street, Boston, Massachusetts 02210.
(7) Based on information reported by T. Rowe Price Associates, Inc. (“T. Rowe Price”) and T. Rowe Price New Horizons Fund, Inc. on Schedule 13G filed with the SEC on February 14, 2018.April 12, 2020. Of the shares of Class A ordinary shares beneficially owned, T. Rowe Price reported that it has sole dispositive power with respect to 17,783,26813,379,591 shares, and sole voting power with respect to 4,903,698 shares. Of the shares of Class A ordinary shares beneficially owned, T. Rowe Price New Horizons Fund, Inc., reported that it has sole voting power with respect to 6,001,4374,646,537 shares. Entities affiliated with T. Rowe Price listed their address as 100 E. Pratt Street, Baltimore, Maryland 21202.
(8)(3) Consists of (i) 9,816,5132,506,331 Class B ordinary shares held of record by Mr. Cannon-Brookes and (ii) 54,448,490 Class B ordinary shares held of record by GrokcoCBC Co Pty LtdLimited as trustee for the GrokCannon-Brookes Head Trust.
(4) Consists of (i) 9,816,5132,506,331 Class B ordinary shares held of record by Mr. Farquhar and (ii) 54,448,490 Class B ordinary shares held of record by Skip Enterprises Pty Limited as trustee for the Farquhar Family Trust.
(5) Consists of 11,616 RSUs that vest within 60 days of June 30, 2021.
(10)(6) Consists of (i) 245,561 Class B ordinary shares held of record by Mr. Simons, (ii) 87,439 Class B ordinary shares held of record by The Jay Norman Simons 2013 Annuity Trust, in which Mr. Simons shares voting and dispositive power, (iii) 500,00015,711 Class A ordinary shares held of record by Mr. Simons,Beer as trustee of the James A & Lael L Beer Trust and (iv) 901,000 Class A ordinary shares subject to outstanding options(ii) 25,141 RSUs that are exercisablevest within 60 days of June 30, 2018.2021.
(11)(7) Consists of (i) 25,000320,298 Class A ordinary shares held of record by Mr. KennedyViswanath and (ii) 128,646 Class A ordinary shares subject to outstanding options15,669 RSUs that are exercisablevest within 60 days of June 30, 2018.2021.
(12)(8) Consists of 123,715(i) 4,873 Class A ordinary shares held of record by Ms. Fisher and (ii) 5,560 RSUs that vest within 60 days of June 30, 2021.
(9) Consists of 30,870 Class A ordinary shares held of record by Dr. Brown.
(10) Consists of 13,500 Class A ordinary shares held of record by Ms. Mirjahangir Fernandez.
(11) Consists of 19,650 Class A ordinary shares held of record by Mr. Viswanath.Parikh.
(13)(12) Consists of (i) 5,776 Class A ordinary shares held of record by Ms. Russell and (ii) 12,049 RSUs that vest within 60 days of June 30, 2018.
(14) Consists of (i) 30,012 Class A ordinary shares held of record by Dr. Brown and (ii) 870 RSUs that vest within 60 days of June 30, 2018.
(15) Consists of (i) 12,286 Class A ordinary shares held of record by Ms. Fernandez and (ii) 870 RSUs that vest within 60 days of June 30, 2018.
(16) Consists of 200,000 Class A ordinary shares held of record by Mr. Parikh as trustee of the Jay and Dhivya Parikh Revocable Trust.
(17) Consists of 120,803130,457 Class A ordinary shares held of record by Mr. Salem.
(18)(13) Consists of (i) 30,01244,884 Class A ordinary shares held of record by Mr. SordelloSordello.
(14) Consists of (i) 9,976 Class A ordinary shares held of record by Mr. Goodarzi and (ii) 870252 RSUs that vest within 60 days of June 30, 2018.2021.
(19)(15) Consists of 181,013145,860 Class A ordinary shares held of record by Mr. Wong.
(20)(16) Consists of (i) 1,228,617736,079 Class A ordinary shares, (ii) 128,863,006113,909,644 Class B ordinary shares, and (iii) options to purchase 1,029,646 Class A ordinary shares that are exercisable within 60 days of June 30, 2018 and (iv) 14,65958,238 RSUs that vest within 60 days of June 30, 2018.
2021.
Two of our major shareholders, Michael Cannon-Brookes and Scott Farquhar, hold the majority of our outstanding Class B ordinary shares.
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
As of June 30, 2021, approximately 0.1% of our outstanding shares were Class B shares held in the United States by one record holder. As of June 30, 2021, approximately 54.40% of our outstanding shares were Class A shares held in the United States by one record holder (Cede and Company).
As of June 30, 2018, approximately 44.63% of our outstanding shares were held by one record holder in the United States (Cede and Company).
As of June 30, 2018,2021, entities affiliated with Accel PartnersBaillie Gifford & Co. no longer hold greater than 5% of our outstanding ordinary shares.
B. Related Party Transactions
Other than as described below, since July 1, 2017,during the fiscal year ended June 30, 2021, there has not been any transaction to which we were or are a party in which we, any of our directors, executive officers, associates, or holders of more than 5% of any class of our voting securities, or any affiliates or member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest.
RSUs
During the fiscal year ended June 30, 2018,2021, we granted RSUs to our non-employee directors and certain of our executive officers.
Indemnification Agreements
We have entered into indemnification agreements with our directors and executive officers to indemnify them to the maximum extent allowed under applicable law. These agreements indemnify these individuals against certain costs, charges, losses, liabilities, damages and expenses incurred by such director in the execution or discharge of his duties. These agreements do not indemnify our directors against any liability attaching to such individuals in connection with any negligence, default, breach of duty or breach of trust in relation to the company of which he or she is a director, which would be rendered void under the Companies Act.
We have obtained insurance policies under which, subject to the limitations of the policies, coverage is provided to our directors and executive officers against loss arising from claims made by reason of breach of fiduciary duty or other wrongful acts as a director or executive officer, including claims relating to public securities matters, and to us with respect to payments that may be made by us to these directors and executive officers pursuant to our indemnification obligations or otherwise as a matter of law.
Certain of our non-employee directors may, through their relationships with their employers, be insured and/or indemnified against certain liabilities incurred in their capacity as members of our board of directors.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, executive officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Registration Agreement
In July 2010, our predecessor entity, Atlassian Corporation Pty Ltd., entered into a Registration Agreement with certain holders of our outstanding share capital, including MichaelMessrs. Cannon-Brookes and Scott Farquhar. As of June 30, 2018,2021, certain holders of our Class A ordinary shares and our Class B ordinary shares, including our founders,Messrs. Cannon-Brookes and Farquhar, are entitled to rights with respect to the registration of their shares under the Securities Act.
Atlassian Foundation
The Atlassian Foundation was established in 2008 with the vision of helping to make the world better. Together with the more recently incorporated Atlassian Foundation International Limited, which was established in 2016, the Atlassian Foundation works on a range of different projects in conjunction with organizations including the Australian Government Department of Foreign Affairs and Trade, Massachusetts Institute of Technology,Brookings Center for Universal Education, Co-Impact, Educate!, Education Commission, Education Outcomes Fund, 40K Foundation, Global Business Coalition for Education, Humanitix, Raspberry Pi Foundation, Room to Read, 40K Foundation, Raspberry Pi Foundation, Open Learning ExchangeRuangguru, and Ruangguru.
Teach for All.
We contribute approximately 1% of our annual profits and all revenues associated with our starter licenses for on-premises products to the Atlassian Foundation. We donated $1.9$7.8 million to the Atlassian Foundation in fiscal 2018.year 2021. Additionally, since the Atlassian Foundation's inception, we have provided, at no charge, certain resources to Atlassian Foundation employees such as office space and salaries.
LinkedIn
In fiscal 2018,year 2021, we purchased approximately $1.2$6.9 million of services from LinkedIn Corporation (“LinkedIn”), for recruiting purposes, in the ordinary course of business. Mr.Steve Sordello, one of our board members, is Chief Financial Officer of LinkedIn. The transactions between Atlassian and LinkedIn were not negotiated by Mr. Sordello and were conducted on an arm's length basis.Sordello. Mr. Sordello does not have a material interest in the relationship described above.
Intuit
Splunk
In fiscal 2018, Intuityear 2021, we purchased $9.0 million of services from Splunk Inc. (“Splunk”) for systems monitoring purposes, and Splunk purchased approximately $0.4$1.3 million of products from us, both in the ordinary course of business. Sri Viswanath, our Chief Technology Officer, is a director of Splunk. The contract with Splunk was not negotiated by Mr. Viswanath and was executed before he joined the board. Mr. Viswanath does not have a material interest in the relationship described above.
DoorDash
In fiscal year 2021, DoorDash, Inc. (“DoorDash”) purchased approximately $1.5 million of products from us, in the ordinary course of business. Mr.Shona Brown, one of our board members, is a director of DoorDash. The transactions between Atlassian and DoorDash were not negotiated by Dr. Brown and were in the ordinary course of business. Dr. Brown does not have a material interest in the relationship described above.
Intuit
In fiscal year 2021, Intuit purchased approximately $0.7 million of products from us, in the ordinary course of business. Sasan Goodarzi, one of our board members, is Chief Executive Vice PresidentOfficer and General Managera director of Intuit's Small Business Group.Intuit. The transactions between Atlassian and Intuit were not negotiated by Mr. Goodarzi and were conducted on an arm's length basis.in the ordinary course of business. Mr. Goodarzi does not have a material interest in the relationship described above.
Certain Relationships
From time to time, we engage in certain transactions with other companies affiliated with our directors, executive officers, and significant shareholders or their immediate family members. We believe that all such arrangements have been entered into in the ordinary course of business and have been conducted on an arm’s-length basis and do not represent a material interest to such directors, executive officers or significant shareholders.
Policies and Procedures for Related Party Transactions
The audit committeeAudit Committee has the primary responsibility for reviewing and approving or disapproving related party transactions, which are transactions between us and related persons in which we or a related person has or will have a direct or indirect material interest. For purposes of this policy, a related person will be defined as a director, executive officer, nominee for director, or greater than 5% beneficial owner of our ordinary shares, in each case since the beginning of the most recently completed year, and their immediate family members. Our audit committeeAudit Committee charter provides that the audit committeeAudit Committee shall review and approve or disapprove any related party transactions.
C. Interests of Experts and Counsel
Not applicable.
Item 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
See “Item 18. Financial Statements.”
Legal Proceedings
We are not a party to any material legal proceedings.proceedings as of the date of this report. From time to time we may be subject to legal proceedings and claims arising in the ordinary course of business.We investigate these claims as they arise and accrue estimates for resolution of legal and other contingencies when losses are probable and estimable. Although the results of litigation and claims cannot be predicted with certainty, we believe there was not at least a reasonable possibility that we had incurred a material loss with respect to such loss contingencies as of June 30, 2021.
Dividend Policy
While we have in the past paid limited dividends, we do not have any present or future plan to pay dividends on our shares. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors, subject to applicable laws, and will depend on then existing conditions, including our financial condition, operating results of operations, contractual restrictions, capital requirements, general business conditions, business prospects and other factors our board of directors may deem relevant.
B. Significant Changes
We have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.
Item 9. THE OFFER AND LISTING
A. Offer and Listing Details
OurThe principal market in which our Class A ordinary shares are traded is on NASDAQthe Nasdaq Global Select Market under the symbol “TEAM.” The following table sets forth for the periods indicated the high and low sales prices per Class A ordinary share as reported on NASDAQ (in U.S. $):
|
| | | | | | |
| | High | | Low |
Annual highs and lows | | | | |
Fiscal year 2016 (from December 10, 2015) | | 31.46 |
| | 16.92 |
|
Fiscal year 2017 | | 37.90 |
| | 23.80 |
|
Fiscal year 2018 | | 68.75 |
| | 33.16 |
|
Quarterly highs and lows | | | | |
First fiscal quarter 2017 | | 35.16 |
| | 25.22 |
|
Second fiscal quarter 2017 | | 30.00 |
| | 23.80 |
|
Third fiscal quarter 2017 | | 30.24 |
| | 24.20 |
|
Fourth fiscal quarter 2017 | | 37.90 |
| | 29.56 |
|
First fiscal quarter 2018 | | 39.25 |
| | 33.16 |
|
Second fiscal quarter 2018 | | 53.45 |
| | 35.00 |
|
Third fiscal quarter 2018 | | 62.17 |
| | 45.61 |
|
Fourth fiscal quarter 2018 | | 68.75 |
| | 51.76 |
|
Monthly highs and lows | | | | |
January 2018 | | 55.91 |
| | 45.61 |
|
February 2018 | | 57.47 |
| | 47.74 |
|
March 2018 | | 62.17 |
| | 50.84 |
|
April 2018 | | 62.78 |
| | 51.76 |
|
May 2018 | | 66.00 |
| | 55.11 |
|
June 2018 | | 68.75 |
| | 60.39 |
|
B. Plan of Distribution
Not applicable.
C. Markets
Our Class A ordinary shares are quoted on NASDAQthe Nasdaq Global Select Market under the symbol “TEAM.”
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
Item 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
The information required by this section, including a summary of certain key provisions of our articles of association, is set forth in the Registration Statement on Form F-1Exhibit 4.4 (Description of Share Capital) filed as an exhibit to our annual report filed with the Securities and Exchange CommissionSEC on December 7, 2015August 23, 2019, and is incorporated herein by reference.
C. Material Contracts
We have not entered into any material contracts other than in the ordinary course of business and other than thoseas may be described in “Item 4. Information on the Company,” “Item 5. Operating and Financial Review and Prospects” or elsewhere in this annual report.
D. Exchange Controls
Other than applicable taxation, anti-money laundering and counter-terrorist financing law and regulations and certain economic sanctions which may be in force from time to time, there are currently no English laws or regulations, or any provision of our articles of association, which would prevent the import or export of capital or remittance of dividends, interest and other payments to holders of our securities who are not residents of the U.K.United Kingdom on a general basis.
E. Taxation
Material U.K.United Kingdom Tax Considerations
The comments set out below are based on current United Kingdom tax law as applied in England and HM Revenue & Customs (“HMRC”)HMRC practice (which may not be binding on HMRC) as of the date of this annual report, both of which are subject to change, possibly with retrospective effect. They are intended as a general guide and apply only to our shareholders resident and, in the case of an individual, domiciled for tax purposes in the United Kingdom and to whom “split year” treatment does not apply (except insofar as express reference is made to the treatment of non-United Kingdom residents), who hold Class A ordinary shares as an investment and who are the absolute beneficial owners thereof. The discussion does not address all possible tax consequences relating to an investment in the Class A ordinary shares. Certain categories of shareholders, including those carrying on certain financial activities, those subject to specific tax regimes or benefittingbenefiting from certain reliefs or exemptions, those connected with us, those that own (or are deemed to own) 5% or more of our shares and/or voting power (either alone or together with connected persons) and those for whom the Class A ordinary shares are employment-related securities may be subject to special rules and this summary does not apply to such shareholders and any general statements made in this disclosure do not take them into account. This summary does not address any inheritance tax considerations.
This summary is for general information only and is not intended to be, nor should it be considered to be, legal or tax advice to any particular investor. It does not address all of the tax considerations that may be relevant to specific investors in light of their particular circumstances or to investors subject to special treatment under U.K.United Kingdom tax law. In particular:
Taxation of Dividends
We will not be required to withhold amounts on account of United Kingdom tax at source when paying a dividend.
Individuals
UKUnited Kingdom resident and domiciled holders do not have to pay tax on the first £2,000 of dividend income received in the 2018/20192021/2022 tax year (the "dividend allowance"). However tax will be levied on any dividends received over the dividend allowance at 7.5% on dividend income within the basic rate band, 32.5% on dividend income within the higher rate band and 38.1% on dividend income within the additional rate band.
Corporate Shareholders
Although shareholders who are within the charge to corporation tax would strictly be subject to corporation tax on dividends paid by us (subject to special rules for such shareholders that are “small” companies), generally such dividends will fall within an exempt class and will not be subject to corporation tax (provided certain conditions are met and anti-avoidance rules are satisfied). However, each shareholder's position will depend on its own individual circumstances and shareholders within the charge to corporation tax should consult their own professional advisers.
Non-Residents
A shareholder resident outside the United Kingdom may also be subject to foreign taxation on dividend income under local law. Shareholders who are not resident for tax purposes in the United Kingdom should obtain their own tax advice concerning tax liabilities on dividends received from us.
Taxation of Capital Gains on Disposals of Class A ordinary shares
U.K.United Kingdom Shareholders
Shareholders who are resident in the United Kingdom, and individual shareholders who are temporarily non-resident and subsequently resume residence in the United Kingdom within a certain time, may depending on their circumstances and the availability of exemptions or reliefs (including, for example, the annual exempt amount
for individuals), be liable to United Kingdom taxation on chargeable gains in respect of gains arising from a sale or other disposal (or deemed disposal) of the Class A ordinary shares.
Non-United Kingdom Shareholders
An individual holder who is not a United Kingdom resident shareholder will not be liable to United Kingdom capital gains tax on chargeable gains realized on the disposal of his or hertheir Class A ordinary shares unless such shareholder carries on (whether solely or in partnership) a trade, profession or vocation in the United Kingdom through a branch or agency in the United Kingdom to which the shares are attributable. In these circumstances, such shareholder may, depending on his or hertheir individual circumstances, be chargeable to United Kingdom capital gains tax on chargeable gains arising from a disposal of his or hertheir shares.
A corporate holder of shares who is not a United Kingdom resident shareholder will not be liable for United Kingdom corporation tax on chargeable gains realized on the disposal of its shares unless it carries on a trade in the United Kingdom through a permanent establishment to which the shares are attributable. In these circumstances, a disposal of shares by such shareholder may give rise to a chargeable gain or an allowable loss for the purposes of United Kingdom corporation tax.
Stamp Duty and Stamp Duty Reserve Tax
The statements in this section titled “Stamp Duty and Stamp Duty Reserve Tax (“SDRT”)” are intended as a general guide to the current United Kingdom stamp duty and SDRT position. The discussion below relates to shareholders wherever resident, but investors should note that certain categories of person are not liable to stamp duty or SDRT and others may be liable at a higher rate or may, although not primarily liable for tax, be required to notify and account for SDRT under the Stamp Duty Reserve Tax Regulations 1986.
General
Except in relation to depositary receipt systems and clearance services (to which the special rules outlined below apply):
(i) No stamp duty or SDRT will arise on the issue of Class A ordinary shares in registered form by us.
(ii) An agreement to transfer Class A ordinary shares will normally give rise to a charge to SDRT at the rate of 0.5% of the amount or value of the consideration payable for the transfer. SDRT is, in general, payable by the purchaser.
(iii) Instruments transferring Class A ordinary shares will generally be subject to stamp duty at the rate of 0.5% of the consideration given for the transfer (rounded up to the next £5). The purchaser normally pays the stamp duty.
(iv) If a duly stamped transfer completing an agreement to transfer is produced within six years of the date on which the agreement is made (or, if the agreement is conditional, the date on which the agreement becomes unconditional), any SDRT already paid is generally repayable, normally with interest, and any SDRT charge yet to be paid is cancelled.
Depositary Receipt Systems and Clearance Services
UKUnited Kingdom domestic law provides that where our Class A ordinary shares are issued or transferred to a depositary receipt system or clearance service (or their nominees or agents) SDRT (in the case of an issue of shares) and stamp duty or SDRT (in the case of a transfer of shares) may be payable, broadly at the higher rate of 1.5% of the amountor value of the consideration given (or, in certain circumstances, the value of the shares) (rounded up to the nearest £5 in the case of stamp duty). Generally, transfers within such depositary receipt system or clearance service are thereafter not subject to stamp duty or SDRT, provided that (in the case of a clearance service) no election under section 97A of the Finance Act 1986 has been made (as to which, see further below).
However, following the European Court of Justice decision in C-569/07 HSBC Holdings Plc, Vidacos Nominees Limited v. The Commissioners of Her Majesty's Revenue & Customs and the First-tier Tax Tribunal decision in HSBC Holdings Plc and The Bank of New York Mellon Corporation v. The Commissioners of Her Majesty's Revenue & Customs(the "BNY Case"), HMRC has confirmed that a charge to 1.5% SDRT is no longer payable when new shares are issued to a clearance service (such as, in our understanding, DTC) or depositary receipt system. We consider that this position still holds notwithstanding the United Kingdom’s exit from the EU on January 31, 2020. The HM Treasury Autumn Budget 2017 Report contained a statement that “The government will not reintroduce the Stamp Duty and Stamp Duty Reserve Tax 1.5% charge on the issue of shares (and transfers integral to capital raising) into overseas clearance services and depositary receipt systems following the UK’s exit from the EU”. As far as we are aware there has been no subsequent government statement revising this position. HMRC’s Stamp Taxes on Shares Manual STSM055050 confirms that the 1.5% charge on issues of shares will remain disapplied under the terms of the European Union (Withdrawal) Act 2018 following the end of the "implementation period" on December 31, 2020 because the direct effect of EU Directive 2008/7/EC was confirmed by the First-tier Tax Tribunal in the BNY Case before the exit of the United Kingdom from the European Union on January 31, 2020.
HMRC remains of the view that where Class A ordinary shares are transferred (a) to, or to a nominee or an agent for, a person whose business is or includes the provision of clearance services or (b) to, or to a nominee or an agent for, a person whose business is or includes issuing depositary receipts, stamp duty or SDRT will generally be payable at the higher rate of 1.5% of the amount or value of the consideration given or, in certain circumstances, the value of the Class A ordinary shares.
There is an exception from the 1.5% charge on the transfer to, or to a nominee or agent for, a clearance service where the clearance service has made and maintained an election under section 97A(1) of the Finance Act 1986 which has been approved by HMRC and which applies to the Class A ordinary shares. In these circumstances, SDRT at the rate of 0.5% of the amount or value of the consideration payable for the transfer will arise on any transfer of Class A ordinary shares into such an account and on subsequent agreements to transfer such Class A ordinary shares within such account. It is our understanding that DTC has not made an election under section 97A(1) of the Finance Act of 1986, and that therefore transfers or agreements to transfer shares held in book entry (i.e., electronic) form within the facilities of DTC should not be subject to U.K.United Kingdom stamp duty or SDRT.
Any liability for stamp duty or SDRT in respect of a transfer into a clearance service or depositary receipt system, or in respect of a transfer within such a service, which does arise will strictly be accountable by the clearance service or depositary receipt system operator or their nominee, as the case may be, but will, in practice, be payable by the participants in the clearance service or depositary receipt system.
Certain Material U.S. Federal Income Tax Considerations for U.S. Holders
The following is a summary of certain material U.S. federal income tax considerations relating to the ownership and disposition of Class A ordinary shares by a U.S. holder (as defined below). This summary addresses only the U.S. federal income tax considerations for U.S. holders that hold Class A ordinary shares as capital assets (generally, property held for investment) for U.S. federal income tax purposes. This summary does not address all U.S. federal income tax matters that may be relevant to a particular U.S. holder. This summary does not address tax considerations applicable to a holder of Class A ordinary shares that may be subject to special tax rules including, without limitation, the following:
•banks, financial institutions or insurance companies;
•brokers, dealers or traders in securities, currencies, commodities, or notional principal contracts;
•tax-exempt entities or organizations, including an “individual retirement account” or “Roth IRA” as defined in Section 408 or 408A of the Code (as defined below), respectively;
•real estate investment trusts, regulated investment companies or grantor trusts;
•persons that hold the Class A ordinary shares as part of a “hedging,” “integrated”“integrated,” “wash sale” or “conversion” transaction or as a position in a “straddle” for U.S. federal income tax purposes;
•partnerships (including entities classified as partnerships for U.S. federal income tax purposes) or other pass-through entities, or persons that will hold the Class A ordinary shares through such an entity;
•certain former citizens or long term residents of the United States;
•holders that own directly, indirectly, or through attribution 10% or more of the voting power or value of the Class A ordinary shares;
•persons who received the Class A ordinary shares as compensation;
•persons subject to Section 451(b) of the Code;
•holders that own directly, indirectly or through attribution Class B ordinary shares; and
•holders that have a “functional currency” for U.S. federal income tax purposes other than the U.S. dollar.
Further, this summary does not address the U.S. federal estate, gift, or alternative minimum tax considerations, or any U.S. state, local, or non-U.S. tax considerations of the ownership and disposition of the Class A ordinary shares.
This description is based on the U.S. Internal Revenue Code, of 1986, as amended, existing, proposed and temporary U.S. Treasury Regulations promulgated thereunder and administrative and judicial interpretations thereof.thereof, all as of the date hereof. All the foregoing is subject to change, which change could apply retroactively, and to differing interpretations, all of which could affect the tax considerations described below. There can be no assurances that the U.S. Internal Revenue Service (the “IRS”)IRS will not take a contrary or different position concerning the tax consequences of the ownership and disposition of the Class A ordinary shares or that such a position would not be sustained.sustained by a court. We have not obtained, nor do we intend to obtain, a ruling with respect to the U.S. federal income tax considerations relating to the purchase, ownership, or disposition of the Class A ordinary shares. Holders should consult their own tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of owning and disposing of the Class A ordinary shares in their particular circumstances.
For the purposes of this summary, a “U.S. holder” is a beneficial owner of Class A ordinary shares that is (or is treated as), for U.S. federal income tax purposes:
•an individual who is a citizen or resident of the United States;
•a corporation, or other entity that is treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;
•an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
•a trust, if a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons“United States persons” (within the meaning of Section 7701(a)(3) of the Code) have the authority to control all of the substantial decisions of such trust or has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person for U.S. person.federal income tax purposes.
If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds Class A ordinary shares, the U.S. federal income tax consequences relating to an investment in the Class A ordinary shares will depend in part upon the status of the partner and the activities of the partnership. Such a partner or partnership should consult its tax advisor regarding the U.S. federal income tax considerations of owning and disposing of the Class A ordinary shares in its particular circumstances.
As indicated below, this discussion is subject to U.S. federal income tax rules applicablerelating to a “passive foreign investment company” (“PFIC”).
Distributions
Although we do not currently plan to pay dividends, and subject to the discussion in “—Passive Foreign Investment Company Considerations,” below, the gross amount of any distribution (before reduction for any amounts withheld in respect of foreign withholding tax) actually or constructively received by a U.S. holder with respect to Class A ordinary shares will generally be taxable to the U.S. holder as a dividend to the extent of the U.S. holder's pro rata share of our current and accumulated earnings and profits as determined under U.S. federal income tax principles. Distributions in excess of earnings and profits will generally be non-taxable to the U.S. holder to the extent of, and will be applied against and reduce, the U.S. holder's adjusted tax basis in the Class A ordinary shares. Distributions in excess of earnings and profits and such adjusted tax basis will generally be taxable to the U.S. holder as either long-term or short-term capital gain depending upon whether the U.S. holder has held the Class A ordinary shares for more than one year as of the time such distribution is received. However, since we do not calculate our earnings and profits under U.S. federal income tax principles, it is expected that any distribution will be reported as a dividend, even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.
Non-corporate U.S. holders may qualify for the preferential rates of taxation with respect to dividends on Class A ordinary shares applicable to long-term capital gains (i.e., gains from the sale of capital assets held for more than one year) applicable to qualified dividend income (as discussed below) if we are a “qualified foreign corporation” and certain other requirements (discussed below) are met. A non-United States corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is
satisfactory for purposes of this provision and which includes an exchange of information provision, or (b) with respect to any dividend it pays on Class A ordinary shares which are readily tradable on an established securities market in the United States. The Class A ordinary shares are listed on the NASDAQNasdaq Global Select Market, which is an established securities market in the United States. However, there can be no assurance that the Class A ordinary shares will be considered readily tradable on an established securities market in the United States in later years. Subject to the discussion in “-Passive Foreign Investment Company Considerations,” below, such dividends will generally be “qualified dividend income” in the hands of individual U.S. holders, provided that a holding period requirement (more than 60 days of ownership, without protection from the risk of loss, during the 121-day period beginning 60 days before the ex-dividend date) and certain other requirements are met. The dividends will not be eligible for the dividends-received deduction generally allowed to corporate U.S. holders.
Subject to applicable limitations and requirements, a U.S. holder generally may claim the amount of any Australian withholding tax as either a deduction from gross income in its computation of its taxable income for U.S. federal income tax purposes or as a credit against its U.S. federal income tax liability. The availability of foreign tax credits is subject to numerous requirements (including a minimum holding period requirement) and complex limitations that must be determined and applied on an individual basis. Generally, the credit cannot exceed the proportionate share of a U.S. holder’s U.S. federal income tax liability that such U.S. holder’s taxable income from foreign sources bears to such U.S. holder’s worldwide taxable income. In applying this limitation, a U.S. holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.” This limitation is calculated separately with respect to specific categories of income. The amount of a distribution with respect to the Class A ordinary shares that is treated as a “dividend” may be lower for U.S. federal income tax purposes than it is for Australian income tax purposes, potentially effectively resulting in a reduced foreign tax credit for the U.S. holder. In addition, the creditability of foreign taxes could be affected by actions taken by intermediaries in the chain of ownership between the holders of the Class A ordinary shares and us if, as a result of such actions, the holders of the Class A ordinary shares are not properly treated as beneficial owners of the underlying ordinary shares. Each U.S. holder should consult its tax advisors regarding the foreign tax credit rules.
In general, the amount of a distribution paid to a U.S. holder in a foreign currency will be the dollar value of the foreign currency calculated by reference to the spot exchange rate on the day the U.S. holder receives the distribution, regardless of whether the foreign currency is converted into U.S. dollars at that time. Any foreign currency gain or loss a U.S. holder realizes on a subsequent conversion of foreign currency into U.S. dollars will be U.S. source ordinary income or loss. If dividends received in a foreign currency are converted into U.S. dollars on the day they are received, a U.S. holder should not be required to recognize foreign currency gain or loss in respect of the dividend.
Sale, Exchange or Other Taxable Disposition of the Class A Ordinary Shares
A U.S. holder will generally recognize gain or loss for U.S. federal income tax purposes upon the sale, exchange or other taxable disposition of Class A ordinary shares in an amount equal to the difference between the U.S. dollar value of the amount realized from such sale or exchange and the U.S. holder's tax basis for those Class A ordinary shares. Subject to the discussion in “—Passive Foreign Investment Company Considerations” below, this gain or loss will generally be a capital gain or loss. The adjusted tax basis in the Class A ordinary shares generally will be equal to the cost of such Class A ordinary shares. Capital gain from the sale, exchange or other taxable disposition of Class A ordinary shares of a non-corporate U.S. holder is generally eligible for a preferential rate of taxation applicable to capital gains, if the non-corporate U.S. holder's holding period determined at the time of such sale, exchange or other taxable disposition for such Class A ordinary shares exceeds one year (i.e., such gain is long-term taxable gain). The deductibility of capital losses for U.S. federal income tax purposes is subject to limitations under the Code. Any such gain or loss that a U.S. holder recognizes generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes.
For a cash basis taxpayer, units of foreign currency paid or received are translated into U.S. dollars at the spot rate on the settlement date of the purchase or sale. In that case, no foreign currency exchange gain or loss will result from currency fluctuations between the trade date and the settlement date of such a purchase or sale. An accrual basis taxpayer, however, may elect the same treatment required of cash basis taxpayers with respect to purchases and sales of the Class A ordinary shares that are traded on an established securities market, provided the election is applied consistently from year to year. Such election may not be changed without the consent of the IRS. For an accrual basis taxpayer who does not make such election, units of foreign currency paid or received are translated into U.S. dollars at the spot rate on the trade date of the purchase or sale. Such an accrual basis taxpayer may recognize exchange gain or loss based on currency fluctuations between the trade date and the settlement date. Any foreign currency gain or loss a U.S. holder realizes will be U.S. source ordinary income or loss.
Net Investment Income Tax
Certain U.S. holders that are individuals, estates or trusts may be subject to a 3.8% tax on all or a portion of their “net investment income,” which may include all or a portion of their dividend income and net gains from the disposition of Class A ordinary shares. Each U.S. holder that is an individual, estate or trust is urged to consult its tax advisors regarding the applicability of the net investment income tax to its income and gains in respect of its investment in the Class A ordinary shares.
Passive Foreign Investment Company Considerations
If we are classified as a PFIC in any taxable year, a U.S. holder would be subject to special rules generally intended to reduce or eliminate any benefits from the deferral of U.S. federal income tax that a U.S. holder could derive from investing in a non-U.S. company that does not distribute all of its earnings on a current basis.
A corporation organized outside the United States generally will be classified as a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying certain look-through rules with respect to the income and assets of its subsidiaries, either: (i) at least 75% of its gross income is “passive income” or (ii) at least 50% of the average quarterly value of its total gross assets (which, assuming we are not a controlled foreign corporation for the year being tested, would be measured by the fair market value of our assets) is attributable to assets that produce “passive income” or are held for the production of “passive income.”
Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from commodities and securities transactions, the excess of gains over losses from the disposition of assets which produce passive income, and includes amounts derived by reason of the temporary investment of cash, including any funds raised in prior or future offerings. If a non-U.S. corporation owns directly or indirectly at least 25% by value of the stock of another corporation, the non-U.S. corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation and as receiving directly its proportionate share of the other corporation’s income. The determination of whether we are a PFIC is a fact-intensive determination made on an annual basis and the applicable law is subject to varying interpretation. If we are classified as a PFIC in any taxable year during which a U.S. holder owns the Class A ordinary shares, such U.S. holder will be subject to special tax rules discussed below and could suffer adverse tax consequences.
We do not believe that we arewere a PFIC and we do not expect to become a PFIC.for our taxable year ending on June 30, 2021. However, our status in any taxable year will depend on our assets, income and activities in each year, and because this is a factual determination made annually after the end of each taxable year, there can be no assurance that we will not be considered a PFIC for the current taxable year or any future taxable years. If we were a PFIC for any taxable year while a taxable U.S. holder held our Class A ordinary shares, such U.S. holder would generally be taxed at ordinary income rates on any gain recognized from the sale or exchange of our Class A ordinary shares and on any dividends treated as “excess distributions” and interest charges generally applicable to underpayments of tax should apply to any taxes payable.
If we are determined to be a PFIC, U.S. holders may be able to make certain elections that could alleviate some of the adverse consequences of PFIC status and would result in an alternative treatment of the Class A ordinary shares. Such elections include a “mark to market” election, a “deemed sale” election, and a “qualified electing fund” election. We may or may not be able to provide the information required to make any such elections, and U.S. holders should therefore not assume that any particular election will be available to them.
If we are determined to be a PFIC, the general tax treatment for U.S. holders described in this section would apply to indirect distributions and gains deemed to be realized by U.S. holders in respect of any of our subsidiaries that also may be determined to be PFICs.
Although the determination of whether we are a PFIC is made annually, if we are a PFIC for any taxable year in which a U.S. holder owns our Class A ordinary shares, such U.S. holder will generally be subject to the special tax rules described above for that year and for each subsequent year in which such U.S. holder owns our Class A ordinary shares (even if we do not qualify as a PFIC in such subsequent years).
If a U.S. holder owns Class A ordinary shares during any taxable year in which we are a PFIC, the U.S. holder generally will be required to file an IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) with respect to the company, generally with the U.S. holder's federal income tax return for that year. If our company were a PFIC for a given taxable year, then you should consult your tax advisor concerning your annual filing requirements.
The U.S. federal income tax rules relating to PFICs are complex. Prospective U.S. investors are urged to consult their own tax advisers with respect to the ownership and disposition of the Class A ordinary shares, the consequences to them of an investment in a PFIC, any elections available with respect to the Class A ordinary shares and the IRS information reporting obligations with respect to the ownership and disposition of the Class A ordinary shares.
Backup Withholding and Information Reporting
U.S. holders generally will be subject to information reporting requirements with respect to dividends on Class A ordinary shares and on the proceeds from the sale, exchange or disposition of Class A ordinary shares that are paid within the United States or through U.S.-related financial intermediaries, unless the U.S. holder is an “exempt recipient.” In addition, U.S. holders may be subject to backup withholding on such payments, unless the U.S. holder provides a taxpayer identification number and a duly executed IRS Form W-9 or otherwise establishes an exemption. Backup withholding is not an additional tax, and the amount of any backup withholding will be allowed as a credit against a U.S. holder's U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
Foreign Asset Reporting
Certain U.S. holders who are individuals are(and certain specified entities) may be required to report information relating to an interest in the Class A ordinary shares, subject to certain exceptions (including an exception for shares held in accounts maintained by U.S. financial institutions) by filing IRS Form 8938 (Statement of Specified Foreign Financial Assets) with their federal income tax return. U.S. holders are urged to consult their tax advisors regarding their information reporting obligations, if any, with respect to their ownership and disposition of the Class A ordinary shares.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are subject to the informational requirements of the Exchange Act. In accordance with these requirements, we file reports and furnish other information as a foreign private issuer with the SEC. These materials, including this report and the exhibits thereto, may be inspected and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The SEC also maintains a Web site at www.sec.gov that contains reports and other information regarding registrants that file electronically with the SEC. This report as well as some of the other information submitted by us to the SEC may be accessed through this Web site. In addition, information about us is available at our web site:site at www.atlassian.com.
I. Subsidiary Information
Not applicable.
Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Currency Risk
We operate globally and are exposed to foreign exchange risk arising from exposure to various currencies in the ordinary course of business. Our exposures primarily consist of the Australian dollar,Dollar, India rupee, Euro, British pound, Euro, Japanese yen, Philippine peso Indian rupee and Swiss franc.Canadian dollar. Foreign exchange risk arises from commercial transactions and recognized financial assets and liabilities denominated in a currency other than the U.S. dollar. Our foreign exchangefinancial risk management policy is reviewed annually by our audit committeeAudit Committee and requires us to monitor our foreign exchange exposure on a regular basis.
AllThe substantial majority of our sales contracts are denominated in U.S. dollars, and our operating expenses are generally denominated in the local currencies of the countries where our operations are located. We therefore benefit from a strengthening of the U.S. dollar and are adversely affected by the weakening of the U.S. dollar.
We have a cash flow hedging program in place and enter into derivative transactions to manage certain foreign currency exchange risks that arise in our ordinary business operations. We recognize all derivative instruments as either assets or liabilities on our consolidated statements of financial position and measure them at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting.
We enter into master netting agreements with select financial institutions to reduce our credit risk, and contractwe trade with several counterparties to reduce our concentration risk with any single counterparty. We do not have significant exposure to counterparty credit risk at this time. We do not require nor are we required to post collateral of any kind related to our foreign currency derivatives.
Foreign currency exchange rate exposure
We hedged material foreign currency denominated monetary assets and liabilities using balance sheet hedges. The fluctuations in the fair market value of balance sheet hedges due to foreign currency rates generally offset those of the hedged items, resulting in no material effect on profit. Consequently, we are primarily exposed to significant foreign currency exchange rate fluctuations with regard to the spot component of derivatives held within a designated cash flow hedge relationship affecting other comprehensive income
Foreign currency sensitivity
A sensitivity analysis performed on our hedging portfolio as of June 30, 2018 2021 and 2020indicated that a hypothetical 10% strengthening of the U.S. dollar against other currenciesthe Australian dollar applicable to our business would decrease the fair value of our foreign currency contracts by $18.8 million. A$39.4 million and $27.0 million, respectively, and a hypothetical 10% weakening of the U.S. dollar against other currenciesthe Australian dollar would increase the fair value of our foreign currency contracts by $18.8 million.$39.4 million and $27.0 million, respectively.
A sensitivity analysis performed on our hedging portfolio as of June 30, 2017 indicated that a hypothetical 10% strengthening of the U.S. dollar against other currencies applicable to our business would decrease the fair value of our foreign currency contracts by $11.3 million. A hypothetical 10% weakening of the U.S. dollar against other currencies would increase the fair value of our foreign currency contracts by $11.3 million.
Interest Rate Risk
We are exposed to interest rate risk arising from our variable interest rate Credit Facility. Our financial risk management policy is reviewed annually by our Audit Committee and requires us to monitor its interest rate exposure on a regular basis.
We have a hedging program in place and enter into derivative transactions to manage the variable interest rate risks that arise with the Group’s Term Loan Facility. We enter into master netting agreements with financial institutions to execute our hedging program. Our master netting agreements are with select financial institutions to reduce our credit risk, and we trade with several counterparties to reduce our concentration risk with any single counterparty. We do not have significant exposure to counterparty credit risk at this time. We do not require nor are we required to post collateral of any kind related to our interest rate derivatives.
We enter into interest rate swaps with the objective to hedge the variability of cash flows in the interest payments associated with our variable-rate Term Loan Facility. The interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The interest rate swaps are designated as cash flow hedges and measured at fair value.
A sensitivity analysis performed on interest rate swaps as of June 30, 2021 indicated that a hypothetical 100 basis point increase in interest rates would increase the market value of our interest rate swap by $24.8 million and a hypothetical 100 basis point decrease in interest rates would decrease the market value of our interest rate swap by $20.6 million. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.
In addition, our cash equivalents and investment portfolio are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely impacted due to a rise in interest rates. As of June 30, 2018,2021, we had cash and cash equivalents totaling $1.4 billion$919.2 million and short-term investments totaling $323.1 million.$313.0 million.
A sensitivity analysis performed on our portfolio as of June 30, 2021 and 2020 indicated that a hypothetical 100 basis point increase in interest rates at June 30, 2018 and 2017 would result in a $1.7 million and $2.0 million decrease in the market value of our investments respectively.by $1.9 million and $5.4 million, respectively, and a hypothetical 100 basis point decrease in interest rates would increase the market value of our investments by $0.3 million and $1.6 million, respectively. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.
Equity Price Risk
We are exposed to equity price risk due toin connection with our exchangeable senior notes,Notes, including exchange and settlement provisions based on the price of our Class A ordinary shares at exchange or maturity of the notes.Notes. In addition, the capped call transactions associated with the notesNotes also include settlement provisions that are based on the price of theour Class A ordinary shares. The amount of cash we may receive from capped call counterparties in connection with the capped calls is determined by the price of our Class A ordinary shares.
A sensitivity analysis performed on the notes embedded exchange derivativefeature of the Notes and related capped call transactions indicatescalls as of June 30, 2021 and 2020 indicated that a hypothetical hypothetical 10% increase in our share price would increase the fair value of the notes embedded exchange derivative feature of the Notes and related capped callsby $46.7$107.9 million and increase the fair value of the capped call transactions by $15.9 million. A$192.6 million, respectively, and a hypothetical 10% decrease in our share price would decrease the fair value of the notes embedded exchange derivativefeature of the Notes and related capped calls by $43.0$106.2 million and $184.8 million, respectively.
We are also exposed to equity price risk in connection with our equity investments. Our marketable equity investments are susceptible to market price risk from uncertainties about future values of the investment securities. As of June 30, 2021 and 2020, our marketable equity investments are fair valued at $110.4 million and $100.2 million, respectively. A hypothetical 10% increase in the respective share prices of our equity investments as of June 30, 2021 and 2020 would increase the fair value of our marketable equity investments by $11.0 million and $10.0 million, respectively, and a hypothetical 10% decrease in the capped call transactionsrespective share prices of our equity investments would decrease the fair value of our marketable equity investments by $16.2 million.$11.0 million and $10.0 million, respectively.
See Note 5, “Financial Assets and Liabilities,” to the notes to our consolidated financial statements for more details on our quantitative and qualitative disclosure about market risk.
Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
PART II
Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
None.
Item 15. CONTROLS AND PROCEDURES
Disclosure controls and procedures
Our Co-Chief Executive Officers and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of June 30, 2018,2021, have concluded that, as of such date, our disclosure controls and procedures were effective and ensured that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Co-Chief Executive Officers and our Chief Financial Officer, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.
Management’s report on internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Our internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with IFRS. Based on this evaluation, management concluded that our internal control over
financial reporting was effective as of June 30, 2018.2021. Our independent registered public accounting firm, Ernst & Young LLP, has issued an audit report with respect to our internal control over financial reporting, which appears in Part III, Item 18 of this annual report.
Changes in internal control over financial reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the year ended June 30, 20182021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on effectiveness of controls and procedures
In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Item 16. [RESERVED]
Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Mr. Steven Sordello is independent and qualifies as an “audit committee financial expert” as set forth in Rule 10A-3 under the Exchange Act and satisfies the financial sophistication requirements of the NASDAQNasdaq listing standards.
Item 16B. CODE OF ETHICS
Our board of directors has adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including our Co-Chief Executive Officers, Chief Financial Officer and other executive and senior financial officers. The full text of our code of business conduct and ethics is posted on the investor relations page of our website at https://investors.atlassian.com. We intend to disclose any amendments to our code of business conduct and ethics, or waivers of its requirements, as it applies to our executive officers and directors, on our website or in filings under the Exchange Act.
Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Aggregate audit fees, audit-related fees, tax fees and the aggregate of all other fees billed to us by Ernst & Young LLP for the fiscal years ended June 30, 20182021 and 20172020 were as follows:
| | | | | | | | | | | |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Audit fees (1) | $ | 3,223 | | | $ | 2,745 | |
Audit-related fees (2) | 879 | | | 876 | |
Tax fees (3) | 292 | | | 243 | |
Other fees (4) | 11 | | | 11 | |
Total | $ | 4,405 | | | $ | 3,875 | |
(1) Audit Fees consist of fees incurred for professional services rendered for the integrated audit of our annual consolidated financial statements, review of the quarterly consolidated financial statements and foreign statutory audits and services that are normally provided by Ernst & Young LLP in connection with statutory and regulatory filings or engagements. Audit fees also include accounting consultations, research related to the integrated audit.
(2) Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under “Audit Fees.” This primarily consists of fees for service organization control audits.
(3) Tax fees relate to assistance with tax compliance, tax planning and various tax advisory services.
(4) Other fees are any additional amounts for products and services provided by the principal accountants.
|
| | | | | | | | |
| | 2018 | | 2017 |
| | (U.S. $ in thousands) |
Audit fees (1) | | $ | 3,469 |
| | $ | 2,036 |
|
Audit-related fees (2) | | 447 |
| | 142 |
|
Tax fees (3) | | 238 |
| | 156 |
|
Other fees (4) | | 3 |
| | 2 |
|
Total | | $ | 4,157 |
| | $ | 2,336 |
|
| |
(1) | Audit fees consist of fees for professional services provided in connection with the audit of our annual consolidated financial statements, including adoption of International Accounting Standards Board, International Financial Reporting Standard 15, the review of our quarterly consolidated financial statements, the audit of our internal controls over financial reporting, and comfort letter services in relation to our exchangeable senior notes. |
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(2) | Audit-related fees consist of aggregate fees for accounting consultations and other services that were reasonably related to the performance of audits or reviews of our consolidated financial statements and were not reported above under “Audit Fees.” This primarily consists of fees for service organization control audits. |
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(3) | Tax fees relate to assistance with tax compliance, tax planning and various tax advisory services. |
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(4) | Other fees are any additional amounts for products and services provided by the principal accountants. |
Our audit committeeAudit Committee has adopted a pre-approval policy for the engagement of our independent accountant to perform certain audit and non-audit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committeeAudit Committee pre-approves annually all audit services, audit-related services, tax services and other services as described above, that may be performed by our independent accountants. All of the audit and non-audit services provided by our principal accountants have been pre-approved by our Audit Committee.
Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
On June 1, 2018 the company acquired 12,302 Class A ordinary shares from employee contractor in connection with such contractor's termination, pursuant to a repurchase right which the company had in connection with an early exercise of options held by the contractor. The repurchased shares were subsequently cancelled. Not applicable.
Item 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
Item 16G. CORPORATE GOVERNANCE
We are a “foreign private issuer” under the securities laws of the United States and the rules of NASDAQ.Nasdaq. Under the securities laws of the United States, foreign private issuers are subject to different disclosure requirements than U.S. domiciled registrants. We intend to take all actions necessary for us to maintain compliance as a foreign private issuer under the applicable corporate governance requirements of the Sarbanes-Oxley Act, the rules adopted by the SEC and NASDAQ'sNasdaq's listing standards. Under NASDAQ'sNasdaq's rules, a foreign private issuer is subject to less stringent corporate governance requirements. Subject to certain exceptions, the rules of NASDAQNasdaq permit a foreign private issuer to follow its home country practice in lieu of the listing requirements of NASDAQ.Nasdaq. We intend to follow home country practices in lieu of the listing requirements of NASDAQNasdaq with regard to voting by a show of hands and quorum requirements. Otherwise, we intend to follow the requirements of NASDAQNasdaq to the extent possible under English law.
In addition, because we are a foreign private issuer, our directors and executive officers are not subject to short-swing profit liability and insider trading reporting obligations under sectionSection 16 of the Exchange Act. They will, however, be subject to the obligations to report changes in share ownership under sectionSection 13 of the Exchange Act and related SEC rules to the extent appropriate.
Item 16H. MINE SAFETY DISCLOSURE
Not applicable.
PART III
Item 17. FINANCIAL STATEMENTS
See “Item 18. Financial Statements.”
Item 18. FINANCIAL STATEMENTS
The following financial statements are filed as part of this annual report, together with the report of the independent registered public accounting firm:
•Reports of Independent Registered Public Accounting Firm
•Consolidated Statements of Operations for the fiscal years ended June 30, 2018, 20172021, 2020 and 2016 2019
•Consolidated Statements of Comprehensive IncomeLoss for the fiscal years ended June 30,2018, 2017 2021, 2020 and 2016 2019
•Consolidated Statements of Financial Position as of June 30,2018 2021 and 2017
2020
•Consolidated Statements of Changes in Equity for the fiscal years ended June 30,2018, 2017 2021, 2020 and 2016
2019
•Consolidated Statements of Cash Flows for the fiscal years ended June 30,2018, 2017 2021, 2020 and 2016
2019
•Notes to the Consolidated Financial Statements
Item 19. EXHIBITS | | | | | | | | |
Exhibit Number | | Description |
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3.1 | | (1) | |
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4.1 | | (2) | |
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4.2 | | (3) | |
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4.3 | | (5) | |
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4.4 | | (8) | |
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10.1 | | (5) | |
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10.1 | | (6) | |
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10.1 | | (7) | |
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10.1 | | (3) # | |
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10.2 | | (3) #
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10.3 | | (3) #
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10.4 | | (3) #
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10.5 | | (3) #
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10.6 | | (3) #
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10.7 | | (3) #
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10.8 | | (3) #
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10.9 | | (3) #
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10.10 | | (4) #
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10.11 | | (3) #
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10.12 | | (3) | |
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10.13 | | (9) | |
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10.14 | | (3) | |
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10.15 | | (3) | |
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10.16 | | (3) | |
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10.17 | | (4) | |
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10.18 | | | |
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10.19 | | | |
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12.1 | | | |
| | |
12.2 | | | |
| | |
12.3 | | | |
| | |
|
| | | |
Exhibit Number | | Description |
| | |
3.1 |
| (1) | |
| | |
4.1 |
| (2) | |
| | |
4.2 |
| (3) | |
| | |
4.3 |
| (4) | |
| | |
10.1 |
| (4) | |
| | |
10.1 |
| (5) | |
| | |
10.1 |
| (6) | |
| | |
10.1 |
| (3) # | |
| | |
10.2 |
| (3) #
| |
| | |
10.3 |
| (3) #
| |
| | |
10.4 |
| (3) #
| |
| | |
10.5 |
| (3) #
| |
| | |
10.6 |
| (3) #
| |
| | |
10.7 |
| (3) #
| |
| | |
10.8 |
| (3) #
| |
| | |
10.9 |
| (3) #
| |
| | |
10.10 |
| (3) #
| |
| | |
10.11 |
| (3) #
| |
| | |
10.12 |
| (3) #
| |
| | |
10.13 |
| (3) #
| |
| | |
10.14 |
| (3) #
| |
| | |
10.15 |
| (3) | |
| | |
10.16 |
| (3) | |
| | |
10.17 |
| (3) | |
| | |
10.18 |
| (3) | |
| | |
12.1 |
| | |
| | |
12.2 |
| | |
| | |
12.3 |
| | |
| | |
13.1 |
| | |
| | |
|
| | | | | | | |
Exhibit Number | | Description |
| | |
13.213.1 |
| | |
| | |
13.313.2 |
| | |
| | |
13.3 | | | |
| | |
21.1 |
| | |
| | |
23.1 |
| | |
| | |
____________________________
(1) Incorporated by reference to the company’s report on Form 6-K filed on December 8, 2016.
(2) Incorporated by reference to the company’s Registration Statement on Form F-1/A (File No. 333-207879) filed on November 18, 2015.
(3) Incorporated by reference to the company’s Registration Statement on Form F-1 (File No. 333-207879) filed on November 9, 2015.
(4) Incorporated by reference to the company’s report on Form 6-K filed on October 29, 2020.
(5) Incorporated by reference to the company’s report on Form 6-K filed on April 30, 2018.
(5)(6) Incorporated by reference to the company’s report on Form 6-K filed on October 30, 2017.
(6)(7) Incorporated by reference to the company’s report on Form 6-K filed on November 27, 2017.
(8) Incorporated by reference to the company’s report on Form 20-F filed on August 23, 2019.
(9) Incorporated by reference to the company’s report on Form 20-F filed on August 14, 2020.
# Indicates management contract or compensatory plan, contract or agreement.
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Reportannual report on its behalf.
| | | | | | | | | | | | | | | | | |
| ATLASSIAN CORPORATION PLC |
| | | |
Date: August 13, 2021 | By: | | /s/ Michael Cannon-Brookes |
| | | Name: | | Michael Cannon-Brookes |
| | | Title: | | Co-Chief Executive Officer |
| | | | | |
| ATLASSIAN CORPORATION PLCBy: | | /s/ Scott Farquhar |
| | | Name: | | Scott Farquhar |
Date: August 30, 2018 | By: | | /s/ MICHAEL CANNON-BROOKES |
Title: | | | Name: | | Michael Cannon-Brookes |
| | | Title: | | Co-Chief Executive Officer |
| | | | | |
| By: | | /s/ SCOTT FARQUHAR |
| | | Name: | | Scott Farquhar |
| | | Title: | | Co-Chief Executive Officer |
ATLASSIAN CORPORATION PLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
| | | | |
| Page |
Reports of Independent Registered Public Accounting Firm | F-2 |
Consolidated Statements of Operations | F-4 |
Consolidated Statements of Comprehensive Income (Loss)Loss | F-5 |
Consolidated Statements of Financial Position | F-6 |
Consolidated Statements of Changes in Equity | F-7 |
Consolidated Statements of Cash Flows | F-8 |
Notes to Consolidated Financial Statements | F-9 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TheReport of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Atlassian Corporation Plc
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Atlassian Corporation Plc (the “Company”)Company) as of June 30, 20182021 and 2017, and2020, the related consolidated statements of operations, comprehensive income (loss),loss, changes in equity and cash flows for each of the three years in the period ended June 30, 2018,2021, and the related notes (collectively referred to as the consolidated“consolidated financial statements)statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2018,2021, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2018,2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)and our report dated August 30, 201813, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.
| | | | | |
| Revenue recognition
|
Description of the Matter | As described in Note 2 to the consolidated financial statements, the Company primarily derives revenues from cloud-based services agreements and subscription-based and perpetual software license arrangements that include bundled support and maintenance services for the term of the license period. The Company’s contracts with customers often contain multiple performance obligations, including promises to transfer multiple software products and/or services to a customer. To account for promised goods and services in accordance with IFRS 15, Revenue from Contracts with Customers, the Company allocates the transaction price to the distinct performance obligations on a relative standalone selling price basis and recognizes revenue when control of the distinct performance obligation is transferred to the customer. For example, the Company recognizes software license revenue at the time of delivery of the license and recognizes subscription and support revenue over time as the services are performed.
Auditing the Company’s recognition of revenue was challenging and complex due to the effort required to analyze the accounting treatment for the Company’s various software product and service offerings in accordance with IFRS 15. This involved assessing the impact of terms and conditions of new or amended contracts with customers or new product or service offerings, the determination of the relative standalone selling prices for each distinct performance obligation and the timing of recognition of revenue.
|
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's internal controls over the relevant terms of its contracts, the appropriate accounting for those terms under IFRS 15, including the identification of performance obligations, determination of the relative standalone selling price for each performance obligation, and the determination of the timing of recognition of revenue. This included testing relevant controls over the information systems that are important to the initiation, recording and billing of revenue transactions.
Among other procedures to evaluate management’s identification and determination of the distinct performance obligations, we read executed contracts for a sample of sales transactions to understand the contract, identified the promised goods and services in the contract and identified the distinct performance obligations. To test management’s determination of relative standalone selling price for each performance obligation, we performed audit procedures, among others, to assess the appropriateness of the methodology applied, tested mathematical accuracy of the underlying data and calculations, and tested sample selections to corroborate the data underlying the Company’s calculations. We also evaluated whether the Company appropriately applied its revenue recognition policy to a sample of sales transactions to determine whether revenue was recognized in the correct amount and period. Finally, we assessed the appropriateness of the related disclosures in the consolidated financial statements. |
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2012.
San Francisco, California
August 30, 201813, 2021
Report of Independent Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TheTo the Board of Directors and Shareholders of Atlassian Corporation Plc
Opinion on Internal Control overOver Financial Reporting
We have audited Atlassian Corporation Plc’s internal control over financial reporting as of June 30, 2018,2021, based on criteria established in Internal Control -– Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Atlassian Corporation Plc (the Company) maintained, in all material respects, effective internal control over financial reporting as of June 30, 2018,2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2018Company’s 2021 consolidated financial statements, of the Company and our report dated August 30, 201813, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying management’sManagement’s report on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
San Francisco, California
August 30, 201813, 2021
ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. $ and shares in thousands, except per share data) | | | | | | | | | | | | | | | | | | | | | | | |
| | | Fiscal Year Ended June 30, |
| Notes | | 2021 | | 2020 | | 2019 |
Revenues: | | | | | | | |
Subscription | | | $ | 1,324,064 | | | $ | 931,455 | | | $ | 633,950 | |
Maintenance | | | 522,971 | | | 469,350 | | | 394,526 | |
Perpetual license | | | 84,806 | | | 95,162 | | | 93,593 | |
Other | | | 157,291 | | | 118,206 | | | 88,058 | |
Total revenues | 15 | | 2,089,132 | | | 1,614,173 | | | 1,210,127 | |
Cost of revenues (1) (2) | | | 336,021 | | | 268,807 | | | 210,285 | |
Gross profit | | | 1,753,111 | | | 1,345,366 | | | 999,842 | |
Operating expenses: | | | | | | | |
Research and development (1) (2) | | | 963,326 | | | 763,188 | | | 579,134 | |
Marketing and sales (1) (2) | | | 372,909 | | | 299,683 | | | 268,356 | |
General and administrative (1) | | | 315,242 | | | 268,409 | | | 215,714 | |
Total operating expenses | | | 1,651,477 | | | 1,331,280 | | | 1,063,204 | |
Operating income (loss) | | | 101,634 | | | 14,086 | | | (63,362) | |
Other non-operating expense, net | 6 | | (620,759) | | | (338,486) | | | (535,453) | |
Finance income | | | 7,174 | | | 27,801 | | | 33,500 | |
Finance costs | | | (122,713) | | | (49,610) | | | (40,241) | |
Loss before income tax expense | | | (634,664) | | | (346,209) | | | (605,556) | |
Income tax expense | 8 | | (61,651) | | | (4,445) | | | (32,065) | |
Net loss | | | $ | (696,315) | | | $ | (350,654) | | | $ | (637,621) | |
| | | | | | | |
| | | | | | | |
Net loss per share attributable to ordinary shareholders: | | | | | | | |
Basic | 18 | | $ | (2.79) | | | $ | (1.43) | | | $ | (2.67) | |
Diluted | 18 | | $ | (2.79) | | | $ | (1.43) | | | $ | (2.67) | |
Weighted-average shares outstanding used to compute net loss per share attributable to ordinary shareholders: | | | | | | | |
Basic | 18 | | 249,679 | | | 244,844 | | | 238,611 | |
Diluted | 18 | | 249,679 | | | 244,844 | | | 238,611 | |
|
| | | | | | | | | | | | | |
| | | Fiscal Year Ended June 30, |
| Notes | | 2018 | | 2017 | | 2016 |
Revenues: | | | |
| | |
| | |
Subscription | | | $ | 403,214 |
| | $ | 242,128 |
| | $ | 146,659 |
|
Maintenance | | | 325,898 |
| | 265,521 |
| | 218,848 |
|
Perpetual license | | | 85,481 |
| | 74,565 |
| | 65,487 |
|
Other | | | 59,357 |
| | 37,722 |
| | 26,064 |
|
Total revenues | 20 | | 873,950 |
| | 619,936 |
| | 457,058 |
|
Cost of revenues (1) (2) | | | 172,690 |
| | 119,161 |
| | 75,783 |
|
Gross profit | | | 701,260 |
| | 500,775 |
| | 381,275 |
|
Operating expenses: | | | |
| | |
| | |
|
Research and development (1) | | | 415,776 |
| | 310,168 |
| | 208,306 |
|
Marketing and sales (1) (2) | | | 187,990 |
| | 134,908 |
| | 93,391 |
|
General and administrative (1) | | | 151,242 |
| | 118,785 |
| | 85,458 |
|
Total operating expenses | | | 755,008 |
| | 563,861 |
| | 387,155 |
|
Operating loss | | | (53,748 | ) | | (63,086 | ) | | (5,880 | ) |
Other non-operating income (expense), net | 6 | | (15,157 | ) | | (1,342 | ) | | (1,072 | ) |
Finance income | | | 9,877 |
| | 4,851 |
| | 2,116 |
|
Finance costs | | | (6,806 | ) | | (75 | ) | | (71 | ) |
Loss before income tax benefit (expense) | | | (65,834 | ) | | (59,652 | ) | | (4,907 | ) |
Income tax benefit (expense) | 8 | | (53,507 | ) | | 17,148 |
| | 9,280 |
|
Net income (loss) | | | $ | (119,341 | ) | | $ | (42,504 | ) | | $ | 4,373 |
|
Net income (loss) attributable to: | | | |
| | |
| | |
|
Owners of Atlassian Corporation Plc | | | $ | (119,341 | ) | | $ | (42,504 | ) | | $ | 4,373 |
|
Net income (loss) per share attributable to ordinary shareholders: | | | |
| | |
| | |
|
Basic | 17 | | $ | (0.52 | ) | | $ | (0.19 | ) | | $ | 0.02 |
|
Diluted | 17 | | $ | (0.52 | ) | | $ | (0.19 | ) | | $ | 0.02 |
|
Weighted-average shares outstanding used to compute net income (loss) per share attributable to ordinary shareholders: | | | | | | | |
|
Basic | 17 | | 231,184 |
| | 222,224 |
| | 182,773 |
|
Diluted | 17 | | 231,184 |
| | 222,224 |
| | 193,481 |
|
(1)Amounts include share-based payment expense, as follows: | | | | | | | | | | | | | | | | | |
Cost of revenues | $ | 24,739 | | | $ | 19,787 | | | $ | 17,450 | |
Research and development | 253,328 | | | 204,150 | | | 149,049 | |
Marketing and sales | 46,978 | | | 41,960 | | | 39,303 | |
General and administrative | 60,687 | | | 47,498 | | | 51,960 | |
|
| | | | | | | | | | | | | |
Cost of revenues | | | $ | 11,955 |
| | $ | 6,856 |
| | $ | 5,371 |
|
Research and development | | | 98,609 |
| | 79,384 |
| | 35,735 |
|
Marketing and sales | | | 23,605 |
| | 17,395 |
| | 11,945 |
|
General and administrative | | | 28,704 |
| | 33,813 |
| | 22,429 |
|
(2)Amounts include amortization of acquired intangible assets, as follows:
|
| | | | | | | | | | | | | |
Cost of revenues | | | $ | 21,188 |
| | $ | 14,587 |
| | $ | 7,405 |
|
Marketing and sales | | | 36,090 |
| | 15,269 |
| | 86 |
|
| | | | | | | | | | | | | | | | | |
Cost of revenues | $ | 22,394 | | | $ | 29,509 | | | $ | 27,997 | |
Research and development | 168 | | | 166 | | | 60 | |
Marketing and sales | 9,192 | | | 12,860 | | | 28,744 | |
The above consolidated statements of operations should be read in conjunction with the accompanying notes.
ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)LOSS
(U.S. $ in thousands)
|
| | | | | | | | | | | | | |
| | | Fiscal Year Ended June 30, |
| Notes | | 2018 | | 2017 | | 2016 |
Net income (loss) | | | $ | (119,341 | ) | | $ | (42,504 | ) | | $ | 4,373 |
|
Other comprehensive income (loss): | | | | | | | |
Foreign currency translation adjustment | 16 | | 118 |
| | 140 |
| | (4 | ) |
Net change in unrealized gain (loss) on investments classified at fair value through other comprehensive income | | | (586 | ) | | (945 | ) | | 687 |
|
Net gain (loss) on derivative instruments | | | (8,341 | ) | | 3,164 |
| | — |
|
Income tax effect | | | 2,502 |
| | (812 | ) | | (137 | ) |
Other comprehensive income (loss) net of tax that will be reclassified to profit or loss in subsequent periods | | | (6,307 | ) | | 1,547 |
| | 546 |
|
Total comprehensive income (loss), net of tax | | | $ | (125,648 | ) | | $ | (40,957 | ) | | $ | 4,919 |
|
Total comprehensive income (loss) attributable to: | | | | | | | |
Owners of Atlassian Corporation Plc | | | $ | (125,648 | ) | | $ | (40,957 | ) | | $ | 4,919 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Fiscal Year Ended June 30, |
| Notes | | 2021 | | 2020 | | 2019 |
Net loss | | | $ | (696,315) | | | $ | (350,654) | | | $ | (637,621) | |
Items that will not be reclassified to profit or loss in subsequent periods: | | | | | | | |
Net gain on equity investments classified at fair value through other comprehensive income | 5 | | 48,080 | | | 41,255 | | | 38,662 | |
Income tax effect | | | (11,283) | | | (9,380) | | | (8,813) | |
Other comprehensive income for items that will not be reclassified to profit or loss, net of tax | | | 36,797 | | | 31,875 | | | 29,849 | |
Items that will be reclassified to profit or loss in subsequent periods: | | | | | | | |
Foreign currency translation adjustment | | | 4,916 | | | (613) | | | (35) | |
Net change in unrealized gain (loss) on debt investments classified at fair value through other comprehensive income | 5 | | (4,844) | | | 5,053 | | | 1,340 | |
Net gain (loss) on cash flow hedging derivative instruments | 5 | | (16,008) | | | 16,711 | | | 1,539 | |
Income tax effect | | | 7,827 | | | (8,961) | | | (553) | |
Other comprehensive income (loss) after tax that will be reclassified to profit or loss in subsequent periods | | | (8,109) | | | 12,190 | | | 2,291 | |
Other comprehensive income, net of tax | | | 28,688 | | | 44,065 | | | 32,140 | |
Total comprehensive loss, net of tax | | | $ | (667,627) | | | $ | (306,589) | | | $ | (605,481) | |
| | | | | | | |
| | | | | | | |
The above consolidated statements of comprehensive income (loss)loss should be read in conjunction with the accompanying notes.
ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(U.S. $ in thousands)
|
| | | | | | | | | |
| | | June 30, |
| Notes | | 2018 | | 2017 |
Assets | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | 13 | | $ | 1,410,339 |
| | $ | 244,420 |
|
Short-term investments | 5 | | 323,134 |
| | 305,499 |
|
Trade receivables | 9 | | 46,141 |
| | 26,807 |
|
Current tax receivables | | | 12,622 |
| | 12,445 |
|
Prepaid expenses and other current assets | 13 | | 28,219 |
| | 23,317 |
|
Total current assets | | | 1,820,455 |
| | 612,488 |
|
Non-current assets: | | | | | |
Property and equipment, net | 10 | | 51,656 |
| | 41,173 |
|
Deferred tax assets | 8 | | 64,662 |
| | 188,239 |
|
Goodwill | 11 | | 311,943 |
| | 311,900 |
|
Intangible assets, net | 11 | | 63,577 |
| | 120,789 |
|
Other non-current assets | 13 | | 112,221 |
| | 9,269 |
|
Total non-current assets | | | 604,059 |
| | 671,370 |
|
Total assets | | | $ | 2,424,514 |
| | $ | 1,283,858 |
|
Liabilities | | | | | |
Current liabilities: | | | | | |
Trade and other payables | 13 | | $ | 113,105 |
| | $ | 73,192 |
|
Current tax liabilities | | | 172 |
| | 2,207 |
|
Provisions | 13 | | 7,215 |
| | 6,162 |
|
Deferred revenue | | | 340,834 |
| | 245,306 |
|
Total current liabilities | | | 461,326 |
| | 326,867 |
|
Non-current liabilities: | | | | | |
Deferred tax liabilities | 8 | | 12,051 |
| | 43,950 |
|
Provisions | 13 | | 4,363 |
| | 3,333 |
|
Deferred revenue | | | 19,386 |
| | 10,691 |
|
Exchangeable senior notes, net | 14 | | 819,637 |
| | — |
|
Other non-current liabilities | 13 | | 214,985 |
| | 4,969 |
|
Total non-current liabilities | | | 1,070,422 |
| | 62,943 |
|
Total liabilities | | | $ | 1,531,748 |
| | $ | 389,810 |
|
Equity | | | | | |
Share capital | 15 | | $ | 23,531 |
| | $ | 22,726 |
|
Share premium | 16 | | 454,766 |
| | 450,959 |
|
Other capital reserves | 16 | | 557,100 |
| | 437,346 |
|
Other components of equity | 16 | | (61 | ) | | 6,246 |
|
Accumulated deficit | | | (142,570 | ) | | (23,229 | ) |
Total equity | | | $ | 892,766 |
| | $ | 894,048 |
|
Total liabilities and equity | | | $ | 2,424,514 |
| | $ | 1,283,858 |
|
| | | | | | | | | | | | | | | | | |
| | | June 30, |
| Notes | | 2021 | | 2020 |
Assets | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | 14 | | $ | 919,227 | | | $ | 1,479,969 | |
Short-term investments | 5 | | 313,001 | | | 676,072 | |
Trade receivables | 9 | | 173,473 | | | 112,019 | |
Tax receivables | | | 2,332 | | | 1,509 | |
Derivative assets | 5,16 | | 127,486 | | | 327,487 | |
Prepaid expenses and other current assets | 14 | | 48,322 | | | 46,730 | |
| | | 1,583,841 | | | 2,643,786 | |
Assets held for sale | 14 | | 43,665 | | | 0 | |
Total current assets | | | 1,627,506 | | | 2,643,786 | |
Non-current assets: | | | | | |
Property and equipment, net | 10 | | 66,221 | | | 97,648 | |
Deferred tax assets | 8 | | 36,174 | | | 35,351 | |
Goodwill | 11 | | 725,758 | | | 645,140 | |
Intangible assets, net | 11 | | 124,590 | | | 129,690 | |
Right-of-use assets, net | 12 | | 205,300 | | | 217,683 | |
| | | | | |
Other non-current assets | 14 | | 159,795 | | | 124,774 | |
Total non-current assets | | | 1,317,838 | | | 1,250,286 | |
Total assets | | | $ | 2,945,344 | | | $ | 3,894,072 | |
Liabilities | | | | | |
Current liabilities: | | | | | |
Trade and other payables | 14 | | $ | 266,497 | | | $ | 202,570 | |
Tax liabilities | | | 42,051 | | | 19,583 | |
Provisions | 14 | | 25,148 | | | 14,291 | |
Deferred revenue | 15 | | 812,943 | | | 573,813 | |
Lease obligations | 12 | | 42,446 | | | 34,743 | |
Derivative liabilities | 5,16 | | 772,127 | | | 1,284,596 | |
Exchangeable senior notes, net | 16 | | 348,799 | | | 889,183 | |
Total current liabilities | | | 2,310,011 | | | 3,018,779 | |
Non-current liabilities: | | | | | |
Deferred tax liabilities | 8 | | 26,625 | | | 31,304 | |
Provisions | 14 | | 12,435 | | | 9,493 | |
Deferred revenue | 15 | | 84,652 | | | 27,192 | |
| | | | | |
Lease obligations | 12 | | 214,103 | | | 229,825 | |
| | | | | |
Other non-current liabilities | | | 2,604 | | | 2,173 | |
Total non-current liabilities | | | 340,419 | | | 299,987 | |
Total liabilities | | | 2,650,430 | | | 3,318,766 | |
Equity | | | | | |
Share capital | 17 | | 25,164 | | | 24,744 | |
Share premium | 17 | | 461,016 | | | 459,892 | |
Other capital reserves | 17 | | 1,516,609 | | | 1,130,918 | |
Other components of equity | 17 | | 104,832 | | | 76,144 | |
Accumulated deficit | | | (1,812,707) | | | (1,116,392) | |
Total equity | | | 294,914 | | | 575,306 | |
Total liabilities and equity | | | $ | 2,945,344 | | | $ | 3,894,072 | |
The above consolidated statements of financial position should be read in conjunction with the accompanying notes.
ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Other components of equity | | | | |
| Notes | | Share capital | | Share premium | | Other capital reserves | | Cash flow hedge reserve | | Foreign currency translation reserve | | Investments at fair value through other comprehensive income reserve | | Retained earnings (accumulated deficit) | | Total equity |
Balance as of July 1, 2015 | | | $ | 18,461 |
| | $ | 5,744 |
| | $ | 146,794 |
| | $ | — |
| | $ | 4,153 |
| | $ | — |
| | $ | 14,902 |
| | $ | 190,054 |
|
Net income | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 4,373 |
| | 4,373 |
|
Other comprehensive income (loss), net of tax | | | — |
| | — |
| | — |
| | — |
| | (4 | ) | | 550 |
| | — |
| | 546 |
|
Total comprehensive income (loss) | | | — |
| | — |
| | — |
| | — |
| | (4 | ) | | 550 |
| | 4,373 |
| | 4,919 |
|
Issuance of ordinary shares upon initial public offering, net of offering costs | 15,16 | | 2,200 |
| | 429,273 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 431,473 |
|
Issuance of ordinary shares upon exercise of share options
| 15,16 | | 633 |
| | 6,099 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 6,732 |
|
Vesting of early exercised shares | 15,16 | | 35 |
| | 618 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 653 |
|
Issuance of ordinary shares for settlement of restricted share units (RSUs) | 15 | | 291 |
| | — |
| | (291 | ) | | — |
| | — |
| | — |
| | — |
| | — |
|
Shares withheld related to net share settlement of RSUs | | | — |
| | — |
| | (5,395 | ) | | — |
| | — |
| | — |
| | — |
| | (5,395 | ) |
Share-based payment | | | — |
| | — |
| | 75,480 |
| | — |
| | — |
| | — |
| | — |
| | 75,480 |
|
Tax benefit from share plans | 16 | | — |
| | — |
| | 27,747 |
| | — |
| | — |
| | — |
| | — |
| | 27,747 |
|
| | | 3,159 |
| | 435,990 |
| | 97,541 |
| | — |
| | — |
| | — |
| | — |
| | 536,690 |
|
Balance as of June 30, 2016 | | | 21,620 |
| | 441,734 |
| | 244,335 |
| | — |
| | 4,149 |
| | 550 |
| | 19,275 |
| | 731,663 |
|
Net loss | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (42,504 | ) | | (42,504 | ) |
Other comprehensive income (loss), net of tax | | | — |
| | — |
| | — |
| | 2,215 |
| | 140 |
| | (808 | ) | | — |
| | 1,547 |
|
Total comprehensive income (loss) | | | — |
| | — |
| | — |
| | 2,215 |
| | 140 |
| | (808 | ) | | (42,504 | ) | | (40,957 | ) |
Issuance of ordinary shares upon exercise of share options | 15,16 | | 640 |
| | 8,858 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 9,498 |
|
Vesting of early exercised shares | 15,16 | | 15 |
| | 367 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 382 |
|
Issuance of ordinary shares for settlement of RSUs | 15 | | 451 |
| | — |
| | (451 | ) | | — |
| | — |
| | — |
| | — |
| | — |
|
Share-based payment | 16 | | — |
| | — |
| | 137,458 |
| | — |
| | — |
| | — |
| | — |
| | 137,458 |
|
Replacement equity awards related to business combination | 12 | | — |
| | — |
| | 20,193 |
| | — |
| | — |
| | — |
| | — |
| | 20,193 |
|
Tax benefit from share plans | 16 | | — |
| | — |
| | 35,811 |
| | — |
| | — |
| | — |
| | — |
| | 35,811 |
|
| | | 1,106 |
| | 9,225 |
| | 193,011 |
| | — |
| | — |
| | — |
| | — |
| | 203,342 |
|
Balance as of June 30, 2017 | | | 22,726 |
| | 450,959 |
| | 437,346 |
| | 2,215 |
| | 4,289 |
| | (258 | ) | | (23,229 | ) | | 894,048 |
|
Net loss | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (119,341 | ) | | (119,341 | ) |
Other comprehensive income (loss), net of tax | | | — |
| | — |
| | — |
| | (5,839 | ) | | 118 |
| | (586 | ) | | — |
| | (6,307 | ) |
Total comprehensive income (loss) | | | — |
| | — |
| | — |
| | (5,839 | ) | | 118 |
| | (586 | ) | | (119,341 | ) | | (125,648 | ) |
Issuance of ordinary shares upon exercise of share options | | | 243 |
| | 3,761 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 4,004 |
|
Vesting of early exercised shares | 15,16 | | 37 |
| | 46 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 83 |
|
Issuance of ordinary shares for settlement of RSUs | 15,16 | | 525 |
| | — |
| | (525 | ) | | — |
| | — |
| | — |
| | — |
| | — |
|
Share-based payment | | | — |
| | — |
| | 162,873 |
| | — |
| | — |
| | — |
| | — |
| | 162,873 |
|
Tax benefit from share plans | 16 | | — |
| | — |
| | 140 |
| | — |
| | — |
| | — |
| | — |
| | 140 |
|
Reduction in deferred tax assets | 16 | | — |
| | — |
| | (42,734 | ) | | — |
| | — |
| | — |
| | — |
| | (42,734 | ) |
| | | 805 |
| | 3,807 |
| | 119,754 |
| | — |
| | — |
| | — |
| | — |
| | 124,366 |
|
Balance as of June 30, 2018 | | | $ | 23,531 |
| | $ | 454,766 |
| | $ | 557,100 |
| | $ | (3,624 | ) | | $ | 4,407 |
| | $ | (844 | ) | | $ | (142,570 | ) | | 892,766 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Other components of equity | | | | |
| Notes | | Share capital | | Share premium | | Other capital reserves | | Cash flow hedge reserve | | Foreign currency translation reserve | | Investments at fair value through other comprehensive income reserve | | Accumulated deficit | | Total equity |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Balance as of June 30, 2018 | | | $ | 23,531 | | | $ | 454,766 | | | $ | 557,100 | | | $ | (3,624) | | | $ | 4,407 | | | $ | (844) | | | $ | (128,016) | | | $ | 907,320 | |
Net loss | | | — | | | — | | | — | | | — | | | — | | | — | | | (637,621) | | | (637,621) | |
Other comprehensive income (loss), net of tax | | | — | | | — | | | — | | | 1,077 | | | (35) | | | 31,098 | | | — | | | 32,140 | |
Total comprehensive income (loss), net of tax | | | — | | | — | | | — | | | 1,077 | | | (35) | | | 31,098 | | | (637,621) | | | (605,481) | |
Issuance of ordinary shares upon exercise of share options | 17 | | 150 | | | 3,392 | | | — | | | — | | | — | | | — | | | — | | | 3,542 | |
Vesting of early exercised shares | 17 | | 51 | | | 8 | | | — | | | — | | | — | | | — | | | — | | | 59 | |
Issuance of ordinary shares for settlement of restricted share units (RSUs) | 17 | | 467 | | | — | | | (467) | | | — | | | — | | | — | | | — | | | 0 | |
Share-based payment | 7 | | — | | | — | | | 257,777 | | | — | | | — | | | — | | | — | | | 257,777 | |
Replacement equity awards related to business combination | 13 | | — | | | — | | | 1,768 | | | — | | | — | | | — | | | — | | | 1,768 | |
Tax benefit from share plans | | | — | | | — | | | 482 | | | — | | | — | | | — | | | — | | | 482 | |
| | | 668 | | | 3,400 | | | 259,560 | | | — | | | — | | | — | | | — | | | 263,628 | |
Balance as of June 30, 2019 | | | $ | 24,199 | | | $ | 458,166 | | | $ | 816,660 | | | $ | (2,547) | | | $ | 4,372 | | | $ | 30,254 | | | $ | (765,637) | | | $ | 565,467 | |
Net loss | | | — | | | — | | | — | | | — | | | — | | | — | | | (350,654) | | | (350,654) | |
Other comprehensive income (loss), net of tax | | | — | | | — | | | — | | | 8,714 | | | (613) | | | 35,964 | | | — | | | 44,065 | |
Total comprehensive income (loss), net of tax | | | — | | | — | | | — | | | 8,714 | | | (613) | | | 35,964 | | | (350,654) | | | (306,589) | |
Issuance of ordinary shares upon exercise of share options | 17 | | 76 | | | 1,726 | | | — | | | — | | | — | | | — | | | — | | | 1,802 | |
Vesting of early exercised shares | 17 | | 64 | | | — | | | (32) | | | — | | | — | | | — | | | — | | | 32 | |
Issuance of ordinary shares for settlement of restricted share units | 17 | | 405 | | | — | | | (405) | | | — | | | — | | | — | | | — | | | 0 | |
Share-based payment | 7 | | — | | | — | | | 313,706 | | | — | | | — | | | — | | | — | | | 313,706 | |
Replacement equity awards related to business combination | 13 | | — | | | — | | | 552 | | | — | | | — | | | — | | | — | | | 552 | |
Tax benefit from share plans | | | — | | | — | | | 437 | | | — | | | — | | | — | | | — | | | 437 | |
Cumulative effect of applying new accounting pronouncement | | | — | | | — | | | — | | | — | | | — | | | — | | | (101) | | | (101) | |
| | | 545 | | | 1,726 | | | 314,258 | | | — | | | — | | | — | | | (101) | | | 316,428 | |
Balance as of June 30, 2020 | | | $ | 24,744 | | | $ | 459,892 | | | $ | 1,130,918 | | | $ | 6,167 | | | $ | 3,759 | | | $ | 66,218 | | | $ | (1,116,392) | | | $ | 575,306 | |
Net loss | | | — | | — | | — | | — | | — | | — | | (696,315) | | (696,315) |
Other comprehensive income (loss), net of tax | | | — | | | — | | | — | | | (9,102) | | 4,916 | | 32,874 | | — | | 28,688 |
Total comprehensive income (loss), net of tax | | | — | | — | | — | | (9,102) | | 4,916 | | 32,874 | | (696,315) | | (667,627) |
Issuance of ordinary shares upon exercise of share options | | | 39 | | 1,124 | | — | | — | | — | | — | | — | | 1,163 |
Vesting of early exercised shares | | | 34 | | — | | (34) | | — | | — | | — | | — | | 0 |
Issuance of ordinary shares for settlement of restricted share units | | | 347 | | — | | (347) | | — | | — | | — | | — | | 0 |
Share-based payment | | | — | | — | | 385,918 | | — | | — | | — | | — | | 385,918 |
Replacement equity awards related to business combination | | | — | | — | | 523 | | — | | — | | — | | — | | 523 |
Tax expense from share plans | | | — | | — | | (369) | | | — | | — | | — | | — | | (369) |
| | | 420 | | 1,124 | | 385,691 | | — | | — | | — | | — | | 387,235 |
Balance as of June 30, 2021 | | | $ | 25,164 | | | $ | 461,016 | | | $ | 1,516,609 | | | $ | (2,935) | | | $ | 8,675 | | | $ | 99,092 | | | $ | (1,812,707) | | | $ | 294,914 | |
The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. $ in thousands)
|
| | | | | | | | | | | | | |
| | | Fiscal Year Ended June 30, |
| Notes | | 2018 | | 2017 | | 2016 |
Operating activities | | | |
| | |
| | |
Loss before income tax benefit (expense) | | | $ | (65,834 | ) | | $ | (59,652 | ) | | $ | (4,907 | ) |
Adjustments to reconcile loss before income tax benefit (expense) to net cash provided by operating activities: | | | |
| | |
| | |
Depreciation and amortization | 10, 11 | | 79,435 |
| | 61,546 |
| | 21,926 |
|
Net loss (gain) on sale of investments and other assets | | | (1,163 | ) | | (397 | ) | | 165 |
|
Net unrealized foreign currency loss (gain) | | | (188 | ) | | 93 |
| | 152 |
|
Share-based payment expense | | | 162,873 |
| | 137,448 |
| | 75,480 |
|
Net unrealized loss on exchange derivative and capped calls | 14 | | 12,414 |
| | — |
| | — |
|
Amortization of debt discount and issuance costs | | | 7,478 |
| | — |
| | — |
|
Interest income | | | (9,877 | ) | | (4,851 | ) | | (2,116 | ) |
Interest expense | | | 1,113 |
| | — |
| | — |
|
Changes in assets and liabilities: | | | | | | | |
|
Trade receivables | | | (19,635 | ) | | (10,208 | ) | | (3,487 | ) |
Prepaid expenses and other assets | | | (7,293 | ) | | (5,647 | ) | | (4,203 | ) |
Trade and other payables, provisions and other non-current liabilities | | | 43,477 |
| | 10,947 |
| | 11,622 |
|
Deferred revenue | | | 104,223 |
| | 72,604 |
| | 44,503 |
|
Interest received | | | 8,679 |
| | 6,540 |
| | 2,839 |
|
Income tax paid, net of refunds | | | (4,246 | ) | | (9,042 | ) | | (12,432 | ) |
Net cash provided by operating activities | | | 311,456 |
| | 199,381 |
| | 129,542 |
|
Investing activities | | | |
| | |
| | |
Business combinations, net of cash acquired | 12 | | — |
| | (381,090 | ) | | — |
|
Purchases of property and equipment | | | (30,209 | ) | | (15,129 | ) | | (34,213 | ) |
Purchases of intangible assets | | | — |
| | (925 | ) | | — |
|
Proceeds from sale of other assets | | | 2,775 |
| | 342 |
| | — |
|
Purchases of investments | | | (347,822 | ) | | (423,540 | ) | | (569,067 | ) |
Proceeds from maturities of investments | | | 206,119 |
| | 111,403 |
| | 65,294 |
|
Proceeds from sales of investments | | | 123,862 |
| | 488,672 |
| | 49,501 |
|
Increase in restricted cash | | | (3,131 | ) | | (3,371 | ) | | — |
|
Payment of deferred consideration | | | (3,290 | ) | | (935 | ) | | (1,025 | ) |
Net cash used in investing activities | | | (51,696 | ) | | (224,573 | ) | | (489,510 | ) |
Financing activities | | | |
| | |
| | |
Proceeds from issuance of ordinary shares upon initial public offering, net of discount and issuance costs | | | — |
| | — |
| | 431,447 |
|
Proceeds from exercise of share options | | | 3,995 |
| | 9,438 |
| | 6,732 |
|
Employee payroll taxes paid related to net share settlement of equity awards | | | — |
| | — |
| | (5,395 | ) |
Proceeds from issuance of exchangeable senior notes, net of discount and issuance costs | 14 | | 990,494 |
| | — |
| | — |
|
Purchase of capped calls | 14 | | (87,700 | ) | | — |
| | — |
|
Net cash provided by financing activities | | | 906,789 |
| | 9,438 |
| | 432,784 |
|
Effect of exchange rate changes on cash and cash equivalents | | | (630 | ) | | 465 |
| | (201 | ) |
Net increase (decrease) in cash and cash equivalents | | | 1,165,919 |
| | (15,289 | ) | | 72,615 |
|
Cash and cash equivalents at beginning of year | | | 244,420 |
| | 259,709 |
| | 187,094 |
|
Cash and cash equivalents at end of year | | | $ | 1,410,339 |
| | $ | 244,420 |
| | $ | 259,709 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Fiscal Year Ended June 30, |
| Notes | | 2021 | | 2020 | | 2019 |
Operating activities | | | | | | | |
Loss before income tax expense | | | $ | (634,664) | | | $ | (346,209) | | | $ | (605,556) | |
Adjustments to reconcile loss before income tax expense to net cash provided by operating activities: | | | | | | | |
Depreciation and amortization | 10, 11 | | 55,296 | | | 62,271 | | | 70,248 | |
Depreciation of right-of-use assets | 12 | | 37,552 | | | 35,127 | | | 0 | |
Share-based payment expense | 7 | | 385,732 | | | 313,395 | | | 257,762 | |
Net loss on exchange derivative and capped call transactions | 6 | | 616,446 | | | 335,953 | | | 533,908 | |
Amortization of debt discount and issuance cost | 16 | | 109,548 | | | 35,608 | | | 33,939 | |
Interest income | | | (7,174) | | | (27,801) | | | (33,500) | |
Interest expense | | | 13,164 | | | 14,002 | | | 6,302 | |
Net unrealized foreign currency loss (gain) | | | 7,650 | | | (1,503) | | | (770) | |
Impairment of lease-related assets | 7 | | 7,435 | | | 0 | | | 0 | |
Net unrealized loss on investments | 5 | | 2,000 | | | 0 | | | 0 | |
Loss (gain) on sale of investments, disposal of assets and other | | | 1,144 | | | (993) | | | (2,357) | |
Changes in assets and liabilities: | | | | | | | |
Trade receivables | | | (61,256) | | | (29,440) | | | (30,211) | |
Prepaid expenses and other assets | | | (13,054) | | | (10,608) | | | 1,085 | |
Trade and other payables, provisions and other non-current liabilities | | | 64,899 | | | 51,532 | | | 75,624 | |
Deferred revenue | 15 | | 294,371 | | | 131,535 | | | 122,502 | |
Interest received | | | 12,513 | | | 29,217 | | | 30,328 | |
Tax refunds received (income tax paid), net | | | (50,272) | | | (17,876) | | | 7,038 | |
Net cash provided by operating activities | | | 841,330 | | | 574,210 | | | 466,342 | |
Investing activities | | | | | | | |
Business combinations, net of cash acquired | 13 | | (91,584) | | | (53,212) | | | (418,595) | |
Purchases of intangible assets | | | (1,800) | | | 0 | | | (2,110) | |
Purchases of property and equipment | | | (31,520) | | | (35,709) | | | (44,192) | |
Proceeds from sales of property, equipment and intangible assets | | | 0 | | | 0 | | | 3,721 | |
Purchases of investments | | | (119,431) | | | (985,931) | | | (648,036) | |
Proceeds from maturities of investments | | | 454,996 | | | 513,268 | | | 485,021 | |
Proceeds from sales of investments | | | 48,786 | | | 245,498 | | | 20,545 | |
Increase in restricted cash | | | (2,618) | | | (2,085) | | | (552) | |
Payment of deferred consideration | | | (185) | | | (760) | | | 0 | |
Net cash provided by (used in) investing activities | | | 256,644 | | | (318,931) | | | (604,198) | |
Financing activities | | | | | | | |
Proceeds from exercise of share options | | | 1,163 | | | 1,802 | | | 3,542 | |
Payment of issuance costs for debt | 16 | | (4,445) | | | 0 | | | (410) | |
Payments of lease obligations | 12 | | (44,874) | | | (38,125) | | | 0 | |
Interest paid | | | (6,498) | | | (6,250) | | | (6,319) | |
Repayment of exchangeable senior notes | 16 | | (1,803,244) | | | (2) | | | 0 | |
Proceeds from settlement of capped call transactions | 16 | | 203,093 | | | 0 | | | 0 | |
Net cash used in financing activities | | | (1,654,805) | | | (42,575) | | | (3,187) | |
Effect of exchange rate changes on cash and cash equivalents | | | 5,406 | | | (1,176) | | | (855) | |
Net increase (decrease) in cash and cash equivalents | | | (551,425) | | | 211,528 | | | (141,898) | |
Cash and cash equivalents at beginning of period | | | 1,479,969 | | | 1,268,441 | | | 1,410,339 | |
Cash and cash equivalents included in assets held for sale | | | (9,317) | | | 0 | | | 0 | |
Cash and cash equivalents at end of period | | | $ | 919,227 | | | $ | 1,479,969 | | | $ | 1,268,441 | |
The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.
ATLASSIAN CORPORATION PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate Information
Atlassian Corporation Plc (the “Company”) is a public company limited by shares, incorporated and registered in the United Kingdom. The registered office of the Company and its subsidiaries (collectively, “Atlassian,” the “Group,” “our,” or “we”) is located at Exchange House, Primrose Street, London EC2A 2EG, c/o Herbert Smith Freehills LLP.
We design, develop, license and maintain software and provision software hosting services to help teams organize, discuss and complete their work. Our primary products include Jira for team planningSoftware, targeting software teams, and project management,Jira Work Management, targeting other business teams (collectively, “Jira”), Confluence for team content creation and sharing, Trello for capturing and adding structure to fluid, fast-forming work for teams, Jira Service Management for team service, management and support applications, Jira Align for enterprise agile planning, Bitbucket for team code sharing and management, and Jira Service DeskAtlassian Access for team serviceenterprise-grade security and support applications.centralized administration.
The accompanying consolidated financial statements of the Company and its subsidiariesGroup for the year ended June 30, 20182021 were authorized for issue in accordance with a resolution of the Boardboard of Directorsdirectors on August 27, 2018.13, 2021.
2. Summary of Significant Accounting Policies
The significant accounting policies adopted in the preparation of these consolidated financial statements are set out below. These accounting policies have been consistently applied to all years presented, unless otherwise stated.
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in applying the Group's accounting policies. The areas that require a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 3, “Critical Accounting Estimates and Judgments.”
Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”), which includes all standards issued by the International Accounting Standards Board (“IASB”) and related interpretations issued by the IFRS Interpretations Committee. The consolidated financial statements have been prepared on a historical cost basis, except for debt and equity financial assets and liabilitiesderivative financial instruments that have been measured at amortized cost, fair value through other comprehensive income or profit or loss.value.
All amounts included in the consolidated financial statements are reported in thousands of U.S. dollars (U.S. $ in thousands) except where otherwise stated. Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
Use of estimates
The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgments and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgments and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which forms the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions and may materially affect the financial results or the financial position reported in future periods. Significant estimates, assumptions and judgments made by management include revenue recognition and impairment of non-financial assets (see Note 3, “Critical Accounting Estimates and Judgments”). Other estimates, assumptions and judgments made by management include business combinations, fair value measurement of financial instruments and accounting for income taxes.
In January 2020, the World Health Organization declared a novel coronavirus (“COVID-19”) a Public Health Emergency of International Concern, and a pandemic in March 2020. The impact of COVID-19 continues to unfold and the extent of the impact will depend on a number of factors, including the duration and spread of the outbreak, its severity, the actions taken by governments and authorities to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. The Group operates asconsidered the impact of COVID-19 on the assumptions and estimates used, including the allowance for credit losses for accounts receivable, the credit worthiness of customers entering into revenue arrangements, our impairment assessment of assets, the fair values of our financial instruments, and income taxes, which require increased judgement and carry a single cash-generating unit (“CGU”) and as a single operating segment, which is also its reporting segment. An operating segment is defined as a componenthigher degree of an entity for which discrete financial information is available and whose operating results are regularly reviewed byestimate uncertainty. The Group determined that there were no material adverse impacts on the chief operating decision maker. The Group's chief operating decision makers are the Group's Co-Chief Executive Officers, who review operating results to make decisions about allocating resources and assessing performance based on consolidated financial information. Accordingly,statements for the Group has determined it operates fiscal years ended June 30, 2021 and 2020. As events continue to evolve and additional information becomes available, the Group’s assumptions and estimates may change in one operating segment.
Initial public offering
In December 2015, we completed our initial public offering (“IPO”) in which we issued and sold 22 million Class A ordinary shares at a public offering price of $21.00 per share. We received net proceeds of $431.4 million after deducting underwriting discounts and commissions and other offering expenses. Upon the closing of our IPO, all then-outstanding Series A preference shares automatically converted into Class A ordinary shares, all then-outstanding restricted shares automatically converted into Class A ordinary shares and all then-outstanding Series B preference shares automatically converted into Class B ordinary shares.
future periods.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilitiesfinancial positions and the results of operations of the Group. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. Intercompany transactions, balances and unrealized gains on transactions between Group companies are eliminated.
Segment
The Group operates as a single operating segment, which is also its reporting segment. An operating segment is defined as a component of an entity for which discrete financial information is available and whose results of operations are regularly reviewed by the chief operating decision maker. The Group's chief operating decision makers are the Group's Co-Chief Executive Officers, who review results of operations to make decisions about allocating resources and assessing performance based on consolidated financial information. Accordingly, the Group has determined it operates in 1 operating segment.
Foreign currency translation
The Group's consolidated financial statements are presented using the U.S. dollar, which is the Company's functional currency. The Group determinesSome of the Group’s foreign subsidiaries’ functional currency for each entity in accordance with International Accounting Standard (“IAS”) 21, The Effects of Changes in Foreign Exchange Rates, based onis the currency of the primary economic environment in which each subsidiary operates, and items included inlocal currency. We translate the financial statements of such entity are measuredthese subsidiaries to U.S. dollars using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency spotmonth-end exchange rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities, denominated inand average exchange rates for revenue, costs, and expenses. Adjustments resulting from translating foreign currencies are translated at the functional currency spot rate of exchange at each reporting date.
All differences arising on settlement or translation of monetary itemsfinancial statements into U.S. dollars are recorded in other non-operating income (expense), netas a separate component on the consolidated statements of operations, with the exceptioncomprehensive loss.
Foreign currency transaction gains and losses from re-measurement of monetary items that are designated as part of the Group's net investment in foreign operations. These differences on translation of the foreign operations account are recognized in other comprehensive income until the net investment is disposed.
Certain non-monetary items, such as property and equipment, which are measured at historical cost in a foreign currency, are translated using the exchange rates as of the dates of the initial transactions. Certain non-monetary items initially measured at fair value in a foreign currency, such as intangible assets, are translated using the exchange rates as of the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognized in other comprehensive income (or profit or loss are also recognized in other comprehensive income or profit or loss, respectively).
Group companies
Upon consolidation, assets and liabilities of foreign operationsthat are translated into U.S. dollars atdenominated in currencies other than the rate of exchange prevailing at the reporting date and their income statementsrespective functional currencies are translated at average exchange rates. The exchange differences arising on translation for consolidation are recognizedincluded in other comprehensive income.
Any goodwill arising onnon-operating expense, net in the acquisitionconsolidated statements of a foreign operation and any fair value adjustments tooperations for the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at each reporting date.period.
Revenue recognition
The Group primarily derives revenues from subscription, maintenance, perpetual license,Policies, Estimates and trainingJudgments
Revenues are generally recognized upon the transfer of control of promised products or services provided to our customers, reflecting the amount of consideration we expect to receive for those products or services. We enter into contracts that can include various combinations of products and other services.
services, which are generally capable of being distinct and accounted for as separate performance obligations.Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. The revenue recognition policy is consistent for sales generated directly with customers and sales generated indirectly through solution partners and resellers.
Revenues are recognized upon the application of the following steps:
1.Identification of the contract or contracts with a customer;
2.Identification of the performance obligations in linethe contract;
3.Determination of the transaction price;
4.Allocation of the transaction price to the performance obligations in the contract; and
5.Recognition of revenue when, or as, the performance obligation is satisfied.
The timing of revenue recognition may differ from the timing of billing our customers. We receive payments from customers based on a billing schedule as established in our contracts. Contract assets are recognized when performance is completed in advance of scheduled billings. Deferred revenue is recognized when billings are in advance of performance under the contract. Our revenue arrangements include standard warranty provisions that our products and services will perform and operate in all material respects with the requirementsapplicable published specifications, the financial impacts of which have historically been, and are expected to continue to be insignificant. Our contracts do not include a significant financing component.
Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require judgment.
We allocate the transaction price for each contract to each performance obligation based on the relative standalone selling price (“SSP”) for each performance obligation. We use judgment in determining the SSP for products and services. We typically determine an SSP range for our products and services which is reassessed on a periodic basis or when facts and circumstances change. For all performance obligations other than perpetual and term licenses, we are able to determine SSP based on the observable prices of products or services sold separately in comparable circumstances to similar customers. In instances where performance obligations do not have observable standalone sales, we utilize available information that may include market conditions, pricing strategies, the economic life of the software, and other observable inputs to estimate the price we would charge if the products and services were sold separately.
Our products are generally sold with a right of return, we may provide other credits or incentives, and in certain instances we estimate customer usage of our services, which are accounted for as stated in IAS 18, Revenue,variable consideration when evidence of an arrangement exists, delivery has occurred, the risks and rewards of ownership have been transferred to the customer,determining the amount of revenue to recognize. Returns and associated costs can be measured reliably,credits are estimated at contract inception and collection of the related receivable is probable. In the absence of industry-specific software revenue recognition guidance under IFRS, the Group refers to GAAP when establishing policies related to revenue recognition. The Group's revenue recognition policy considers the guidance provided by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 985-605, Software Revenue Recognition, and FASB ASC Subtopic 605-25, Multiple-Element Arrangements, where applicable, as authorized by IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.
If,updated at the outsetend of an arrangement,each reporting period if additional information becomes available. Variable consideration was not material for the periods presented.
Recognition of revenue cannot be measured reliably, revenue recognition is deferred until the arrangement fee becomes due and payable by the customer. Additionally, if, at the outset of an arrangement, it is determined that collectability is not probable, revenue recognition is deferred until the earlier of when collectability becomes probable or payment is received. The Group enters into arrangements directly
Revenue recognized from contracts with end users as well as indirectly through value-added resellers (e.g., “channel partners”). Revenue recognition for indirect customers is disaggregated into categories that depict how the same as for direct customers as the termsnature, amount, timing and uncertainty of salerevenue and cash flows are substantially the same.affected by economic factors. We report our revenues in 4 categories: (i) subscription, (ii) maintenance, (iii) perpetual license, and (iv) other. In addition, we present revenue by geographic region in Note 15, “Revenue.”
Subscription revenuerevenues
Subscription revenue representsrevenues consist primarily of fees earned from subscription-based arrangements for: (1) cloud-based services for providing customers the right to use our software in a cloud-based-infrastructure provided by the Group, where the customer does not have the right to terminate the hosting contract and take possession of the software without significant penalty; and (2)that we provide. We also sell on-premises term license agreements for our data center products, which are software licensed for a specified period, in which fees forand includes support and maintenance areservice that is bundled with the license fee overfor the entire term of the license period. Subscription-basedSubscription revenues are driven primarily by the number and size of active licenses, the type of product and the price of the licenses. Our subscription-based arrangements generally have a contractual term of one to twelve months. Subscriptionmonths, with a majority being one month. For cloud-based services, subscription revenue is recognized ratably as the services are performed, commencing with the date the service is made available to customerscustomers. For on-premises term-based licenses, we recognize revenue upfront for the portion that relates to the delivery of the term license and all otherthe support and related revenue recognition criteria have been satisfied.is recognized ratably as the services are delivered over the term of the arrangement.
Maintenance revenuerevenues
Maintenance revenue representsrevenues represent fees earned from providing customers unspecified future updates, upgrades and enhancements and technical product support for perpetual license products on an if and when available basis. The first year of maintenance is purchased concurrently with the purchase of perpetual licenses, and subsequent renewals extend for an additional year in most cases. Maintenance services are priced as a percentage of the total product sale, and a substantial majority of customers elect to renew software support contracts annually at standard list maintenance renewal pricing. Maintenance revenue is recognized ratably over the term of the support period.
Perpetual license revenue
Perpetual license revenue representsrevenues
Perpetual license revenues represent fees earned from the license of software to customers for use on the customer's premises.customer’s premises other than data center products. Software is licensed on a perpetual basis, subjectbasis. Perpetual license revenues consist of the revenues recognized from sales of licenses to a standard licensing agreement. The Group recognizesnew customers and additional licenses to existing customers. We typically recognize revenue on the license portion of perpetual license arrangements ononce the datecustomer obtains control of productthe license, which is generally upon delivery in substantially all situations.
Other revenueof the license.
Other revenues
Other revenues primarily include fees received for sales of third-party apps in the Group's online marketplace, Atlassian Marketplace,Marketplace. Technical account management, consulting and for training services.services are also included in other revenues. Revenue from the sale of third-party vendor productsapps via Atlassian Marketplace is recognized net of the vendor liability portion as the Group functions as an agent in the relationship. The Group's revenue portion is recognized onat the date of product delivery given that all of our obligations have been met at that time and on a net basis as we function as the Group has no future obligations.agent in the relationship. Revenue from technical account management is recognized over the time period that the customer has access to the service. Revenue from consulting and training is recognized over time as deliveredthe services are performed.
Cash and cash equivalents
The Group considers all highly liquid investments purchased with an original maturity of three months or less and subject to an insignificant risk of changes in value to be cash equivalents. Cash equivalents also include amounts due from third-party credit card processors as they are both short-term and highly liquid in nature and are typically converted to cash within three days of the sales transaction.
Current versus non-current classification
The Group presents assets and liabilities in the consolidated statements of financial position based on current or non-current classification. An asset is current when it is: expected to be realized or intended to be sold or consumed in the normal operating cycle; expected to be realized within twelve months after the reporting period; or cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when it is due to be settled within twelve months after the reporting period. The Group classifies all other liabilities as non-current.
Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Our financial assets include trade receivables and contract assets, debt and equity investments and derivative financial instruments. We generally classify financial assets into the following categories: subsequently measured at amortized cost, at fair value through other comprehensive income, and at fair value through profit or loss depending on the contractual cash flows of and our business model for holding the respective asset. Financial assets that are measured at fair value on a recurring basis include debt and equity investments and derivative financial instruments. Trade receivables and contract assets are measured at amortized cost. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date.
Our financial liabilities include trade and other payables, the Notes and derivative financial instruments. We generally classify financial liabilities as subsequently measured at amortized cost and at fair value through profit or loss. Financial liabilities that are measured at fair value are the derivative financial instruments. Trade and other payables are measured at amortized cost and the Notes are measured at amortized cost using the effective interest rate (“EIR”) method.
Debt investments
The Group’s marketable debt securities were classified as instruments at fair value through other comprehensive income. These debt securities give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After consideration of our objectives, as well as our liquidity requirements, we may sell these debt securities prior to their stated maturities. As we view these securities as available for use to support current operations, we classify highly liquid securities with maturities beyond 12 months as current assets under the caption short-term investments on the consolidated statements of financial position. Fair value changes of marketable debt securities that have been recognized in other comprehensive income are reclassified to profit or loss upon sale of the financial asset.
The Group’s non-marketable debt securities are classified as instruments at fair value through profit or loss. The non-marketable debt securities are convertible notes issued by private companies without quoted market prices. To estimate the fair value of the non-marketable debt securities, we use the income approach utilizing our estimates of timing, probability, and amount of cash flows associated with liquidation of the securities. Financial information of private companies may not be available and consequently we will estimate the fair value based on the best available information at the measurement date.
Equity investments
We invest in equity securities of public and private companies, in which the Company does not have a controlling interest or significant influence, to promote business and strategic objectives. The Group has irrevocably designated the equity investments as instruments at fair value through other comprehensive income. Changes in fair value of these equity investments are recognized in other comprehensive income and never reclassified to profit or loss, even if the asset is impaired, sold or otherwise derecognized.
Marketable equity securities are measured at fair value using readily determinable market value. Non-marketable equity securities are measured at fair value using market data, such as publicly available financing round valuations. Judgment is required particularly in estimating the fair values of non-marketable equity securities.
Exchangeable senior notes
The Notes are classified as financial liabilities at amortized cost and measured using the EIR method. Amortized cost is calculated by taking into account any discount and issuance cost that are an integral part of the EIR. The EIR amortization is included as finance costs in the consolidated statements of operations.
Derivative financial instruments
The Group enters into foreign exchange forward contracts with the objective to mitigate certain currency risks associated with cost of revenues and operating expenses denominated in foreign currencies. These foreign exchange forward contracts are designated as cash flow hedges. The Group also enters into foreign exchange forward contracts to hedge a portion of certain foreign currency denominated as monetary assets and liabilities to reduce the risk that such foreign currency will be adversely affected by changes in exchange rates. The Group uses interest rate swaps to hedge the variability of cash flows in the interest payments associated with its variable-rate debt due to changes in the LIBOR-based floating interest rate. The interest rate swaps are designated as cash flow hedges and involve interest obligations for U.S. dollar-denominated amounts. Hedging derivative instruments are recognized as either assets or liabilities and are measured at fair value.
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.
The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
•There is ‘an economic relationship’ between the hedged item and the hedging instrument;
•The effect of credit risk does not ‘dominate the value changes’ that result from that economic relationship; and
•The hedge ratio of the hedging relationship is the same as the ratio resulting from the quantity of the hedged item and the quantity of the hedging instrument.
For derivative instruments designated as cash flow hedges, the effective portion of the gains (losses) on the derivatives is initially reported as a component of other comprehensive income and is subsequently recognized in earnings when the hedged exposure is recognized in earnings. Amounts reclassified from cash flow hedge reserve to profit or loss are recorded to the same functional expense as the hedged item or items. Gains (losses) on derivatives representing hedge ineffectiveness are recognized in earnings. For derivative instruments that are not designated as hedges, gains (losses) from changes in fair values are primarily recognized in other income (expense), net.
The Group has other derivatives such as embedded exchange feature of the Notes and capped call transactions (“Exchange and Capped Call Derivatives”). Please see Note 16, “Debt” for details. The Exchange and Capped Call Derivatives are measured at fair value at each reporting date and gains (losses) from changes in fair values are recognized in other non-operating expense, net. The Group used Black-Scholes option pricing models to fair value the exchange feature of the Notes. Certain inputs used in the model such as stock price volatility requires judgment. The Capped Call Derivatives’ fair value was obtained from counterparty banks.
Impairment of financial assets
The Group measures loss allowances on debt investments at fair value through other comprehensive income at an amount equal to lifetime expected credit losses (“ECLs”), except for securities that are determined to have low credit risk at the reporting date and other securities and bank balances for which credit risk has not increased significantly since initial recognition, which are measured as 12-month ECLs. ECLs are a probability-weighted estimate of the difference in the present value of contractual cash flows and the present value of cash flows that the Group expects to receive. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. 12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months following the reporting date.
For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. The Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
Derecognition
Financial assets are derecognized when the rights to receive training expire.cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
Multiple-element arrangementsFinancial liabilities are derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the consolidated statements of operations.
ManyFair value measurement
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, we consider the principal or most advantageous market in which we would transact, as well as assumptions that market participants would use when pricing the asset or liability.
The three levels of inputs that may be used to measure fair value are:
•Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
•Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
•Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
The fair value of financial instruments traded in active markets is included in Level 1.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to measure the fair value an instrument are observable, the instrument is included in Level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Group's assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and considers factors specific to the asset or liability.
Disposal group held for sale
The Group classifies the disposal group as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. A disposal group is a group of assets and liabilities which the Group intends to dispose of in a single transaction. The disposal group classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of the asset group, excluding finance costs and income tax expense.
The criteria for held for sale classification is regarded as met only when the sale is highly probable, and the disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the plan to sell the asset group and the sale expected to be completed within one year from the date of the classification.
Assets classified as held for sale are presented separately as current items in the consolidated statement of financial position.
Property and equipment
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method to allocate the cost over the estimated useful lives or, in the case of leasehold improvements and certain leased equipment, the remaining lease term if shorter. The estimated useful lives for each asset class are as follows:
| | | | | |
Equipment | 1 - 3 years |
Computer hardware and computer-related software | 1 - 5 years |
Furniture and fittings | 4 - 10 years |
Leasehold improvements | Shorter of the remaining lease term or 7 years |
Business combinations
We include the results of operations of the businesses that we acquire as of the acquisition date. We record the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.
We use our best estimates and assumptions to accurately assign fair value to the intangible assets acquired at the acquisition date. The estimation is primarily due to the judgmental nature of the inputs to the valuation models used to measure the fair value of these intangible assets, as well as the sensitivity of the respective fair values to the underlying significant assumptions. Our estimates are inherently uncertain and subject to refinement. We use a discounted cash flow method of the income approach to measure the fair value of these intangible assets. Assumptions used to estimate the fair value of the intangible assets include revenue growth rates, technology migration curves, customer attrition rates and discount rates. These assumptions are forward-looking and could be affected by future economic and market conditions.
During the measurement period, which may be up to one year from the date of acquisition, the Group may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed based on additional information obtained affecting the fair value of those assets and liabilities, with the corresponding offset to goodwill. In addition, uncertain tax positions are initially established in connection with a business combination as of the acquisition date. The Group continues to collect information and reevaluates these provisional estimates and assumptions as deemed reasonable by management. The Group records any adjustments to these provisional estimates and assumptions against goodwill provided they arise within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations. Please refer to Note 13, “Business combinations,” for details.
Goodwill
Goodwill is the excess of the aggregate of the consideration transferred over the identifiable assets acquired and liabilities assumed. Goodwill is tested for impairment annually during the fourth quarter of the Group's arrangements include purchasesfiscal year and when circumstances indicate that the carrying value may be impaired. The Group performs its goodwill impairment test at the level of both software related products and services. For these software related multiple-element arrangements,its operating segment as there are no lower levels within the Group appliesat which goodwill is monitored. Impairment is determined for goodwill by assessing the residual methodrecoverable amount of the operating segment. When the recoverable amount of the operating segment is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.
Intangible assets
We acquire intangible assets separately or in connection with business combinations. Intangible assets are measured at cost initially. All of our intangible assets are with finite lives and are amortized over their estimated useful life using the straight-line method. The amortization expense on intangible assets is recognized in the consolidated statements of operations in the expense category, consistent with the function of the intangible asset.
The estimated useful lives for each intangible asset class are as follows: | | | | | |
Patents, trademarks and other rights | 5 - 12 years |
Customer relationships | 3 - 10 years |
Acquired developed technology | 4 - 6 years |
Intangible assets with finite lives are assessed for impairment whenever there is an indication that the intangible asset may be impaired. When the recoverable amount of an intangible asset is less than its carrying amount, an impairment loss is recognized.
Impairment of non-financial assets
At the end of each reporting period, the Group assesses whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. An asset’s recoverable amount is the higher of an asset’s or cash generating unit (“CGU”)’s fair value less costs of disposal and its value in use. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.
Share-based payments
Share-based payments cover equity-settled awards including stock options, restricted share units (“RSUs”) and restricted shares issued to our employees in exchange of their service. The cost of the equity-settled awards is determined by the fair value at the grant date. The fair value of RSUs or restricted shares is equal to the market value of our common stock on the grant date. The Group estimates the fair value of stock options using the Black-Scholes option pricing model. This option-pricing model requires the input of assumptions, including the awards’ expected life and the price volatility of the underlying stock.
We recognize equity-settled awards cost, net of estimated forfeitures, over the awards’ requisite service period on a graded-vesting basis. No compensation cost is recognized for awards that do not ultimately vest because service conditions have not been met and we estimate forfeiture based on historical experience. The respective expenses are recognized as employee benefits and classified in our consolidated statements of operations according to the activities that the employees perform.
The Group also issues replacement awards in connection with business combinations in exchange for awards held by employees of the acquiree. We recognize the portion of the acquiree award that is attributable to pre-combination service as purchase consideration. The portion of the replacement award attributable to post-combination service is recognized as employee benefits and classified in our consolidated statements of operations according to the activities that the employees perform.
Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
Leases
Group as lessee
We determine if an arrangement is a lease at inception. Our lease agreements generally contain lease and non-lease components. Lease payments under our lease arrangements are primarily fixed. Non-lease components primarily include payments for maintenance and utilities and are expensed as incurred.
Lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the amountpresent value of software license revenuethe future lease payments is our incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated to be recognized. The Group first allocates fair valueapproximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Our lease terms include periods under options to elements of a software related multiple-element arrangement based on its fair value as determined by vendor specific objective evidence (“VSOE”), with any remaining amount allocated toextend or terminate the software license. The Group determines VSOE based on its historical pricing for a specific product or servicelease when sold separatelyit is reasonably certain that we will exercise that option. We generally use the base, non-cancelable, lease term when determining lease liabilities. We reassess the lease term if and when a substantial majoritysignificant event or change in circumstances occurs within the control of the selling pricesGroup.
Right-of-use assets are recognized at cost at the lease commencement date. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct cost incurred, any prepaid lease payments less lease incentives and an estimate of restoration cost. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
We apply the short-term lease recognition exemption for these services fall withinour short-term leases and leases of low-value assets. Short-term leases are leases with a narrow range.lease term of 12 months or less. Low-value assets are primarily comprised of office equipment. Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis over the lease term.
Cloud-based arrangements may be purchased alongside other servicesResearch and development
Research and development expense includes the employee and hardware costs incurred for the development of new products, enhancements and updates of existing products and quality assurance activities. These costs incurred for the development of computer software are expensed until the point that are intended to be used withtechnological feasibility has been established, which for our products, is typically reached shortly before the cloud offering. Such arrangements are considered to be non-software multiple-element arrangements. The Group accordingly allocates revenue to each element considered to berelease of such products and as a separate unit of accounting using the relative selling prices of each unit.
The relative selling price for each element is based upon the following selling price hierarchy: VSOE if available, third-party evidence (“TPE”) if VSOE is not available, or estimated selling price if neither VSOE nor TPE are available. Historically,result, the Group has established VSOE for all non-software elements using the same methodology applied to software-related elements, as a substantial majority of the selling prices for these elements fall within a narrow range when sold separately.
If the Group enters into an arrangement with both softwarenot capitalized any research and non-software deliverables, the Group will first allocate the total arrangement consideration based on the relative selling prices of the software group of elements as a whole and the non-software elements. The Group then further allocates consideration within the software group in accordance with the residual method described above.
The revenue amount allocated to each element is recognized when the revenue recognition criteria described above have been met for the respective element.development costs.
Taxation
Current tax
Current income tax assets and/or liabilities comprise amounts expected to be recovered or paid to Her Majesty's Revenue & Customs, the Australian Taxation Office, the United States Internal Revenue Service and other fiscal authorities relating to the current or prior reporting periods, which are unpaid at each reporting date. Current tax is payable on taxable income that differs from the consolidated statements of operations in the financial statements due to permanent and temporary timing differences. The calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
The Group uses the liability method of accounting for income taxes. Deferred income tax assets and liabilities represent temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and their corresponding tax basis used in the computation of taxable income. Deferred tax however is not recognized on the initial recognition of goodwill, or the initial recognition of an asset or liability (other than in a business combination) in a transaction that affects neither tax nor accounting income.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax liabilities are generally provided for in full.
Deferred tax assets are recognized to the extent that they are expected to reverse in the foreseeable future and it is probable that they will be able to be utilized against future taxable income, based on the Group's forecast of future operating results.results of operations. Deferred tax assets are adjusted for significant non-taxable income, expenses and specific limits on the use of any unused tax loss or credit. Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable income will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are calculated, without discounting, at tax rates and in accordance with laws that are expected to apply to their respective period of realization, provided the tax rates and laws are enacted or substantively enacted by the end of the reporting period. The carrying amount of deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred tax asset to be utilized.
Deferred tax liabilities and assets are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Changes in deferred tax assets or liabilities are recognized as a component of tax expense (benefit) in the consolidated statements of operations, except where they relate to items that are recognized in other comprehensive income or directly in equity, in which case the related deferred tax is also recognized in other comprehensive income or equity, respectively. Where deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
Share-based payments
Employees of the Group receive, in part, remuneration for services rendered in the form of share-based payments, which are considered equity-settled transactions. The cost of equity-settled transactions is recognized, together with a corresponding increase in equity, over the period in which the performance or service conditions are fulfilled. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company's best estimate of the number of equity instruments that will ultimately vest. The share-based payment expense for each reporting period reflects the movement in cumulative expense recognized at the beginning and end of that period. The Group follows the accelerated method of expense recognition for share-based awards, as the awards vest in tranches over the vesting period.
The estimation of share awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from current estimates, such amounts will be recorded as a cumulative adjustment in the period the estimates are revised. Actual results, and future changes in estimates, may differ substantially from current estimates.
If an equity-settled award is cancelled, it is treated as if it had forfeited on the date of cancellation, and any expense previously recognized for unvested shares is immediately reversed.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement at the inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Expenses incurred in operating leases (net of any incentives received from the lessor) are recognized on a straight-line basis over the term of the lease. Operating lease incentives are recognized as a liability when received and subsequently reduced by allocating lease payments between rental expense and a reduction of the liability.
Business combinations
Business combinations are accounted for using the acquisition method at the acquisition date, which is the date on which control is transferred. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at the acquisition date fair value and the amount of any non-controlling interest in the acquiree. Settlements of pre-existing relationships are not included in the consideration transferred and are recognized in the consolidated statements of operations. Identifiable assets acquired and liabilities assumed in a business combination are measured at their fair values at the acquisition date. Upon acquisition, the Group recognizes any non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred and included in general and administrative expenses. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value at the date of exchange.
Goodwill
Goodwill is initially measured at cost, which is the excess of the aggregate of the consideration transferred and the amount recognized for the non-controlling interest over the net identifiable assets acquired and liabilities assumed.
If this consideration is lower than the fair value of the net of these assets acquired and liabilities assumed, the difference is recognized in the consolidated statements of operations. After initial recognition, goodwill is measured at cost, less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the Group's CGU that is expected to benefit from the combination, regardless of whether other assets or liabilities of the acquiree are assigned to those units.
Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of financial position comprise cash at banks, short-term deposits and low-risk, highly liquid investments with original maturities of three months or less when
initially recorded. Cash equivalents also include amounts due from third-party credit card processors as they are both short-term and highly liquid in nature and are typically converted to cash within three days of the sales transaction.
Current versus non-current classification
The Group presents assets and liabilities in the consolidated statements of financial position based on current or non-current classification. An asset is current when it is: expected to be realized within twelve months after the reporting period; or cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting period. All other assets are classified as non-current. A liability is current when it is due to be settled within twelve months after the reporting period. The Group classifies all other liabilities as non-current.
Trade receivables
Trade receivables are initially recognized at fair value, less a provision for impairment. Trade receivables are unsecured and substantially all are due for settlement within 30 days of recognition. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date.
Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off by reducing the carrying amount directly.
The amount of the impairment loss is recognized within general and administrative expense. When a trade receivable for which an impairment allowance had been recognized becomes uncollectible in a subsequent period, it is written off against an allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the consolidated statements of operations.
Financial assets
Classification
The Group classifies its financial assets in the following categories: amortized cost, fair value through other comprehensive income and fair value through profit or loss. The Group determines the classification of its financial assets at initial recognition with the classification dependent on the business model for managing the financial assets and the contractual cash flow characteristics of the assets. Management evaluates the business model for managing its financial assets at the end of each reporting period.
Recognition and derecognition
Purchases and sales of financial assets are recognized on the date on which the Group commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. Fair value changes that have been recognized in other comprehensive income are recycled to profit or loss upon sale of the financial asset.
Measurement
At initial recognition, for financial assets not at fair value through profit or loss, the Group measures the assets at its purchase price plus transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the consolidated statements of operations.
Subsequently, financial assets are carried at fair value or amortized cost less impairment. Financial assets classified at amortized cost are measured using the effective interest method.
Impairment
The Group measures loss allowances on its financial assets at an amount equal to lifetime expected credit losses (“ECLs”), except for securities that are determined to have low credit risk at the reporting date and other securities and bank balances for which credit risk has not increased significantly since initial recognition, which are measured as 12-month ECLs. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. 12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months following the reporting date.
Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities measured at fair value through other comprehensive income, the loss allowance is charged to profit or loss and is recognized in other comprehensive income.
ECLS are a probability-weighted estimate of the difference in the present value of contractual cash flows and the present value of cash flows that the Group expects to receive.
The changes in the loss allowance balance are recognized as an impairment loss in the consolidated statements of operations. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the reversal of the previously recognized impairment loss is recorded in the consolidated statements of operations.
Fair value estimation
The fair value of financial assets and financial liabilities are estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments traded in active markets is based on quoted market prices as of the consolidated statements of financial position date. The quoted market price used for financial assets held by the Group is the current bid price.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing as of the consolidated statements of financial position date. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments.
The carrying value, less any impairment provision of trade receivables and payables, is assumed to approximate the fair value due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
Property and equipment
Property and equipment are stated at cost, net of accumulated depreciation. Historical cost includes expenditures directly attributable to the acquisition of the assets. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are expensed as incurred.
Depreciation is calculated using the straight-line method to allocate the cost over the estimated useful lives or, in the case of leasehold improvements and certain leased equipment, the remaining lease term if shorter. The estimated useful lives for each asset class are as follows:
|
| |
Equipment | 3 - 5 years |
Computer hardware and computer-related software | 3 - 5 years |
Furniture and fittings | 5 - 10 years |
Leasehold improvements | Shorter of the remaining lease term or 7 years |
Research and development
Research and development includes the employee and hardware costs incurred for the development of new products, enhancements and updates of existing products and quality assurance activities. These costs incurred internally for the development of computer software are capitalized only when technological feasibility has been established for the solution. To establish technological feasibility, the Group must demonstrate it intends to complete development and the solution will be available for sale or internal use, it is probable the solution will generate future economic benefits, and the Group has the ability to reliably measure the expenditure attributable to the solution during its development. The Company has not capitalized any research and development costs.
Intangible assets
Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as of the date of acquisition. Following initial recognition, intangible assets are carried at cost, net of accumulated amortization.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over their useful life using the straight-line method. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least annually at each fiscal year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by changing the amortization period or method, as appropriate, which is a change in an accounting estimate. The amortization expense on intangible assets with finite lives is recognized in the consolidated statements of operations in the expense category, consistent with the function of the intangible asset.
The estimated useful lives for each intangible asset class are as follows:
|
| |
Patents, trademarks and other rights | 2 - 7 years |
Customer relationships | 2 - 4 years |
Acquired developed technology | 3 - 10 years |
Impairment of goodwill, intangible assets and long-lived assets
Goodwill is tested for impairment annually during the fourth quarter of the Group's fiscal year and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of the CGU. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.
Intangible assets are tested for impairment annually, during the fourth quarter, and when circumstances indicate that the carrying value may be impaired. When the recoverable amount of an intangible asset is less than its carrying amount, an impairment loss is recognized.
The residual values and useful lives of long-lived assets are reviewed at the end of each reporting period and adjusted if appropriate. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities held for trading, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, exchangeable senior notes (the “Notes”) and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification. Financial liabilities classified as held for trading, including derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships are recognized at fair value. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognized in the consolidated statements of operations.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method (“EIR”). Gains and losses are recognized in the consolidated statements of operations when the liabilities are derecognized as well as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the consolidated statements of operations.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective
carrying amounts is recognized in the consolidated statements of operations.
Provisions and accrued liabilities
Provisions and accrued expenses are recognized when the Group has a present obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognized for future operating losses.
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the end of each reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as finance costs.
Shareholders' equity
Preference, ordinary and restricted shares are classified as equity. When the Group purchases its own equity instruments, for example as the result of a share buyback or a share-based payment plan, the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the owners of the Company as treasury shares, until the shares are cancelled or reissued. When such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the owners of the Company.
Refer to Note 15, "Shareholders' Equity," for the terms and conditions on preference, ordinary and restricted shares.
Dividends
Provision is made for any dividend declared, being appropriately authorized and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
Royalties
Royalties payable are recognized as an expense on an accruals basis in accordance with the applicable royalty agreement.
New accounting standards not yet adopted
IFRS 15, Revenue from Contracts with Customers, was issued in May 2014, and amended in April 2016, and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to customers.
The new revenue standard supersedes all current revenue recognition requirements under IFRS. Either a full retrospective application or modified retrospective application is required for annual periods beginning on or after January 1, 2018. The standard is applicable for our fiscal year ending June 30, 2019. We have assessed the new standard, including completing our contract reviews and evaluation of the incremental costs of obtaining a contract. Based on our assessment, we will be adopting the requirements of the new standard in the first quarter of fiscal 2019, utilizing the full retrospective method of transition.
The primary impact of adopting the new standard relates to our on-premises term-based licenses, as under IFRS 15, the requirement to have vendor specific objective evidence (VSOE) for undelivered elements is eliminated. Our term-based licenses include the delivery of software and support services as well as unspecified future updates. Under our current policies, we recognize revenue for these contracts ratably over the life of the service period. In contrast, under IFRS 15, we will estimate the standalone selling price associated with the software license and the support services separately and recognize license revenue upon delivery of the initial software at the outset of the arrangement. Upon adoption, unused maintenance upon server product upgrades will be allocated between maintenance, perpetual license and other revenue. Under our current policy it is allocated in-full to perpetual license revenue.
The impact of adopting the new standard as it relates to the incremental costs of obtaining a contract was not material to our fiscal 2018 and fiscal 2017 financial statements.
Select consolidated statements of operations line items which reflect the adoption of IFRS 15 are as follows:
|
| | | | | | | | | | | |
| Year ended June 30, 2018 |
| As Reported | | IFRS 15 Adjustment | | As Adjusted |
| (U.S. $ in thousands)
|
Revenues: | | | | | |
Subscription | $ | 403,214 |
| | $ | 7,480 |
| | $ | 410,694 |
|
Maintenance | 325,898 |
| | 613 |
| | 326,511 |
|
Perpetual license | 85,481 |
| | (2,310 | ) | | 83,171 |
|
Other | 59,357 |
| | 1,245 |
| | 60,602 |
|
Total revenues | 873,950 |
| | 7,028 |
| | 880,978 |
|
Total operating expenses | 755,008 |
| | (675 | ) | | 754,333 |
|
Operating loss | (53,748 | ) | | 7,703 |
| | (46,045 | ) |
Income tax expense | (53,507 | ) | | (1,794 | ) | | (55,301 | ) |
Net loss | $ | (119,341 | ) | | $ | 5,909 |
| | $ | (113,432 | ) |
|
| | | | | | | | | | | |
| Year ended June 30, 2017 |
| As Reported | | IFRS 15 Adjustment | | As Adjusted |
| (U.S. $ in thousands)
|
Revenues: | | | | | |
Subscription | $ | 242,128 |
| | $ | 7,695 |
| | $ | 249,823 |
|
Maintenance | 265,521 |
| | (1,068 | ) | | 264,453 |
|
Perpetual license | 74,565 |
| | (507 | ) | | 74,058 |
|
Other | 37,722 |
| | 628 |
| | 38,350 |
|
Total revenues | 619,936 |
| | 6,748 |
| | 626,684 |
|
Total operating expenses | 563,861 |
| | (504 | ) | | 563,357 |
|
Operating loss | (63,086 | ) | | 7,252 |
| | (55,834 | ) |
Income tax benefit | 17,148 |
| | (2,197 | ) | | 14,951 |
|
Net loss | $ | (42,504 | ) | | $ | 5,055 |
| | $ | (37,449 | ) |
Select consolidated statements of financial position line items, which reflect the adoption of IFRS 15 are as follows: |
| | | | | | | | | | | |
| As of June 30, 2018 |
| As Reported | | IFRS 15 Adjustment | | As Adjusted |
| (U.S. $ in thousands)
|
Current assets: | | | | | |
Prepaid expenses and other current assets | $ | 28,219 |
| | $ | 1,576 |
| | $ | 29,795 |
|
Non-current assets: | | | | | |
Deferred tax assets | 64,662 |
| | (5,442 | ) | | 59,220 |
|
Other non-current assets | 112,221 |
| | 1,180 |
| | 113,401 |
|
Current liabilities: | | | | | |
Deferred revenue | 340,834 |
| | (16,440 | ) | | 324,394 |
|
Non-current liabilities: | | | | | |
Deferred tax liabilities | 12,051 |
| | 109 |
| | 12,160 |
|
Deferred revenue | 19,386 |
| | (909 | ) | | 18,477 |
|
Equity | | | | | |
Accumulated deficit | $ | (142,570 | ) | | $ | 14,554 |
| | $ | (128,016 | ) |
|
| | | | | | | | | | | |
| As of June 30, 2017 |
| As Reported | | IFRS 15 Adjustment | | As Adjusted |
| (U.S. $ in thousands) |
Current assets: | | | | | |
Prepaid expenses and other current assets | $ | 23,317 |
| | $ | 822 |
| | $ | 24,139 |
|
Non-current assets: | | | | | |
Deferred tax assets | 188,239 |
| | (3,341 | ) | | 184,898 |
|
Other non-current assets | 9,269 |
| | 778 |
| | 10,047 |
|
Current liabilities: | | | | | |
Deferred revenue | 245,306 |
| | (10,541 | ) | | 234,765 |
|
Non-current liabilities: | | | | | |
Deferred tax liabilities | 43,950 |
| | 416 |
| | 44,366 |
|
Deferred revenue | 10,691 |
| | (261 | ) | | 10,430 |
|
Equity | | | | | |
Accumulated deficit | $ | (23,229 | ) | | $ | 8,645 |
| | $ | (14,584 | ) |
Adoption of the standard related to revenue recognition had no impact to cash provided by or used in operating, financing, or investing activities on our consolidated cash flows statements.
In January 2016, the IASB issued IFRS 16, Leases, which supersedes the existing leases standard, IAS 17, Leases, and related interpretations. The standard introduces a single lessee accounting model and requires a lessee to recognize all leases with a term of more than 12 months, as assets and liabilities on its statement of financial position. The standard also contains enhanced disclosure requirements for lessees and is effective for the Group beginning for its fiscal year ending June 30, 2020, though early adoption is permitted for companies that early adopt IFRS 15. The Group is currently evaluating the impact of adopting the standard on its consolidated financial statements.
3. Critical Accounting Estimates and Judgments
The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgments and estimates in relation to assets, liabilities, contingent liabilities, revenues and expenses. Management bases its judgments and estimates on historical experience and on other various factors it believes to be reasonable
under the circumstances, the result of which forms the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions and may materially affect the financial results or the financial position reported in future periods.
Management has identified the following critical accounting policies for which significant judgments, estimates and assumptions are made.
Significant accounting estimates and assumptions
Revenue
As described in the Group’s revenue accounting policy, revenue will be recognized when all criteria are met in accordance with IAS 18, Revenue. Most of the Group’s revenue-generating arrangements include more than one deliverable. Assumptions have to be applied in order to determine when to account for deliverables separately and how to allocate the total arrangement fee to its individual elements. The Group does not allocate different deliverables under one arrangement separately if a basis for allocating the overall arrangement fee cannot be identified. The Group has concluded that a reasonable allocation basis exists if vendor-specific objective evidence of fair value can be established for each undelivered software element in an arrangement. However, estimation is required and the Group’s conclusions around the approach to allocate fair value may significantly impact the timing and amount of revenue recognized.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The accounting estimates and assumptions relating to equity-settled share-based payments may impact expenses, equity and the carrying amounts of liabilities within the next financial reporting period.
Business combinations
The Group uses its best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Group’s estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the date of acquisition, the Group may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions are initially established in connection with a business combination as of the acquisition date. The Group continues to collect information and reevaluates these estimates and assumptions as deemed reasonable by management. The Group records any adjustments to these estimates and assumptions against goodwill provided they arise within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.
Significant accounting judgments
Taxation
Deferred tax assets are recognized for deductible temporary differences for which management considers it is probable that future taxable income will be available to utilize those temporary differences. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable income, together with future tax-planning strategies.
Management judgment is required to determine the extent to which deferred tax assets should be recognized based upon the likely timing and the level of future taxable income available to utilize the Group’s deferred tax benefits. Assumptions about the generation of future taxable income depend on management’s estimates of future cash flows, future business expectations, capital expenditure,expenditures, dividends, and other capital management transactions.
Management judgment is also required in relation to the application of income tax legislation, which involves complexity and an element of inherent risk and uncertainty. Where management judgment is found to be misplaced, some or all of recognized deferred tax asset and liability carrying amounts may require adjustment, resulting in a corresponding credit or charge to the consolidated statements of operations.
The Company assesses uncertainty over a tax treatment in accordance with the International Financial Reporting Interpretations Committee (“IFRIC”) 23. When the Company concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the Company will reflect the effect of uncertainty by using either of the following methods, depending on which method the Company expects to better predict the resolution of the uncertainty:
•The most likely amount: the single most likely amount in a range of possible outcomes.
•The expected value: the sum of the probability-weighted amounts in a range of possible outcomes.
For details of taxation, please refer to Note 8, “Income Tax.”
New Standards, Interpretations and Amendments Not Yet Adopted in Fiscal Year 2021
The IASB has issued other amendments resulting from improvements to IFRS that management considers do not have any impact on the accounting policies, financial position or performance of the Group. The Group does not expect them to have a material impact on the accounting policies.
3. Critical Accounting Estimates and Judgments
Management has identified the following critical accounting policies for which significant judgments, estimates and assumptions are made.
Critical accounting estimates and assumptions
The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
Revenue recognition
Determining the SSP for products and services requires estimates and assumptions. We typically determine a SSP range for our products and services which is reassessed on a periodic basis or when facts and circumstances change. For all performance obligations other than perpetual and term licenses, we are able to determine SSP based on the observable prices of products or services sold separately in comparable circumstances to similar customers. In instances where performance obligations do not have observable standalone sales, we utilize available information that may include market conditions, pricing strategies, the economic life of the software, and other observable inputs to estimate the price we would charge if the products and services were sold separately.
Critical accounting judgments
Impairment of non-financial assets
The Group assessesFor assets excluding goodwill, and CGUs, impairment of all assetsassessments are made at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment.
Goodwill is tested for impairment annually during the fourth quarter of the Group's fiscal year and when circumstances indicate that the carrying value may be impaired. These include product performance, technology, economic and political environments, and future product expectations. If an impairment trigger exists or when annual impairment testing for an asset is required, the recoverable amount of the asset is determined. No
The Group operates as a single operating segment and the Group performs the goodwill impairment test at the level of its operating segment as there are no lower levels within the Group at which goodwill is monitored. The recoverable amount of goodwill was assessed by comparing the market capitalization of the Group to its book value, among other qualitative factors, when reviewing for impairment. There was 0 impairment of goodwill during the fiscal years 2021, 2020 and 2019.
During fiscal year 2021, the Group made the decision to early terminate one of our office leases. The Group does not have any rights to sublease the facility. The recoverable amount of the related lease assets including right-of-use assets and leasehold improvement was determined to be 0. An impairment charge of $7.4 million was recorded to profit or loss in fiscal year 2021. For details of the office lease impairment, please refer to Note 7, “Expenses.” Other than the lease-related assets discussed above, no indicators of impairment existed that were significant enough to warrant suchnon-financial assets to be tested for impairment in the fiscal years ended June 30, 20182021, 2020 and 2019. For details of non-financial assets, please refer to Note 10, “Property and Equipment”, 2017Note 11, “Goodwill and 2016.Intangible assets” and Note 12, “Leases.”
Impairment of financial instrumentsThe Group assesses the credit risk for financial instruments and establishes a loss allowance for impairment that represents its estimate of incurred losses in respect of financial instruments.
4. Group Information
As of June 30, 2018,2021, the Group’s subsidiaries, all of which are wholly-owned,wholly owned, were as follows:
|
| | | | | | | |
Name | | Country of Incorporation |
Atlassian (UK) Limited | | United Kingdom, United States of America |
Atlassian (UK) Holdings Limited | | United Kingdom, United States of America |
Atlassian (Australia) Limited | | United Kingdom, United States of America |
Atlassian (Global) Limited | | United Kingdom |
Atlassian (UK) Operations Limited | | United Kingdom |
Atlassian, Inc. | | United States of America |
Atlassian LLCNetwork Services, Inc. | | United States of America |
Atlassian Network Services,Dogwood Labs, Inc. | | United States of America |
Dogwood Labs,Trello, Inc. | | United States of America |
Trello, Inc.AgileCraft LLC | | United States of America |
OpsGenie, Inc. | | United States of America |
Opsgenie Yazılım Anonim Şirketi | | Turkey |
iFountain, LLC | | United States of America |
Halp, Inc. | | United States of America |
Atlassian Australia 1 Pty Ltd | | Australia |
Atlassian Australia 2 Pty Ltd | | Australia |
Atlassian Corporation Pty. Ltd. | | Australia |
Atlassian Pty Ltd | | Australia |
Good Software Co. Pty Ltd | | Australia |
Code Barrel Pty Ltd | | Australia |
Lead Green Pty Ltd | | Australia |
Lead Green Trust | | Australia |
Vertical First Pty Ltd | | Australia |
Vertical First Trust | | Australia |
Atlassian Capital Pty. Ltd. | | Australia |
MITT Australia Pty Ltd | | Australia |
MITT Trust | | Australia |
Atlassian K.K. Holdings B.V. | | JapanNetherlands |
Atlassian K.K. | | Japan |
Atlassian Germany GmbH | | Germany |
Atlassian Holdings B.V. | | Netherlands |
Atlassian Philippines, Inc. | | Philippines |
Atlassian France SAS | | France |
Atlassian B.V. | | Netherlands |
Atlassian Canada Inc. | | Canada |
Atlassian India LLP | | India |
Mindville AB | | Sweden |
Riada Germany GmbH | | Germany |
Mindville Technology Canada LTD | | Canada |
Atlassian New Zealand | | New Zealand |
Atlassian Poland sp z o.o. | | Poland |
Chart.io, Inc. | | United States of America |
ThinkTilt Pty Ltd | | Australia |
5. Financial Assets and Liabilities
Financial Risk Management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, equity price risk, and interest rate risk), credit risk and liquidity risk. The Group's overall risk management approach focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the Group.
Management regularly reviews the Group's risk management objectives to ensure that risks are identified and managed appropriately. The Boardboard of Directorsdirectors is made aware of and reviews management's risk assessments prior to entering into significant transactions.
Market risk
Currency risk
The Group operates globally and is exposed to foreign exchange risk arising from exposure to various currencies in the ordinary course of business. Our exposures primarily consist of the Australian dollar (“AUD”), Indian rupee, Euro (“EUR”), British pound, Euro, Japanese yen, Philippine peso Indian rupee and Swiss franc.Canadian dollar. Foreign exchange risk arises from commercial transactions and recognized financial assets and liabilities denominated in a currency other than the U.S. dollar.dollar (“USD”). The Group’s foreign exchangefinancial risk management policy is reviewed annually by the Group’s audit committeeAudit Committee and requires the Group to monitor its foreign exchange exposure on a regular basis.
AllThe substantial majority of our sales contracts are denominated in U.S. dollars, and our operating expenses are generally denominated in the local currencies of the countries where our operations are located. We therefore benefit from a strengthening of the U.S. dollar and are adversely affected by the weakening of the U.S. dollar.
We have a cash flow hedging program in place and enter into derivative transactions to manage certain foreign currency exchange risks that arise in the Group’s ordinary business operations. We enter into master netting agreements with financial institutions to execute our hedging program. We recognize all hedging derivative instruments as either assets or liabilities on our consolidated statements of financial position and measure them at fair value. We have the rights to net certain hedging derivative assets and liabilities, but we currently present them on the gross basis. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting.
We enter intoOur master netting agreements are with select financial institutions to reduce our credit risk, and contractwe trade with several counterparties to reduce our concentration risk with any single counterparty. We do not have significant exposure to counterparty credit risk at this time. We do not require nor are we required to post collateral of any kind related to our foreign currency derivatives.
Cash flow hedging
We enter into foreign exchange forward contracts with the objective to mitigate certain currency risks associated with forecast cost of revenues and operating expenses denominated in Australian dollars. These foreign exchange forward contracts are designated as cash flow hedges.
To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. We include the forward element of these hedging instruments in the hedgeThere is an economic relationship and on a quarterly basis qualitatively assess whether the hedges are expected to provide offsetting changes against the hedged items. The effect of the cash flow hedges determined to be effective is recognized in other comprehensive income and impact profit or loss in the same period or periods asbetween the hedged items and the hedging instruments as the terms of the foreign exchange and forward contracts match the terms of the expected highly probable forecast transactions (i.e., notional amount and expected payment date). The Group has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the foreign exchange and forward contracts are recognized in profit or loss. Amounts reclassified from cash flow hedge reserve to profit or loss are recordedidentical to the same functional expense as hedged item or items. Gains or losses related to the ineffective portion of cash flow hedges, if any, are recognized immediately in the same functional expense as the hedged item or items.risk components. We measure ineffectiveness in a cash flow hedge relationship using the hypothetical derivative method. Ineffectiveness occurs only if the present value of the cumulative gain or loss on the derivative instrument exceeds the present value of the cumulative gain or loss on the hypothetical derivative, which is used to measure changes of expected future cash flow. Ineffectiveness mainly rises from the differences in the timing of the cash flows of the hedged items and the hedging instruments.
It is our policy to enter into cash flow hedges to hedge cost of revenues and operating expenses up to 1824 months.
Balance sheet hedging
We also enter into foreign exchange forward contracts to hedge a portion of certain foreign currency denominated as monetary assets and liabilities to reduce the risk that such foreign currency assets or liabilities will be adversely affected by changes in exchange rates. These contracts hedge monetary assets and liabilities that are denominated in non-functional currencies and are carried at fair value with changes in the fair value recorded to other non-operating income (expense), net on our consolidated statements of operations.currencies. These contracts do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the monetary assets and liabilities being hedged.
Foreign currency sensitivityexchange rate exposure
A
The Group hedges material foreign currency denominated monetary assets and liabilities using balance sheet hedges. The fluctuations in the fair market value of balance sheet hedges due to foreign currency rates generally offset those of the hedged items, resulting in no material effect on profit. Consequently, we are primarily exposed to significant foreign currency exchange rate fluctuations with regard to the spot component of derivatives held within a designated cash flow hedge relationship affecting other comprehensive income.
The following table sets forth foreign currency sensitivity analysis performed on our hedging portfolio as of June 30, 2018 indicated that a hypothetical 10% strengtheningchange in exchange rate of the U.S. dollar against other currencies applicablethe Australian dollar to our business would decrease the fair value of our foreign currency contracts by $18.8 million. A hypothetical 10% weakening of the U.S. dollar against other currencies would increase the fair value of our foreign currency contracts by $18.8 million.cash flow hedging portfolio:
A sensitivity analysis performed on our hedging portfolio as of June 30, 2017 indicated that a hypothetical 10% strengthening of the U.S. dollar against other currencies applicable to our business would decrease the fair value of our foreign currency contracts by $11.3 million. A hypothetical 10% weakening of the U.S. dollar against other currencies would increase the fair value of our foreign currency contracts by $11.3 million. | | | | | | | | | | | |
Foreign Currency Sensitivity | Effect on other comprehensive income, before tax |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Foreign currency forward contracts - cash flow hedging: | | | |
U.S. dollar +10%, decrease in fair value of foreign currency forward contracts | $ | (39,416) | | | $ | (26,999) | |
U.S. dollar -10%, increase in fair value of foreign currency forward contracts | 39,416 | | | 26,999 | |
Equity Price Risk
The Group is exposed to equity price risk in connection with our Notes, including exchange and settlement provisions based on the price of our Class A ordinary shares at exchange or maturity of the Notes. In addition, the capped call transactions associated with the Notes also include settlement provisions that are based on the price of our Class A ordinary shares. The amount of cash we may receive from capped call counterparties in connection with the capped calls is determined by the price of our Class A ordinary shares. The Group is also exposed to equity price risk in connection with our equity investments. The Group’s marketable equity investments are susceptible to market price risk from uncertainties about future values of the investment securities.
AThe following table sets forth equity price sensitivity analysis performed on the Notes embedded exchange derivative and capped call transactions indicates thatof a hypothetical 10% increasechange in our share price would increase the fair value of the Notes embedded exchange derivative by $46.7 million and increase the fair value of the capped call transactions by $15.9 million. A hypothetical 10% decrease in our share price would decrease the fair value of the Notes embedded exchange derivative by $43.0 million and increase the fair value of the capped call transactions by $16.2 million.prices:
| | | | | | | | | | | | | | | | | | | | | | | |
Equity Price Sensitivity | Effect on other non-operating expense, net | | Effect on other comprehensive income, before tax |
| 2021 | | 2020 | | 2021 | | 2020 |
| (U.S. $ in thousands) |
Fair Value change of the Exchange and Capped Call Derivatives: | | | | | | | |
Increase in our share price of 10% | $ | (107,880) | | | $ | (192,641) | | | $ | — | | | $ | — | |
Decrease in our share price of 10% | 106,241 | | | 184,784 | | | — | | | — | |
| | | | | | | |
Fair value change of marketable equity investments: | | | | | | | |
Increase in respective share prices of 10% | — | | | — | | | 11,041 | | | 10,019 | |
Decrease in respective share prices of 10% | — | | | — | | | (11,041) | | | (10,019) | |
Interest rate risk
During the fiscal year ended June 30, 2021, the Group entered into a $1 billion senior unsecured delayed-draw term loan facility (the “Term Loan Facility”) and a $500 million senior unsecured revolving credit facility (the “Revolving Credit Facility,” and together with the Term Loan Facility, the “Credit Facility”). The Credit Facility matures in October 2025 and bears a variable interest rate. Please refer to Note 16, “Debt” for the details of the Credit Facility.
The Group is exposed to interest rate risk arising from our variable interest rate Credit Facility. The Group’s financial risk management policy is reviewed annually by the Group’s Audit Committee and requires the Group to monitor its interest rate exposure on a regular basis.
We have a hedging program in place and enter into derivative transactions to manage the variable interest rate risks that arise with the Group’s Term Loan Facility. We enter into master netting agreements with financial institutions to execute our hedging program. Our master netting agreements are with select financial institutions to reduce our credit risk, and we trade with several counterparties to reduce our concentration risk with any single counterparty. We do not have significant exposure to counterparty credit risk at this time. We do not require nor are we required to post collateral of any kind related to our interest rate derivatives.
We enter into interest rate swaps with the objective to hedge the variability of cash flows in the interest payments associated with our variable-rate Term Loan Facility. The interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The interest rate swaps are designated as cash flow hedges and measured at fair value. As of June 30, 2021, we have entered into interest rate swaps with a total notional amount of $650 million.
In addition, our cash equivalents and investment portfolio are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely impacted due to a rise in interest rates. As of June 30, 2018,2021, the Group had cash and cash equivalents totaling $1.4 billion$919.2 million and short-term investments totaling $323.1$313.0 million.
AThe following table sets forth an interest rate sensitivity analysis performed on our portfolio indicated thatof a hypothetical 100 basis point increasechange in interest rates at June 30, 2018 and 2017 would result in a $1.7 million and $2.0 million decrease in the market value of our investments, respectively.rates. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.occur:
| | | | | | | | | | | |
Interest Rate Sensitivity | Effect on other comprehensive income, before tax |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Change in market value of debt investments: | | | |
Interest Rate +100bps, decrease in market value of debt investments | $ | (1,888) | | | $ | (5,397) | |
Interest Rate -100bps, increase in market value of debt investments | 259 | | | 1,617 | |
| | | |
Change in market value of interest rate swap: | | | |
Interest Rate +100bps, increase in market value of interest rate swaps | 24,845 | | | 0 | |
Interest Rate -100bps, decrease in market value of interest rate swaps | (20,635) | | | 0 | |
Credit risk
The Group is exposed to credit risk arising from cash and cash equivalents, deposits with banks and financial institutions, investments, foreign exchange and interest rate derivative contracts, and capped call transactions related to our issuance of the Notes, as well as credit exposures to customers, including outstanding receivables and committed transactions. Credit risk is managed on a Group basis.
The Group has a minimum credit rating requirement for banks and financial institutions with which it transacts. The Group’s investments are governed by a corporate investment policy with a minimum credit ratingsrating and concentration limits for all securities.
The Group is exposed to credit risk in the event of non-performance by the counterparties to our foreign exchange and interest rate derivative contracts and our capped call transactions at maturity. To reduce the credit risk, we continuously monitor credit quality of our counterparties to such derivatives. We believe the risk of non-performance under these contracts is remote.
The Group's customer base is highly diversified, thereby limiting credit risk. The Group manages its credit risk with customers by closely monitoring its receivables. Sales are typically settled using major credit cards, mitigating credit risk. Our credit policy typically requires payment within 30-45 days, and we establish credit limits for each customer based on our internal guidelines. No one customer accountedThe Group does not hold collateral as security or call on other credit enhancements. The Group manages its credit risk with customers by closely monitoring its receivables and contract assets. We continuously monitor outstanding receivables locally to assess whether there is objective evidence that our trade receivables and contract assets are credit-impaired. An impairment analysis is performed at each reporting date using a provision matrix to measure ECLs. The provision rates are based on days past due. Please refer to Note 9, “Trade Receivables” for more than 10%the details of total revenues during each of the fiscal years ended June 30, 2018, 2017 or 2016.
receivables, credit concentration, and ECL allowance.
Liquidity risk
Liquidity risk is the risk that the group will encounter difficulty in meeting its obligations associated with its financial liabilities as they fall due. The Group’s primary source of cash is cash generated from business operations.
The table below presentpresents the contractual undiscounted cash flows relating to the Group’s financial liabilities at the balance sheet date. The cash flows are grouped based on the remaining period to the contractual maturity date. The Group has sufficient funds, including its cash, cash equivalents, short-term investments, expected cash flows from operations and access to the Credit Facility, to meet these commitments as they become due. The Group may enter into financial transactions to secure additional funding to supplement existing cash flows or to maintain financial flexibility.
Contractual maturities of financial liabilities are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Less than 1 year | | 1 - 3 years | | 3 - 5 years | | More than 5 years | | Total |
| (U.S. $ in thousands) |
As of June 30, 2021 | | | | | | | | | |
Financial liabilities: | | | | | | | | | |
Trade and other payables | $ | 266,497 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 266,497 | |
Lease obligations (1) | 48,297 | | | 77,768 | | | 65,227 | | | 91,131 | | | 282,423 | |
Derivative liabilities | 11,438 | | | 669 | | | 0 | | | 0 | | | 12,107 | |
Exchangeable senior notes (2) | 1,109,593 | | | 0 | | | 0 | | | 0 | | | 1,109,593 | |
| $ | 1,435,825 | | | $ | 78,437 | | | $ | 65,227 | | | $ | 91,131 | | | $ | 1,670,620 | |
As of June 30, 2020 | | | | | | | | | |
Financial liabilities: | | | | | | | | | |
Trade and other payables | $ | 202,570 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 202,570 | |
Lease liabilities (1) | 41,584 | | | 109,015 | | | 54,325 | | | 92,158 | | | 297,082 | |
Derivative liabilities | 1,507 | | | 2 | | | 0 | | | 0 | | | 1,509 | |
Exchangeable senior notes (2) | 2,211,244 | | | 0 | | | 0 | | | 0 | | | 2,211,244 | |
| $ | 2,456,905 | | | $ | 109,017 | | | $ | 54,325 | | | $ | 92,158 | | | $ | 2,712,405 | |
(1) Lease obligations represent undiscounted lease payments excluding certain low-value and short-term leases, refer to Note 12, “Leases” for details.
(2) The amount related to Notes represent the if-exchanged value using stock price as of June 30, 2021 and 2020, respectively. Refer to Note 16, “Debt” for details.
|
| | | | | | | | | | | |
| Up to 12 Months | | Greater than 12 Months | | Total
|
| (U.S. $ in thousands) |
As of June 30, 2018 | | | | | |
Financial liabilities: | | | | | |
Trade and other payables | $ | 113,105 |
| | $ | — |
| | $ | 113,105 |
|
Exchangeable senior notes, net | — |
| | 1,000,000 |
| | 1,000,000 |
|
| $ | 113,105 |
| | $ | 1,000,000 |
| | $ | 1,113,105 |
|
As of June 30, 2017 | | | | | |
Financial liabilities: | | | | | |
Trade and other payables | $ | 73,192 |
| | $ | — |
| | $ | 73,192 |
|
Other non-current liabilities | — |
| | 4,969 |
| | 4,969 |
|
| $ | 73,192 |
| | $ | 4,969 |
| | $ | 78,161 |
|
Capital risk management
For the purpose of the Group’s capital management, capital includes issued capital, share premium and all other capital reserves attributable to the equity holders of the parent. The primary objective of the Group's capital structure management is to ensure that it maintains an appropriate capital structure to support its business and maximize shareholder value. The Group manages its capital structure and adjusts it based on business needs and economic conditions.
During the fiscal year ended June 30, 2018, the Group issued $1.0 billion of exchangeable debtthe Notes for working capital and other corporate purposes, including acquiring complementary businesses, products, services or technologies.
No material changes were made to the process of managing capital during During the fiscal yearsyear ended June 30, 2017 and 2016.
2021, the Group entered into a $1.5 billion Credit Facility. The Group will use the net proceeds of the Credit Facility for general corporate purposes, including repayment of existing indebtedness. Refer to Note 16, “Debt” for details.
To maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares, or consider external financing alternatives. The Group does not have any present or future plan to pay dividends on its shares.
Fair value measurementsValue Measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.
IFRS 13, Fair value measurement defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either, in the principle market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability.
IFRS 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
The fair value of financial instruments traded in active markets is included in Level 1.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to measure the fair value an instrument are observable, the instrument is included in Level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Group's assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and considers factors specific to the asset or liability. There were no transfers between levels during fiscal year 2018 and 2017.
The following table presents the Group’s financial assets and liabilities measured and recognized at fair value as of June 30, 2018,2021, by level within the fair value hierarchy: | | | | | | | | | | | | | | | | | | | | | | | |
| Level 1 | | Level 2 | | Level 3 | | Total |
| (U.S. $ in thousands) |
Description | | | | | | | |
Assets measured at fair value | | | | | | | |
Cash and cash equivalents: | | | | | | | |
Money market funds | $ | 20,966 | | | $ | 0 | | | $ | 0 | | | $ | 20,966 | |
| | | | | | | |
Agency securities | 0 | | | 4,600 | | | 0 | | | 4,600 | |
| | | | | | | |
Commercial paper | 0 | | | 149,347 | | | 0 | | | 149,347 | |
| | | | | | | |
| | | | | | | |
Short-term investments: | | | | | | | |
U.S. treasury securities | 0 | | | 209,948 | | | 0 | | | 209,948 | |
Agency securities | 0 | | | 5,752 | | | 0 | | | 5,752 | |
Certificates of deposit and time deposits | 0 | | | 6,653 | | | 0 | | | 6,653 | |
| | | | | | | |
Corporate debt securities | 0 | | | 87,948 | | | 0 | | | 87,948 | |
Municipal securities | 0 | | | 2,700 | | | 0 | | | 2,700 | |
| | | | | | | |
Current derivative assets: | | | | | | | |
Derivative assets - foreign exchange hedging | 0 | | | 3,333 | | | 0 | | | 3,333 | |
Derivative assets - capped call transactions | 0 | | | 0 | | | 124,153 | | | 124,153 | |
| | | | | | | |
Non-current derivative assets: | | | | | | | |
| | | | | | | |
Derivative assets - interest rate swaps | 0 | | | 3,147 | | | 0 | | | 3,147 | |
Other non-current assets: | | | | | | | |
Certificates of deposit and time deposits | 0 | | | 2,600 | | | 0 | | | 2,600 | |
Marketable equity securities | 110,409 | | | 0 | | | 0 | | | 110,409 | |
Non-marketable equity securities | 0 | | | 0 | | | 11,750 | | | 11,750 | |
Total assets measured at fair value | $ | 131,375 | | | $ | 476,028 | | | $ | 135,903 | | | $ | 743,306 | |
| | | | | | | |
Liabilities measured at fair value | | | | | | | |
Current derivative liabilities: | | | | | | | |
Derivative liabilities - foreign exchange hedging | $ | 0 | | | $ | 8,058 | | | $ | 0 | | | $ | 8,058 | |
Derivative liabilities - interest rate swaps | 0 | | | 3,380 | | | 0 | | | 3,380 | |
Derivative liabilities - exchangeable feature of the Notes | 0 | | | 0 | | | 760,689 | | | 760,689 | |
Non-current derivative liabilities: | | | | | | | |
Derivative liabilities - foreign exchange hedging | 0 | | | 669 | | | 0 | | | 669 | |
| | | | | | | |
| | | | | | | |
Total liabilities measured at fair value | $ | 0 | | | $ | 12,107 | | | $ | 760,689 | | | $ | 772,796 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| Level 1 | | Level 2 | | Level 3 | | Total |
| (U.S. $ in thousands) |
Description | | | | | | | |
Assets | | | | | | | |
Cash and cash equivalents: | | | | | | | |
Money market funds | $ | 693,596 |
| | $ | — |
| | $ | — |
| | $ | 693,596 |
|
Commercial paper | — |
| | 29,118 |
| | — |
| | 29,118 |
|
Agency securities | — |
| | 7,989 |
| | — |
| | 7,989 |
|
Corporate debt securities | — |
| | 1,000 |
| | — |
| | 1,000 |
|
U.S. treasury securities | — |
| | 18,968 |
| | — |
| | 18,968 |
|
Total cash and cash equivalents | 693,596 |
| | 57,075 |
| | — |
| | 750,671 |
|
Investments: | | | | | | | |
U.S. treasury securities | — |
| | 52,700 |
| | — |
| | 52,700 |
|
Agency securities | — |
| | 22,015 |
| | — |
| | 22,015 |
|
Certificates of deposit and time deposits | — |
| | 58,824 |
| | — |
| | 58,824 |
|
Commercial paper | — |
| | 35,372 |
| | — |
| | 35,372 |
|
Corporate debt securities | — |
| | 157,883 |
| | — |
| | 157,883 |
|
Municipal securities | — |
| | — |
| | — |
| | — |
|
Total investments | — |
| | 326,794 |
| | — |
| | 326,794 |
|
Derivative assets | — |
| | 63 |
| | — |
| | 63 |
|
Capped call transactions | — |
| | — |
| | 99,932 |
| | 99,932 |
|
Total assets | 693,596 |
| | 383,932 |
| | 99,932 |
| | 1,177,460 |
|
Liabilities | | | | | | | |
Derivative liabilities | — |
| | 5,417 |
| | — |
| | 5,417 |
|
Notes embedded exchange derivative | — |
| | — |
| | 202,553 |
| | 202,553 |
|
Total liabilities | $ | — |
| | $ | 5,417 |
| | $ | 202,553 |
| | $ | 207,970 |
|
The following table presents the Group’s financial assets and liabilities as of June 30, 2020, by the level within the fair value hierarchy: | | | | | | | | | | | | | | | | | | | | | | | |
| Level 1 | | Level 2 | | Level 3 | | Total |
| (U.S. $ in thousands) |
Description | | | | | | | |
Assets measured at fair value | | | | | | | |
Cash and cash equivalents: | | | | | | | |
Money market funds | $ | 439,947 | | | $ | 0 | | | $ | 0 | | | $ | 439,947 | |
U.S. treasury securities | 0 | | | 5,599 | | | 0 | | | 5,599 | |
Agency securities | 0 | | | 8,749 | | | 0 | | | 8,749 | |
| | | | | | | |
Commercial paper | 0 | | | 167,248 | | | 0 | | | 167,248 | |
Corporate debt securities | 0 | | | 27,365 | | | 0 | | | 27,365 | |
Short-term investments: | | | | | | | |
U.S. treasury securities | 0 | | | 296,118 | | | 0 | | | 296,118 | |
Agency securities | 0 | | | 24,586 | | | 0 | | | 24,586 | |
Certificates of deposit and time deposits | 0 | | | 12,052 | | | 0 | | | 12,052 | |
Commercial paper | 0 | | | 31,937 | | | 0 | | | 31,937 | |
Corporate debt securities | 0 | | | 308,651 | | | 0 | | | 308,651 | |
Municipal securities | 0 | | | 2,728 | | | 0 | | | 2,728 | |
| | | | | | | |
Current derivative assets: | | | | | | | |
Derivative assets - foreign exchange hedging | 0 | | | 16,879 | | | 0 | | | 16,879 | |
Derivative assets - capped call transactions | 0 | | | 0 | | | 310,608 | | | 310,608 | |
| | | | | | | |
| | | | | | | |
Other non-current assets: | | | | | | | |
Certificates of deposit and time deposits | 0 | | | 3,347 | | | 0 | | | 3,347 | |
Marketable equity securities | 100,187 | | | 0 | | | 0 | | | 100,187 | |
Non-marketable equity securities | 0 | | | 0 | | | 3,750 | | | 3,750 | |
Total assets measured at fair value | $ | 540,134 | | | $ | 905,259 | | | $ | 314,358 | | | $ | 1,759,751 | |
| | | | | | | |
Liabilities measured at fair value | | | | | | | |
Current derivative liabilities: | | | | | | | |
Derivative liabilities - foreign exchange hedging | $ | 0 | | | $ | 1,507 | | | $ | 0 | | | $ | 1,507 | |
Derivative liabilities - exchangeable feature of exchangeable senior notes | 0 | | | 0 | | | 1,283,089 | | | 1,283,089 | |
Non-current derivative liabilities: | | | | | | | |
Derivative liabilities - foreign exchange hedging | 0 | | | 2 | | | 0 | | | 2 | |
| | | | | | | |
Total liabilities measured at fair value | $ | 0 | | | $ | 1,509 | | | $ | 1,283,089 | | | $ | 1,284,598 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Due to the short-term nature of trade receivables, contract assets and trade and other payables, their carrying amount is assumed to approximate their fair value.
Determination of fair value
The following table sets forth a description of the valuation techniques and the inputs used in fair value measurement: | | | | | | | | | | | |
Type | Level | Valuation Technique | Inputs |
Money market fund | Level 1 | Quoted price in active market | N/A |
Marketable equity securities | Level 1 | Quoted price in active market | N/A |
Marketable debt securities | Level 2 | Quoted market price to the extent possible or alternative pricing sources and models utilizing market observable inputs | N/A |
Non-marketable equity securities | Level 3 | Publicly available financing round valuation | N/A |
Non-marketable debt securities | Level 3 | Discounted cash flow | Timing, probability, and amount of forecasted cash flows associated with liquidation of the securities |
Foreign currency forward contracts | Level 2 | Discounted cash flow | Foreign currency spot and forward rate Interest rate Credit quality of counterparties |
Interest rate swaps | Level 2 | Discounted cash flow | Forward and contract interest rates Credit quality of counterparties |
Exchange feature of the Notes | Level 3 | Black-Scholes option pricing models | Stock price Time to expiration of the options Stock price volatility Interest rate |
Capped Call Derivatives | Level 3 | Prior to December 31, 2020: Black-Scholes option pricing models | Stock price Time to expiration of the options Stock price volatility Interest rate |
On December 31, 2020 and after: Non-binding quoted price obtained from counterparty banks* | N/A |
Exchangeable senior notes | Level 2 | Quoted market price | N/A |
*OnDecember 31, 2020, the Group changed the valuation technique of capped call derivatives from income approach to market approach, which is a more meaningful indicator of fair value given the Group’s intention to settle the Notes and related capped call derivatives earlier than their contractual maturity.
Level 3 financial instruments disclosure
In April 2018, Atlassian Inc., a wholly-owned subsidiary of the Company, issued $1 billion in Notes and entered into related capped call transactions. Please refer to Note 16, “Debt” for details. Exchange and Capped Call Derivatives are classified as Level 3. The exchange feature of the Notes is valued using a Black-Scholes option pricing model. The Group used stock price volatility implied from its listed options with a shorter term for valuation of the exchange feature of the Notes, which makes this an unobservable input that is significant to the valuation.
The table below present stock price volatility sensitivity analysis of the fair value change assume a 10% higher volatility, holding other inputs constant:
| | | | | | | | | | | |
Stock Price Volatility Sensitivity | Effect on Other non-operating expense, net |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Stock price volatility range as of fiscal year end | 39.3 | % | | 39.2% - 42.8% |
Fair value change of the exchange feature of the Notes | $ | (1,347) | | | $ | (21,973) | |
Fair value change of the Capped Call Derivatives | 0 | | | (15,393) | |
The following table presents the reconciliations of Level 3 financial instrument fair values: | | | | | | | | | | | | | | | | | |
| Capped Call | | Embedded exchange feature of Notes | | Non-marketable investments |
| (U.S. $ in thousands) |
Balance as of June 30, 2019 | $ | 214,597 | | | $ | (851,126) | | | $ | 3,000 | |
Purchases | 0 | | | 1 | | | 750 | |
| | | | | |
Gains (losses) | | | | | |
| | | | | |
Recognized in other non-operating expense, net | 96,011 | | | (431,964) | | | 0 | |
| | | | | |
Balance as of June 30, 2020 | $ | 310,608 | | | $ | (1,283,089) | | | $ | 3,750 | |
Change in unrealized gains (losses) relating to assets and liabilities held as of June 30, 2020 | | | | | |
Recognized in other non-operating expense, net | $ | 96,011 | | | $ | (431,964) | | | $ | 0 | |
| | | | | |
Balance as of June 30, 2020 | $ | 310,608 | | | $ | (1,283,089) | | | $ | 3,750 | |
Settlements or purchases | (203,093) | | | 1,155,484 | | | 10,250 | |
| | | | | |
Gains (losses) | | | | | |
| | | | | |
Recognized in other non-operating expense, net | 16,638 | | | (633,084) | | | (2,000) | |
Recognized in other comprehensive income (loss) | 0 | | | 0 | | | (250) | |
Balance as of June 30, 2021 | $ | 124,153 | | | $ | (760,689) | | | $ | 11,750 | |
Change in unrealized gains (losses) relating to assets and liabilities held as of June 30, 2021 | | | | | |
Recognized in other non-operating expense, net | $ | 14,764 | | | $ | (308,820) | | | $ | (2,000) | |
Recognized in other comprehensive income (loss) | 0 | | | 0 | | | (250) | |
There were no transfers between levels during fiscal years 2021 and 2020.
Investments
As of June 30, 2021, the Group’s investments consisted of the following: | | | | | | | | | | | | | | | | | | | | | | | |
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
| (U.S. $ in thousands) |
Debt Investments | | | | | | | |
Marketable debt securities: | | | | | | | |
U.S. treasury securities | $ | 209,567 | | | $ | 407 | | | $ | (26) | | | $ | 209,948 | |
Agency securities | 5,750 | | | 2 | | | 0 | | | 5,752 | |
Certificates of deposit and time deposits | 9,253 | | | 0 | | | 0 | | | 9,253 | |
| | | | | | | |
Corporate debt securities | 87,626 | | | 322 | | | 0 | | | 87,948 | |
Municipal securities | 2,700 | | | 0 | | | 0 | | | 2,700 | |
| | | | | | | |
Non-marketable debt securities | 2,000 | | | 0 | | | (2,000) | | | 0 | |
Total debt investments | $ | 316,896 | | | $ | 731 | | | $ | (2,026) | | | $ | 315,601 | |
Equity Investments | | | | | | | |
Marketable equity securities | $ | 10,270 | | | $ | 100,139 | | | $ | 0 | | | $ | 110,409 | |
Non-marketable equity securities | 12,000 | | | 0 | | | (250) | | | 11,750 | |
Total equity investments | $ | 22,270 | | | $ | 100,139 | | | $ | (250) | | | $ | 122,159 | |
Total investments | $ | 339,166 | | | $ | 100,870 | | | $ | (2,276) | | | $ | 437,760 | |
As of June 30, 2018,2021, the Group had $323.1$313.0 million of investments which were classified as short-term investments on the Group’s consolidated statements of financial position. Additionally, the Group had marketable equity securities totaling $110.4 million, non-marketable equity securities totaling $11.8 million, and certificates of deposit and time deposits totaling $3.6$2.6 million which were classified as long-term and were included in other non-current assets on the Group’s statementconsolidated statements of financial position.
In December 2020, the Group sold a marketable equity security following an assessment of investments. The fair values on the dates of sale were $38.1 million and the accumulated gains recognized in other comprehensive income were $28.1 million.
As of June 30, 2018 and 2017,2020, the Group’s short-term investments were classified as debt instruments at fair value through other comprehensive income.
Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)
The Notes embedded exchange derivative and capped call transactions (“Exchange and Capped Call Derivatives”) are measured at fair value using Black-Scholes option pricing models that utilizes both observable and unobservable market inputs.
Exchange and Capped Call Derivatives are classified as level 3 as the Group uses stock price volatility implied from options traded with a substantially shorter term, which makes this an unobservable input that is significant to the valuation. The stock price volatility as of June 30, 2018, ranged from 32.7% to 36.3%. Other inputs that are observable and significant for the valuation includes our stock price and time to expirationconsisted of the options.
In general, an increase in our stock price volatility would increase the fair value of the derivatives and would result in a net loss. The future impact on the other non-operating income (expense), net depends on how significant volatility changes independently and in relation to other inputs. As of June 30, 2018, a 10% higher volatility, holding other inputs constant would result in an approximately $23.5 million of additional loss.
The following table illustrates the changes in the balances of the capped call transaction and Notes embedded exchange derivative liability associated with the Notes, as reported in other non-current assets and other non-current liabilities in the consolidated statements of financial position:following: | | | | | | | | | | | | | | | | | | | | | | | |
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
| (U.S. $ in thousands) |
Debt Investments | | | | | | | |
Marketable debt securities: | | | | | | | |
U.S. treasury securities | $ | 294,103 | | | $ | 2,017 | | | $ | (2) | | | $ | 296,118 | |
Agency securities | 24,280 | | | 306 | | | 0 | | | 24,586 | |
Certificates of deposit and time deposits | 15,399 | | | 0 | | | 0 | | | 15,399 | |
Commercial paper | 31,937 | | | 0 | | | 0 | | | 31,937 | |
Corporate debt securities | 305,448 | | | 3,205 | | | (2) | | | 308,651 | |
Municipal securities | 2,700 | | | 28 | | | 0 | | | 2,728 | |
| | | | | | | |
Total debt investments | $ | 673,867 | | | $ | 5,556 | | | $ | (4) | | | $ | 679,419 | |
Equity Investments | | | | | | | |
Marketable equity securities | $ | 20,270 | | | $ | 79,917 | | | $ | 0 | | | $ | 100,187 | |
Non-marketable equity securities | 3,750 | | | 0 | | | 0 | | | 3,750 | |
Total equity investments | $ | 24,020 | | | $ | 79,917 | | | $ | 0 | | | $ | 103,937 | |
Total investments | $ | 697,887 | | | $ | 85,473 | | | $ | (4) | | | $ | 783,356 | |
|
| | | | | | | |
| Capped Call Transactions | | Notes Embedded Exchange Derivative
|
| (U.S. $ in thousands)
|
Balance as of June 30, 2017 | $ | — |
| | $ | — |
|
Additions | 87,700 |
| | (177,907 | ) |
Changes in unrealized gains (losses) | 12,232 |
| | (24,646 | ) |
Balance as of June 30, 2018 | $ | 99,932 |
| | $ | (202,553 | ) |
The following table presents the Group’s financial assets and liabilities measured and recognized at fair value as of June 30, 2017, by the level within the fair value hierarchy: |
| | | | | | | | | | | | | | | |
| Level 1 | | Level 2 | | Level 3 | | Total |
| (U.S. $ in thousands) |
Description | | | | | | | |
Cash and cash equivalents: | | | | | | | |
Money market funds | $ | 78,564 |
| | $ | — |
| | $ | — |
| | $ | 78,564 |
|
Commercial paper | — |
| | 2,749 |
| | — |
| | 2,749 |
|
Total cash and cash equivalents | 78,564 |
| | 2,749 |
| | — |
| | 81,313 |
|
Investments: | | | | | | | |
U.S. treasury securities | — |
| | 61,676 |
| | — |
| | 61,676 |
|
Agency securities | — |
| | 16,654 |
| | — |
| | 16,654 |
|
Certificates of deposit and time deposits | — |
| | 44,101 |
| | — |
| | 44,101 |
|
Commercial paper | — |
| | 33,928 |
| | — |
| | 33,928 |
|
Corporate debt securities | — |
| | 148,546 |
| | — |
| | 148,546 |
|
Municipal securities | — |
| | 4,788 |
| | — |
| | 4,788 |
|
Total investments | — |
| | 309,693 |
| | — |
| | 309,693 |
|
Derivative assets | — |
| | 3,252 |
| | — |
| | 3,252 |
|
Total assets | $ | 78,564 |
| | $ | 315,694 |
| | $ | — |
| | $ | 394,258 |
|
As of June 30, 2017,2020, the Group had $305.5$676.1 million of investments which were classified as short-term investments on the Group’s consolidated statements of financial position. Additionally, the Group had marketable equity securities totaling $100.2 million, non-marketable equity securities totaling $3.8 million, and certificates of
deposit and time deposits totaling $4.2$3.3 million which were classified as long-term and were included in other non-current assets on the Group’s consolidated statements of financial position.
The Group's financial assets include cash and cash equivalents, trade receivables, tax receivables, and short-term and long-term deposits with fixed interest rates.
Aseffects of June 30, 2018, the Group’s investments consisted ofon the following:consolidated financial statements were as follows (amounts presented are prior to any income tax effects):
| | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 | | 2019 |
| (U.S. $ in thousands) |
Unrealized fair value movements on marketable debt investments recognized in other comprehensive income | $ | (4,779) | | | $ | 5,750 | | | $ | 1,355 | |
Gains recognized into profit or loss on sale of debt investments | 65 | | | 697 | | | 15 | |
Unrealized fair value movements on non-marketable debt securities recognized in other non-operating expense, net | (2,000) | | | 0 | | | 0 | |
Fair value movements on equity investments recognized in other comprehensive income | 48,080 | | | 41,255 | | | 38,662 | |
|
| | | | | | | | | | | | | | | |
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
| (U.S. $ in thousands) |
Investments | |
| | |
| | | | |
|
U.S. treasury securities | $ | 52,809 |
| | $ | — |
| | $ | (109 | ) | | $ | 52,700 |
|
Agency securities | 22,097 |
| | — |
| | (82 | ) | | 22,015 |
|
Certificates of deposit and time deposits | 58,824 |
| | — |
| | — |
| | 58,824 |
|
Commercial paper | 35,372 |
| | — |
| | — |
| | 35,372 |
|
Corporate debt securities | 158,538 |
| | 14 |
| | (669 | ) | | 157,883 |
|
Total investments | $ | 327,640 |
| | $ | 14 |
| | $ | (860 | ) | | $ | 326,794 |
|
As of June 30, 2017, the Group’s investments consisted of the following: |
| | | | | | | | | | | | | | | |
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
| (U.S. $ in thousands) |
Investments | |
| | |
| | | | |
|
U.S. treasury securities | $ | 61,760 |
| | $ | — |
| | $ | (84 | ) | | $ | 61,676 |
|
Agency securities | 16,740 |
| | — |
| | (86 | ) | | 16,654 |
|
Certificates of deposit and time deposits | 44,101 |
| | — |
| | — |
| | 44,101 |
|
Commercial paper | 33,928 |
| | — |
| | — |
| | 33,928 |
|
Corporate debt securities | 148,634 |
| | 52 |
| | (140 | ) | | 148,546 |
|
Municipal securities | 4,789 |
| | — |
| | (1 | ) | | 4,788 |
|
Total investments | $ | 309,952 |
| | $ | 52 |
| | $ | (311 | ) | | $ | 309,693 |
|
The table below summarizes the Group’s debt investments by remaining contractual maturity based on the effective maturity date:
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Recorded as follows: | | | |
Due in one year or less | $ | 265,679 | | | $ | 443,324 | |
Due after one year | 49,922 | | | 236,095 | |
Total investments | $ | 315,601 | | | $ | 679,419 | |
|
| | | | | | | |
| As of June 30, |
| 2018 | | 2017 |
| (U.S. $ in thousands) |
Recorded as follows: | |
| | |
|
Due in one year or less | $ | 277,087 |
| | $ | 223,562 |
|
Due after one year | 49,707 |
| | 86,131 |
|
Total investments | $ | 326,794 |
| | $ | 309,693 |
|
Derivative financial instruments
The group haveGroup has derivative instruments that are used for hedging activities as discussed below and derivative instruments relating to the Notes and the capped calls as discussed in Note 14: Exchangeable Senior Notes.16, “Debt.”
The fair value of the hedging derivative instruments were as follows:
|
| | | | | | | | | | |
| | Statement of Financial Position Location | | Fair Value As of June 30, 2018 | | Fair Value As of June 30, 2017 |
| | | | (U.S. $ in thousands) |
Derivative assets | | | | | |
|
Derivatives designated as hedging instruments: | | | | | |
|
Foreign exchange forward contracts | | Prepaid expenses and other current assets | | $ | 39 |
| | $ | 2,915 |
|
Foreign exchange forward contracts | | Other non-current assets | | 3 |
| | 249 |
|
Derivatives not designated as hedging instruments: | | | | | |
|
Foreign exchange forward contracts | | Prepaid expenses and other current assets | | 21 |
| | 88 |
|
Total derivative assets | | | | $ | 63 |
| | $ | 3,252 |
|
Derivative liabilities | | | | | |
|
Derivatives designated as hedging instruments: | | | | | |
|
Foreign exchange forward contracts | | Trade and other payables | | $ | 5,006 |
| | $ | — |
|
Foreign exchange forward contracts | | Other non-current liabilities | | 204 |
| | — |
|
Derivatives not designated as hedging instruments: | | | | | |
|
Foreign exchange forward contracts | | Trade and other payables | | 207 |
| | — |
|
Total derivative liabilities | | | | $ | 5,417 |
| | $ | — |
|
The following table sets forth the notional amounts of our derivative instruments at June 30, 2018 (in thousands): |
| | | | | | | | | | | |
| Notional Amounts of Derivative Instruments |
| Notional Amount by Term to Maturity | | Classification by Notional Amount |
| Under 12 months | | Over 12 months | | Total | | Cash Flow Hedge | | Non Hedge | | Total |
Foreign exchange forward contracts | $188,633 | | $12,492 | | $201,125 | | $180,898 | | $20,227 | | $201,125 |
| | | | | | | | | | | | | | | | | | | | |
| | | | As of June 30, |
| | Statement of Financial Position Location | | 2021 | | 2020 |
| | | | (U.S. $ in thousands) |
Derivative assets - hedging | | | | | | |
Derivatives designated as hedging instruments: | | | | | | |
Foreign exchange forward contracts | | Current derivative assets | | $ | 3,325 | | | $ | 14,195 | |
| | | | | | |
Interest rate swaps | | Other non-current assets | | 3,147 | | | 0 | |
Derivatives not designated as hedging instruments: | | | | | | |
Foreign exchange forward contracts | | Current derivative assets | | 8 | | | 2,684 | |
Total derivative assets | | | | $ | 6,480 | | | $ | 16,879 | |
| | | | | | |
Derivative liabilities - hedging | | | | | | |
Derivatives designated as hedging instruments: | | | | | | |
Foreign exchange forward contracts | | Current derivative liabilities | | $ | 5,336 | | | $ | 1,164 | |
Foreign exchange forward contracts | | Other non-current liabilities | | 669 | | | 2 | |
Interest rate swaps | | Current derivative liabilities | | 3,380 | | | 0 | |
Derivatives not designated as hedging instruments: | | | | | | |
Foreign exchange forward contracts | | Current derivative liabilities | | 2,722 | | | 343 | |
Total derivative liabilities | | | | $ | 12,107 | | | $ | 1,509 | |
The following table sets forth the notional amounts of our hedging derivative instruments atas of June 30, 2017 (in2021 (U.S. $ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Notional Amounts of Derivative Instruments |
| Notional Amount by Term to Maturity | | Classification by Notional Amount |
| Under 12 months | | Over 12 months | | Total | | Cash Flow Hedge | | Non Hedge | | Total |
Forward contracts: | | | | | | | | | | | |
AUD/USD forward contracts: | | | | | | | | | | | |
Notional amount | $ | 623,321 | | | $ | 24,627 | | | $ | 647,948 | | | $ | 397,184 | | | $ | 250,764 | | | $ | 647,948 | |
Average forward rate | 0.7563 | | | 0.7718 | | | 0.7569 | | | 0.7563 | | | 0.7579 | | | 0.7569 | |
EUR/USD forward contracts: | | | | | | | | | | | |
Notional amount | 11,040 | | | 0 | | | 11,040 | | | 0 | | | 11,040 | | | 11,040 | |
Average forward rate | 1.2025 | | | 0 | | | 1.2025 | | | 0 | | | 1.2025 | | | 1.2025 | |
Total | $ | 634,361 | | | $ | 24,627 | | | $ | 658,988 | | | $ | 397,184 | | | $ | 261,804 | | | $ | 658,988 | |
| | | | | | | | | | | |
Interest rate swaps: | | | | | | | | | | | |
Notional amount | $ | 0 | | | $ | 650,000 | | | $ | 650,000 | | | $ | 650,000 | | | $ | 0 | | | $ | 650,000 | |
Average fixed rate | 0 | | 0.81 | % | | 0.81 | % | | 0.81 | % | | 0 | | 0.81 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Notional Amounts of Derivative Instruments |
| Notional Amount by Term to Maturity | | Classification by Notional Amount |
| Under 12 months | | Over 12 months | | Total | | Cash Flow Hedge | | Non Hedge | | Total |
Foreign exchange forward contracts | $ | 100,470 |
| | $ | 8,707 |
| | $ | 109,177 |
| | $ | 99,662 |
| | $ | 9,515 |
| | $ | 109,177 |
|
The following table sets forth the notional amounts of our hedging derivative instruments as of June 30, 2020 (U.S. $ in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Notional Amounts of Derivative Instruments |
| Notional Amount by Term to Maturity | | Classification by Notional Amount |
| Under 12 months | | Over 12 months | | Total | | Cash Flow Hedge | | Non Hedge | | Total |
AUD/USD forward contracts: | | | | | | | | | | | |
Notional amount | $ | 393,705 | | | $ | 8,441 | | | $ | 402,146 | | | $ | 256,890 | | | $ | 145,256 | | | $ | 402,146 | |
Average forward rate | 0.6610 | | | 0.6844 | | | 0.6757 | | | 0.6536 | | | 0.6754 | | | 0.6757 | |
EUR/USD forward contracts: | | | | | | | | | | | |
Notional amount | 7,205 | | | 0 | | | 7,205 | | | 0 | | | 7,205 | | | 7,205 | |
Average forward rate | 1.1179 | | | 0 | | | 1.1179 | | | 0 | | | 1.1179 | | | 1.1179 | |
Total | $ | 400,910 | | | $ | 8,441 | | | $ | 409,351 | | | $ | 256,890 | | | $ | 152,461 | | | $ | 409,351 | |
The effects of derivatives designated as hedging instruments on our consolidated financial statements were as follows (amounts presented are prior to any income tax effects):
| | | | | | | | | | | | | | | | | |
| |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 | | 2019 |
| (U.S. $ in thousands) |
Forward contracts: | | | | | |
Gross unrealized gains (losses) recognized in other comprehensive income (loss) | $ | 19,302 | | | $ | 3,048 | | | $ | (8,369) | |
Net gains (losses) reclassified from cash flow hedge reserve into profit or loss - effective portion | $ | 35,077 | | | $ | (13,663) | | | $ | (9,908) | |
Recognized in cost of revenues | 1,326 | | | (807) | | | (713) | |
Recognized in research and development | 28,490 | | | (9,647) | | | (6,935) | |
Recognized in marketing and sales | 400 | | | (273) | | | (194) | |
Recognized in general and administrative | 4,861 | | | (2,936) | | | (2,066) | |
| | | | | |
Change in fair value used for measuring ineffectiveness: | | | | | |
Cash flow hedging instruments | $ | 19,312 | | | $ | 2,889 | | | $ | (8,345) | |
Hedged item - highly probable forecast purchases | 19,302 | | | 3,048 | | | (8,369) | |
Gains (losses) recognized into general and administrative - ineffective portion | 10 | | | (159) | | | 24 | |
| | | | | |
Interest rate swaps: | | | | | |
Gross unrealized loss recognized in other comprehensive income (loss) | $ | (233) | | | $ | 0 | | | $ | 0 | |
| | | | | |
|
| | | | | | | |
| Foreign Exchange Forward Contracts |
| Fiscal Year Ended June 30, |
| 2018 | | 2017 |
| (U.S. $ in thousands) |
Gross unrealized gain (loss) recognized in other comprehensive income | $ | (5,730 | ) | | $ | 4,517 |
|
Net gain reclassified from cash flow hedge reserve into profit or loss - effective portion | $ | 2,599 |
| | $ | 1,356 |
|
Gain (loss) recognized into profit or loss - ineffective portion | $ | 12 |
| | $ | (3 | ) |
6. Other Non-operating Income (Expense),Non-Operating Expense, Net
Other non-operating income (expense),expense, net consisted of the following: | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 | | 2019 |
| (U.S. $ in thousands) |
Net loss on exchange derivative and capped calls | $ | (616,446) | | | $ | (335,953) | | | $ | (533,908) | |
Foreign currency exchange gain (loss), net | 4,054 | | | 910 | | | (702) | |
Contributions to Atlassian Foundation | (7,809) | | | (5,282) | | | (3,629) | |
Other income (expense) | (558) | | | 1,839 | | | 2,786 | |
| | | | | |
Other non-operating expense, net | $ | (620,759) | | | $ | (338,486) | | | $ | (535,453) | |
|
| | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2018 | | 2017 | | 2016 |
| (U.S. $ in thousands) |
Exchange derivative allocated issuance costs | $ | (1,785 | ) | | $ | — |
| | $ | — |
|
Net unrealized loss on exchange derivative and capped calls | (12,414 | ) | | — |
| | — |
|
Foreign currency exchange gain (loss), net | (413 | ) | | (93 | ) | | 376 |
|
Contributions to Atlassian Foundation | (1,856 | ) | | (1,620 | ) | | (1,463 | ) |
Other income | 1,311 |
| | 371 |
| | 15 |
|
Other non-operating income (expense), net | $ | (15,157 | ) | | $ | (1,342 | ) | | $ | (1,072 | ) |
F-34
7. Expenses
Loss before income tax benefit (expense)expense included the following expenses: | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 | | 2019 |
| (U.S. $ in thousands) |
Depreciation: | | | | | |
Equipment | $ | 2,150 | | | $ | 2,077 | | | $ | 1,336 | |
Computer hardware and software | 1,897 | | | 1,096 | | | 1,476 | |
Furniture and fittings | 3,442 | | | 3,000 | | | 2,031 | |
Leasehold improvements | 16,053 | | | 13,563 | | | 8,604 | |
Total depreciation | 23,542 | | | 19,736 | | | 13,447 | |
Amortization: | | | | | |
Patents and trademarks | 1,124 | | | 5,377 | | | 7,796 | |
Customer relationships | 8,939 | | | 8,086 | | | 21,015 | |
Acquired developed technology | 21,691 | | | 29,072 | | | 27,990 | |
Total amortization | 31,754 | | | 42,535 | | | 56,801 | |
Total depreciation and amortization | $ | 55,296 | | | $ | 62,271 | | | $ | 70,248 | |
Employee benefits expense: | | | | | |
Salaries and wages | 637,143 | | | $ | 467,718 | | | $ | 350,450 | |
Variable compensation | 106,835 | | | 82,851 | | | 63,057 | |
Payroll taxes | 68,543 | | | 53,189 | | | 42,020 | |
Share-based payment expense | 385,732 | | | 313,395 | | | 257,762 | |
Defined contribution plan expense | 39,116 | | | 29,783 | | | 22,566 | |
Contractor expense | 26,589 | | | 35,343 | | | 27,263 | |
Other | 83,350 | | | 63,362 | | | 53,654 | |
Total employee benefits expense | $ | 1,347,308 | | | $ | 1,045,641 | | | $ | 816,772 | |
Impairment: | | | | | |
Right of use assets | 3,759 | | | 0 | | | 0 | |
Property and equipment | 3,676 | | | 0 | | | 0 | |
Total impairment | $ | 7,435 | | | $ | 0 | | | $ | 0 | |
The impairment charge is related to our leased office space. During fiscal year 2021, the Group made the decision to early terminate one of our office leases. The recoverable amount of the related lease assets including right-of-use assets and leasehold improvement was determined to be 0. The impairment charge has been classified within the statement of operations as follows:
| | | | | |
| Fiscal Year Ended June 30, 2021 |
| (U.S. $ in thousands) |
Cost of revenues | $ | 1,710 | |
Research and development | 3,217 | |
Marketing and sales | 195 | |
General and administrative | 2,313 | |
|
| | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2018 | | 2017 | | 2016 |
| (U.S. $ in thousands) |
Depreciation: | |
| | |
| | |
Equipment | $ | 1,214 |
| | $ | 1,022 |
| | $ | 762 |
|
Computer hardware and software | 11,543 |
| | 23,729 |
| | 9,537 |
|
Furniture and fittings | 1,485 |
| | 1,016 |
| | 720 |
|
Leasehold improvements | 7,915 |
| | 5,923 |
| | 3,416 |
|
Total depreciation | 22,157 |
| | 31,690 |
| | 14,435 |
|
Amortization: | |
| | |
| | |
|
Patents and trademarks | 6,990 |
| | 2,907 |
| | 31 |
|
Customer relationships | 29,100 |
| | 12,361 |
| | 55 |
|
Acquired developed technology | 21,188 |
| | 14,588 |
| | 7,405 |
|
Total amortization | 57,278 |
| | 29,856 |
| | 7,491 |
|
Total depreciation and amortization | $ | 79,435 |
| | $ | 61,546 |
| | $ | 21,926 |
|
| | | | | |
Employee benefits expense: | |
| | |
| | |
|
Salaries and wages | $ | 273,326 |
| | $ | 201,953 |
| | $ | 149,506 |
|
Variable compensation | 33,067 |
| | 19,260 |
| | 14,260 |
|
Payroll taxes | 30,478 |
| | 20,792 |
| | 14,250 |
|
Share-based payment expense | 162,873 |
| | 137,448 |
| | 75,480 |
|
Defined contribution plan expense | 16,839 |
| | 13,041 |
| | 10,105 |
|
Contractor expense | 23,666 |
| | 16,333 |
| | 18,352 |
|
Other | 44,877 |
| | 34,605 |
| | 31,946 |
|
Total employee benefits expense | $ | 585,126 |
| | $ | 443,432 |
| | $ | 313,899 |
|
8. Income Tax
The major components of income tax benefitexpense for the fiscal years ended June 30, 2018, 20172021, 2020 and 20162019 are as follows: | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 | | 2019 |
| (U.S. $ in thousands) |
Current income tax: | | | | | |
Current income tax charge | $ | (74,126) | | | $ | (25,715) | | | $ | (15,788) | |
Adjustments in respect of current income tax of previous years | 702 | | | 1,276 | | | (361) | |
Deferred tax: | | | | | |
Benefit relating to origination and reversal of temporary differences | 11,422 | | | 18,702 | | | 30,417 | |
Adjustments in respect of temporary differences of previous years | 351 | | | 1,292 | | | (46,333) | |
Income tax expense | $ | (61,651) | | | $ | (4,445) | | | $ | (32,065) | |
|
| | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2018 | | 2017 | | 2016 |
| (U.S. $ in thousands) |
Current income tax: | | | |
| | |
|
Current income tax charge | $ | (1,956 | ) | | $ | (11,518 | ) | | $ | (6,475 | ) |
Adjustments in respect of current income tax of previous years | (48 | ) | | (25 | ) | | 989 |
|
Deferred tax: | | | | |
|
|
Benefit (expense) relating to origination and reversal of temporary differences | (18,140 | ) | | 28,061 |
| | 17,041 |
|
Adjustments in respect of temporary differences of previous years | (33,363 | ) | | 630 |
| | (2,275 | ) |
Income tax benefit (expense) | $ | (53,507 | ) | | $ | 17,148 |
| | $ | 9,280 |
|
A reconciliation between income tax benefitexpense and the product of accounting income (loss)loss multiplied by the United Kingdom'sU.K.'s domestic tax rate for the fiscal years ended June 30, 2018, 20172021, 2020 and 2016,2019, is as follows:
| | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 | | 2019 |
| (U.S. $ in thousands) |
Loss before income tax expense | $ | (634,664) | | | $ | (346,209) | | | $ | (605,556) | |
At the United Kingdom's statutory income tax rate of 19% in fiscal years 2021, 2020 and 2019 | 120,586 | | | 65,688 | | | 115,031 | |
Tax effect of amounts that are not taxable (deductible) in calculating taxable income: | | | | | |
Research and development incentive | 7,693 | | | 6,816 | | | 660 | |
Non-deductible charges relating to exchangeable senior notes | (149,265) | | | (80,262) | | | (104,445) | |
Share-based payment | (14,674) | | | (10,619) | | | (3,729) | |
Foreign tax credits not utilized | (166) | | | (93) | | | 0 | |
Foreign tax paid | 15,797 | | | 4,765 | | | 0 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Foreign tax rate differential | (9,008) | | | 1,416 | | | 1,685 | |
Adjustment to unrecognized deferred tax balance | (37,062) | | | 8,835 | | | 6,337 | |
Other items, net | 3,395 | | | (3,559) | | | (910) | |
| (62,704) | | | (7,013) | | | 14,629 | |
Adjustments in respect to current income tax of previous years | 702 | | | 1,276 | | | (361) | |
Adjustments in respect to deferred income tax of previous years | 351 | | | 1,292 | | | (46,333) | |
Income tax expense | $ | (61,651) | | | $ | (4,445) | | | $ | (32,065) | |
In March 2021, the UK announced an increase in the main corporate tax rate from 19% to 25%, effective for financial years beginning after April 1, 2023. Due to the magnitude of UK operations, this change is not expected to have a material impact to the Company.
|
| | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2018 | | 2017 | | 2016 |
| (U.S. $ in thousands) |
Loss before income tax benefit (expense) | $ | (65,834 | ) | | $ | (59,652 | ) | | $ | (4,907 | ) |
At the United Kingdom's statutory income tax rate of 19%, 19.75%, and 20.00% in fiscal 2018, 2017 and 2016, respectively | 12,508 |
| | 11,781 |
| | 983 |
|
Tax effect of amounts that are not taxable (deductible) in calculating taxable income: | | |
|
| |
|
|
Research and development incentive | 2,620 |
| | 18,404 |
| | 20,673 |
|
Non-deductible charges relating to exchangeable senior notes | (3,195 | ) | | — |
| | — |
|
Share-based payment | (11,199 | ) | | (9,946 | ) | | (6,317 | ) |
Foreign tax credits not utilized | (81 | ) | | — |
| | (4,011 | ) |
Amortization of intangible assets that do not give rise to deferred taxes | (31 | ) | | (673 | ) | | (907 | ) |
Non-deductible retention on acquisition | — |
| | (150 | ) | | (405 | ) |
Non-assessable non-operating items | — |
| | — |
| | 7,995 |
|
Foreign tax rate adjustment | (4,968 | ) | | (1,990 | ) | | (7,341 | ) |
Adjustment to deferred tax balance | (14,602 | ) | | (332 | ) | | 150 |
|
Other items, net | (1,148 | ) | | (551 | ) | | (254 | ) |
| (20,096 | ) | | 16,543 |
| | 10,566 |
|
Adjustments in respect to current income tax of previous years | (48 | ) | | (25 | ) | | 989 |
|
Adjustments in respect to deferred income tax of previous years | (33,363 | ) | | 630 |
| | (2,275 | ) |
Income tax benefit (expense) | $ | (53,507 | ) | | $ | 17,148 |
| | $ | 9,280 |
|
Details of deferred taxes, recognized and unrecognized: | | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Depreciation for tax purposes | $ | 275 | | | $ | 500 | |
Provisions, accruals and prepayments | (1,427) | | | 152 | |
Deferred revenue | (948) | | | 697 | |
Unrealized foreign currency exchange losses (gains) | 9 | | | (1,414) | |
Unrealized investment gains | (23,150) | | | (26,133) | |
Carried forward tax losses | 7,610 | | | 5,893 | |
Carried forward tax credits—credited to profit and loss | 9,129 | | | 3,571 | |
Intangible assets | 15,555 | | | 17,538 | |
Tax benefit from share plans—income | 1,143 | | | 1,012 | |
Tax benefit from share plans—equity | 733 | | | 1,230 | |
| | | |
Other, net | 620 | | | 1,001 | |
| | | |
Deferred tax assets, net | $ | 9,549 | | | $ | 4,047 | |
Reflected in the consolidated statements of financial position as follows: | | | |
Deferred tax assets | $ | 36,174 | | | $ | 35,351 | |
Deferred tax liabilities | (26,625) | | | (31,304) | |
Deferred tax assets, net | $ | 9,549 | | | $ | 4,047 | |
Items for which no deferred tax asset has been recognized: | | | |
Depreciation and amortization for tax purposes | $ | 9,747 | | | $ | 7,197 | |
Provisions, accruals and prepayments | 45,711 | | | 19,561 | |
Deferred revenue | 86,722 | | | 45,874 | |
Unrealized foreign currency exchange gains | 3,569 | | | 92 | |
Unused tax losses | 814,106 | | | 616,667 | |
Intangible assets | 1,682,610 | | | 1,818,086 | |
Tax benefit from share plans- income | 69,113 | | | 54,066 | |
Tax benefit from share plans- equity | 74,631 | | | 89,151 | |
Capital loss | 0 | | | 1,291 | |
Carried forward tax credits- credited to profit and loss | 100,251 | | | 70,259 | |
Unrealized loss on investments | 1,541 | | | 0 | |
Other, net | 28,063 | | | 10,787 | |
| $ | 2,916,064 | | | $ | 2,733,031 | |
| | | |
| | | |
|
| | | | | | | | | | | | | | | |
| Consolidated Statements of Financial Position | | Consolidated Statements of Operations |
|
| As of June 30, | | Fiscal Year Ended June 30,
|
| 2018 | | 2017 | | 2018 | | 2017 |
| (U.S. $ in thousands) |
Depreciation for tax purposes | $ | 2,537 |
| | $ | 1,122 |
| | $ | 1,415 |
| | $ | 4,331 |
|
Provisions, accruals and prepayments | 7,349 |
| | 7,560 |
| | (211 | ) | | 1,795 |
|
Deferred revenue | 28,093 |
| | 15,275 |
| | 12,818 |
| | 11,621 |
|
Unrealized foreign currency exchange gains | (410 | ) | | (184 | ) | | (226 | ) | | — |
|
Carried forward tax losses (gains) | 850 |
| | 35,071 |
| | (34,221 | ) | | 29,729 |
|
Carried forward tax credits—credited to profit and loss | 5,456 |
| | 46,412 |
| | (41,546 | ) | | 9,709 |
|
Intangible assets | 16,620 |
| | (34,060 | ) | | 50,680 |
| | 9,091 |
|
Tax benefit (expense) from share plans—income | 216 |
| | 30,597 |
| | (30,379 | ) | | 10,695 |
|
Tax benefit (expense) from share plans—equity | 127 |
| | 42,846 |
| | (123 | ) | | (48,012 | ) |
Deferred foreign taxes | (10,605 | ) | | — |
| | (10,605 | ) | | — |
|
Other, net | 2,378 |
| | (350 | ) | | 895 |
| | (267 | ) |
Deferred tax benefit | — |
| | — |
| | $ | (51,503 | ) | | $ | 28,692 |
|
Deferred tax assets, net | $ | 52,611 |
| | $ | 144,289 |
| | |
| | |
|
Reflected in the consolidated statements of financial position as follows: | |
| | |
| | |
| | |
|
Deferred tax assets | $ | 64,662 |
| | $ | 188,239 |
| | |
| | |
|
Deferred tax liabilities | (12,051 | ) | | (43,950 | ) | | |
| | |
|
Deferred tax assets, net | $ | 52,611 |
| | $ | 144,289 |
| | |
| | |
|
Items for which no deferred tax asset has been recognized: | |
| | |
| | |
| | |
|
Depreciation and amortization for tax purposes | 2,081 |
| | $ | — |
| | | | |
Provisions, accruals and prepayments | 3,514 |
| | — |
| | | | |
Deferred revenue | 22,541 |
| | — |
| | | | |
Unrealized foreign currency exchange gains | 132 |
| | — |
| | | | |
Unused tax losses | 166,465 |
| | 2,022 |
| | | | |
Intangible assets | 2,052,484 |
| | — |
| | | | |
Tax benefit from share plans- income | 30,114 |
| | — |
| | | | |
Tax benefit from share plans- equity | 62,760 |
| | — |
| | | | |
Capital loss | 1,391 |
| | 1,391 |
| | | | |
Carried forward tax credits- credited to profit and loss | 25,524 |
| | 3,587 |
| | | | |
Unrealized loss on investments | 160 |
| | 51 |
| | | | |
Other, net | 1,121 |
| | — |
| | | | |
| $ | 2,368,287 |
| | $ | 7,051 |
| | | | |
Details of deferred tax benefits and expenses: | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 | | 2019 |
| (U.S. $ in thousands) |
Depreciation for tax purposes | $ | (215) | | | $ | 465 | | | $ | (2,564) | |
Provisions, accruals and prepayments | (1,843) | | | 240 | | | (7,164) | |
Deferred revenue | (1,198) | | | 3,775 | | | (23,932) | |
Unrealized foreign currency exchange losses (gains) | 1,422 | | | (986) | | | (101) | |
Unrealized investment losses (gains) | 5,269 | | | 421 | | | (405) | |
Carried forward tax losses (gains) | 1,970 | | | 3,430 | | | (409) | |
Carried forward tax credits—credited to profit and loss | 5,555 | | | 1,055 | | | (3,005) | |
Intangible assets | 44 | | | 9,445 | | | 13,095 | |
Tax benefit from share plans—income | 162 | | | 459 | | | 331 | |
Tax benefit (expense) from share plans—equity | (704) | | | (91) | | | 300 | |
Deferred foreign taxes | 0 | | | 0 | | | 10,605 | |
Other, net | 1,311 | | | 1,781 | | | (2,667) | |
Deferred tax benefit (expense) | $ | 11,773 | | | $ | 19,994 | | | $ | (15,916) | |
| | | | | |
| | | | | |
| | | | | |
|
| | | | | | | |
| 2018 | | 2017 |
| (U.S. $ in thousands) |
Reconciliation of deferred tax assets, net | | | |
|
Balance as of July 1, | $ | 144,289 |
| | $ | 120,773 |
|
Deferred tax charge (benefit) for the year | (51,503 | ) | | 28,692 |
|
Debited (credited) to equity | (40,091 | ) | | 34,517 |
|
Adjustment in respect of income tax payable | (84 | ) | | (7,282 | ) |
Impact from business combinations | — |
| | (32,411 | ) |
Balance as of June 30, | $ | 52,611 |
| | $ | 144,289 |
|
The U.S. Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017 introduces a numberReconciliation of changes to U.S. income tax law. Among other changes, the Tax Act (i) reduces the U.S. federal corporate tax rate from 35% to 21%, (ii) enacts limitations regarding the deductibility of interest expense, (iii) modifies the provisions relating to the limitations on deductions for executive compensation of publicly traded corporations, (iv) imposes new limitations on the utilization of net operating loss arising in taxable years beginning after December 31, 2017, (v) repeals the corporate alternative minimum tax and provides for a refund of existing alternative minimum tax credits, and (vi) creates new taxes on certain foreign-sourced earnings and certain related-party payments, which are referred to as the global intangible low-taxed income tax and the base erosion tax, respectively. As of June 30, 2018, the Group has completed the accounting for the federal tax effects of the Tax Act, however the Group’s analysis of the state impacts of the Tax Act related state non-conformity with certain provisions of the Tax Act is not yet complete. The accounting for the state impacts of the Tax Act will be completed in fiscal 2019, in accordance with International Accounting Standard 12.
As a result of the new U.S. federal statutory corporate tax rate of 21% contained within the Tax Act, the Group recorded non-cash charges of $16.9 million to tax expense and $16.9 million to equity to revalue the Group’s U.S. net deferred tax assets. Additionally, in December 2017, as a result of the Group’sassets:
| | | | | | | | | | | | |
| 2021 | | 2020 | |
| (U.S. $ in thousands) |
| | | | |
Balance at the beginning of | $ | 4,047 | | | $ | 3,212 | | |
Deferred tax expense for the year | 11,773 | | | 19,994 | | |
Debited to equity | (6,147) | | | (17,867) | | |
| | | | |
Impact from business combinations | (97) | | | (1,401) | | |
Currency revaluation impact | (27) | | | 109 | | |
Balance at the end of | $ | 9,549 | | | $ | 4,047 | | |
The assessment of the realizability of itsthe Australian and U.S. deferred tax assets is based on all available positive and negative evidence. Such evidence includes, but is not limited to, recent cumulative earnings or losses, expectations of future taxable income by taxing jurisdiction, and the Group recorded non-cash chargescarry-forward periods available for the utilization of $30.4 milliondeferred tax assets. The assessment of the recoverability of Australian and U.S. deferred tax assets will not change until there is sufficient evidence to tax expense and $25.8 million to equity to reduce the carrying value of these assets. Making this decision included consideration of our historical operating results and cumulative losses in the United States.support their realizability. The Group will continue to assess and record any necessary changes to align its deferred tax assets to their realizable value. In December 2017, the
The Group made changes to its corporate structure to include certain foreign subsidiariesdoes not have any material deferred tax liabilities associated with investments in its U.S. consolidatedsubsidiaries.
The Group recognizes certain amounts directly in equity including current tax group that resultedbenefits related to tax deductions in the creationexcess of certaincumulative book expense for share based payment awards, deferred tax benefits related to revaluing its deferred tax assets and liabilities, including a non-recognized deferred tax asset of $2.1 billion relatedfor share based payment awards to the fair market value of its intellectual property. The assets are included in the Group’s quarterly assessmentat each reporting date, and are only recognized to the extent they are determined to be realizable.
The $34.5 million credited to equity in fiscal 2017, primarily represents the deferred tax benefit of share-based payments in excess of the cumulative expense recognized to date of the share-based award. The total deferred taxor benefit is determined using the intrinsic value of the share-based award as of each reporting date.
The $7.3 million adjustment in respect of income taxes payable in fiscal 2017 represents the utilization of net operating loss deferred tax assets against taxable income of prior years, resulting in a refund due to the Group of prior year taxes paid.
The impact from business combinations of $32.4 million in fiscal 2017 represents the net deferred tax assets and liabilities recognized and charged to goodwill as a result of the acquisitions of Dogwood Labs, Inc. (“StatusPage”) and Trello, Inc. (“Trello”). The Group acquired net operating loss carryforward deferred tax assets of approximately $0.5 million and $13.6 million from StatusPage and Trello, respectively. The Group also recognized deferred tax liabilities of approximately $3.1 million and $45.3 million related to acquired intangibles from StatusPageunrealized gains and Trello, respectively, the amortization of which will not be deductible from future taxable profits.losses that are recorded in other comprehensive income.
| | | | | | | | | | | |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Amounts recognized directly in equity: | | | |
| | | |
Net deferred tax—debited directly to equity | $ | (6,147) | | | $ | (17,867) | |
|
| | | | | | | |
| 2018 | | 2017 |
| (U.S. $ in thousands) |
Amounts recognized directly in equity: | | | |
|
Current tax—credited (debited) directly to equity | $ | — |
| | $ | 401 |
|
Net deferred tax—credited (debited) directly to equity | (40,091 | ) | | 34,517 |
|
| $ | (40,091 | ) | | $ | 34,918 |
|
The Group has the following losses and credits available for offsetting future profit and taxes: | | | | | | | | | | | | | | | | | |
| Expiration | | Amount carried forward | | Amount recognized as of June 30, 2021 |
| | | (U.S. $ in thousands) |
U.S. net operating loss (Pre - 2017 Tax Reform) | June 30, 2031 - December 30, 2038 | | $ | 137,123 | | | $ | 266 | |
U.S. net operating loss (Post - 2017 Tax Reform) | None | | 3,433,815 | | | 6,659 | |
State net operating loss- various states | June 30, 2024 - June 30, 2040 | | 1,090,281 | | | 600 | |
U.K. net operating loss | None | | 4,338 | | | 0 | |
U.S. research and development credits | June 30, 2030 - June 30, 2040 | | 70,589 | | | 651 | |
State research and development credits- California | None | | 37,299 | | | 257 | |
State research and development credits- Texas | June 30, 2036 - June 30, 2040 | | 4,720 | | | 4,720 | |
Australia capital loss | None | | 4,637 | | | 0 | |
State enterprise zone credits | June 30, 2020 - June 30, 2024 | | 260 | | | 2 | |
India alternative minimum tax credits | March 30, 2036 | | 3,498 | | | 3,498 | |
Poland research and development credits | June 30,2026 | | 728 | | | 0 | |
|
| | | | | | | |
| Expiration | Amount carried forward | Amount recognized as of June 30, 2018 |
United States net operating loss | June 30, 2032-June 30, 2038 | $ | 762,682 |
| $ | 3,774 |
|
State net operating loss | June 30, 2024-June 30, 2038 | 110,770 |
| 1,879 |
|
United Kingdom net operating loss | None | 1,790 |
| 304 |
|
United States research and development credits | June 30, 2031-June 30, 2038 | 18,211 |
| 121 |
|
State research and development credits- California | None | 6,672 |
| — |
|
State research and development credits- Texas | June 30, 2036-June 30, 2038 | 1,617 |
| 1,557 |
|
Australia research and development credits | None | 3,778 |
| 3,778 |
|
Australia capital loss | None | 4,637 |
| — |
|
State enterprise zone credits | June 30, 2020-June 30, 2024 | 867 |
| — |
|
9. Trade Receivables
The Group’s trade receivables consisted of the following:
|
| | | | | | | |
| As of June 30, |
| 2018 | | 2017 |
| (U.S. $ in thousands) |
Trade receivables | $ | 46,770 |
| | $ | 26,923 |
|
Provision for impairment of receivables | (629 | ) | | (116 | ) |
| $ | 46,141 |
| | $ | 26,807 |
|
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Gross trade receivables | $ | 173,849 | | | $ | 113,175 | |
Expected credit loss allowance | (376) | | | (1,156) | |
Total trade receivables | $ | 173,473 | | | $ | 112,019 | |
As of June 30, 2018 two customers accounted for2021, no customer represented more than 10% of the total trade receivables balance. These customers, both channel partners, represent 15% and 10% of the total trade receivables balance. As of June 30, 2017,2020, one customer a channel partner, represented 11% of the total trade receivables balance.
Impaired trade receivablesExpected Credit Loss Allowance
As of June 30, 2018 and 2017, the Group had a provision for impaired receivables of $629,000 and $116,000, respectively.
The movements in the provision for impairment of receivablesECL allowance were as follows: | | | | | |
| (U.S. $ in thousands) |
As of June 30, 2019 | $ | 519 | |
Change in estimate | 637 | |
| |
As of June 30, 2020 | $ | 1,156 | |
Change in estimate | (780) | |
| |
As of June 30, 2021 | $ | 376 | |
|
| | | |
| (U.S. $ in thousands) |
As of July 1, 2016 | $ | — |
|
Charge for the period | 116 |
|
As of June 30, 2017 | 116 |
|
Charge for the period | 513 |
|
As of June 30, 2018 | $ | 629 |
|
Past due but not impaired
As of June 30, 2018 and 2017, trade receivables that were past due but not impaired totaled $5.0 million and $5.9 million, respectively. These relate to a number of channel partners and customers for whom there is no recent history of default. The aging analysis of these trade receivables is as follows:
|
| | | | | | | |
| As of June 30, |
| 2018 | | 2017 |
| (U.S. $ in thousands) |
Up to three months | $ | 4,923 |
| | $ | 5,658 |
|
Greater than three months | 74 |
| | 276 |
|
| $ | 4,997 |
| | $ | 5,934 |
|
Fair value and credit risk
Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.
The maximum exposure tofollowing table sets forth the information about the credit risk at the end of the reporting period is the carrying amount of each class of receivables mentioned above. The fair value of securities held for certain trade receivables is insignificant, as is the fair value of any collateral sold or repledged. Refer to Note 5, “Financial Risk Management,” for more informationexposure on the risk management policy of the Group and the credit quality of the Group's trade receivables.receivables using a provision matrix:
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Past due days | | |
| Current | | < 90 days | | > 90 days | | Total |
| (U.S. $ in thousands except ECL rate) |
As of June 30, 2021 | | | | | | | |
ECL rate | 0.0 | % | | 0.3 | % | | 20.9 | % | | |
Trade receivables carrying amount | $ | 157,804 | | | $ | 14,468 | | | $ | 1,577 | | | $ | 173,849 | |
ECL allowance | 6 | | | 41 | | | 329 | | | 376 | |
| | | | | | | |
As of June 30, 2020 | | | | | | | |
ECL rate | 0.5 | % | | 4.1 | % | | 52.9 | % | | |
Trade receivables carrying amount | $ | 105,585 | | | $ | 6,858 | | | $ | 732 | | | $ | 113,175 | |
ECL allowance | 489 | | | 280 | | | 387 | | | 1,156 | |
For the purpose of the provision matrix, customers are clustered into different risk classes, mainly based on past due days of trade receivables. We also consider market information such as the country risk assessment of their country of origin, type of industry and objective evidence of credit impairment for individual receivables. Loss rates used to reflect lifetime ECL are based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
10. Property and Equipment
Property and equipment, net consisted of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Equipment | | Computer Hardware and Software | | Furniture and Fittings | | Leasehold Improvements and Other | | Construction in progress* | | Total |
| (U.S. $ in thousands) |
As of June 30, 2020 | | | | | | | | | | | |
Opening cost balance | $ | 7,857 | | | $ | 10,548 | | | $ | 14,606 | | | $ | 90,038 | | | $ | 0 | | | $ | 123,049 | |
Additions | 1,967 | | | 1,825 | | | 5,190 | | | 17,608 | | | 10,985 | | | 37,575 | |
Disposals | (118) | | | (289) | | | (105) | | | (1,116) | | | 0 | | | (1,628) | |
Adjustment due to IFRS 16 adoption | 0 | | | 0 | | | 0 | | | (2,767) | | | 0 | | | (2,767) | |
Effect of change in exchange rates | (54) | | | (19) | | | (4) | | | (663) | | | 276 | | | (464) | |
Closing cost balance | 9,652 | | | 12,065 | | | 19,687 | | | 103,100 | | | 11,261 | | | 155,765 | |
| | | | | | | | | | | |
Opening accumulated depreciation | (3,658) | | | (7,808) | | | (5,428) | | | (24,696) | | | 0 | | | (41,590) | |
Depreciation expense | (2,077) | | | (1,096) | | | (3,000) | | | (13,563) | | | 0 | | | (19,736) | |
Effect of change in exchange rates | 13 | | | 4 | | | 1 | | | 122 | | | 0 | | | 140 | |
Disposals | 104 | | | 289 | | | 39 | | | 1,116 | | | 0 | | | 1,548 | |
Adjustment due to IFRS 16 adoption | 0 | | | 0 | | | 0 | | | 1,521 | | | 0 | | | 1,521 | |
Closing accumulated depreciation | (5,618) | | | (8,611) | | | (8,388) | | | (35,500) | | | 0 | | | (58,117) | |
Net book balance | $ | 4,034 | | | $ | 3,454 | | | $ | 11,299 | | | $ | 67,600 | | | $ | 11,261 | | | $ | 97,648 | |
| | | | | | | | | | | |
As of June 30, 2021 | | | | | | | | | | | |
Opening cost balance | $ | 9,652 | | | $ | 12,065 | | | $ | 19,687 | | | $ | 103,100 | | | $ | 11,261 | | | $ | 155,765 | |
Additions | 1,077 | | | 170 | | | 2,051 | | | 4,807 | | | 21,872 | | | 29,977 | |
Transfer to assets held for sale | 0 | | | 0 | | | 0 | | | 0 | | | (35,123) | | | (35,123) | |
Disposals | (311) | | | (2,694) | | | (643) | | | (1,266) | | | 0 | | | (4,914) | |
Effect of change in exchange rates | 12 | | | (4) | | | 93 | | | 355 | | | 1,990 | | | 2,446 | |
Closing cost balance | 10,430 | | | 9,537 | | | 21,188 | | | 106,996 | | | $ | 0 | | | 148,151 | |
| | | | | | | | | | | |
Opening accumulated depreciation | (5,618) | | | (8,611) | | | (8,388) | | | (35,500) | | | 0 | | | (58,117) | |
Depreciation expense | (2,150) | | | (1,897) | | | (3,442) | | | (16,053) | | | 0 | | | (23,542) | |
Impairment | 0 | | | 0 | | | 0 | | | (3,676) | | | 0 | | | (3,676) | |
Effect of change in exchange rates | (7) | | | 4 | | | (31) | | | (99) | | | 0 | | | (133) | |
Disposals | 230 | | | 1,442 | | | 602 | | | 1,264 | | | 0 | | | 3,538 | |
Closing accumulated depreciation and impairment | (7,545) | | | (9,062) | | | (11,259) | | | (54,064) | | | 0 | | | (81,930) | |
| | | | | | | | | | | |
Net book balance | $ | 2,885 | | | $ | 475 | | | $ | 9,929 | | | $ | 52,932 | | | $ | 0 | | | $ | 66,221 | |
*Construction in progress is related to the construction project associated with our new headquarters building in Sydney, Australia. As of June 30, 2021, construction in progress has been transferred to assets held for sale. Please refer to Note 14, “Other Balance Sheet Accounts” for details. |
| | | | | | | | | | | | | | | | | | | |
| Equipment | | Computer Hardware and Software | | Furniture and Fittings | | Leasehold Improvements | | Total |
| (U.S. $ in thousands) |
As of June 30, 2017 | | | | | | | | | |
Opening cost balance | $ | 3,400 |
| | $ | 52,141 |
| | $ | 5,409 |
| | $ | 25,114 |
| | $ | 86,064 |
|
Additions | 1,138 |
| | 2,106 |
| | 1,693 |
| | 9,168 |
| | 14,105 |
|
Disposals | (645 | ) | | (794 | ) | | (34 | ) | | (471 | ) | | (1,944 | ) |
Effect of change in exchange rates | 2 |
| | (5 | ) | | 15 |
| | 29 |
| | 41 |
|
Closing cost balance | 3,895 |
| | 53,448 |
| | 7,083 |
| | 33,840 |
| | 98,266 |
|
| | | | | | | | | |
Opening accumulated depreciation | (1,727 | ) | | (15,390 | ) | | (1,444 | ) | | (8,741 | ) | | (27,302 | ) |
Depreciation expense | (1,022 | ) | | (23,729 | ) | | (1,016 | ) | | (5,923 | ) | | (31,690 | ) |
Effect of change in exchange rates | (2 | ) | | 1 |
| | (6 | ) | | 6 |
| | (1 | ) |
Disposals | 630 |
| | 782 |
| | 17 |
| | 471 |
| | 1,900 |
|
Closing accumulated depreciation | (2,121 | ) | | (38,336 | ) | | (2,449 | ) | | (14,187 | ) | | (57,093 | ) |
Net book amount | $ | 1,774 |
| | $ | 15,112 |
| | $ | 4,634 |
| | $ | 19,653 |
| | $ | 41,173 |
|
As of June 30, 2018 | | | | | | | | | |
Opening cost balance | $ | 3,895 |
| | $ | 53,448 |
| | $ | 7,083 |
| | $ | 33,840 |
| | $ | 98,266 |
|
Additions | 1,651 |
| | 247 |
| | 4,023 |
| | 28,279 |
| | 34,200 |
|
Disposals | (320 | ) | | (44,545 | ) | | (83 | ) | | (668 | ) | | (45,616 | ) |
Effect of change in exchange rates | (2 | ) | | (3 | ) | | 8 |
| | 5 |
| | 8 |
|
Closing cost balance | 5,224 |
| | 9,147 |
| | 11,031 |
| | 61,456 |
| | 86,858 |
|
| | | | | | | | | |
Opening accumulated depreciation | (2,121 | ) | | (38,336 | ) | | (2,449 | ) | | (14,187 | ) | | (57,093 | ) |
Depreciation expense | (1,214 | ) | | (11,543 | ) | | (1,485 | ) | | (7,915 | ) | | (22,157 | ) |
Effect of change in exchange rates | (1 | ) | | 1 |
| | (4 | ) | | 21 |
| | 17 |
|
Disposals | 272 |
| | 43,048 |
| | 43 |
| | 668 |
| | 44,031 |
|
Closing accumulated depreciation | (3,064 | ) | | (6,830 | ) | | (3,895 | ) | | (21,413 | ) | | (35,202 | ) |
Net book amount | $ | 2,160 |
| | $ | 2,317 |
| | $ | 7,136 |
| | $ | 40,043 |
| | $ | 51,656 |
|
11. Goodwill and Intangible Assets
Goodwill
Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. Goodwill amounts are not amortized, but rather tested for impairment at least annually during the fourth quarter.quarter, or when indicators of impairment exist.
Goodwill consisted of the following: | | | | | | | | |
| | Goodwill |
| Note | (U.S. $ in thousands) |
Balance as of June 30, 2019 | | $ | 608,907 | |
Additions | 13 | 36,261 | |
Effect of change in exchange rates | | (28) | |
Balance as of June 30, 2020 | | $ | 645,140 | |
Additions | 13 | 80,649 | |
Effect of change in exchange rates | | (31) | |
Balance as of June 30, 2021 | | $ | 725,758 | |
|
| | | |
| Goodwill |
| (U.S. $ in thousands) |
Balance as of July 1, 2016 | $ | 7,138 |
|
Additions | 304,712 |
|
Effect of change in exchange rates | 50 |
|
Balance as of June 30, 2017 | 311,900 |
|
Additions | — |
|
Effect of change in exchange rates | 43 |
|
Balance as of June 30, 2018 | $ | 311,943 |
|
Impairment test forAdditions to goodwill
The Group operates during fiscal year 2021 were as a single CGU and all goodwill is allocated to this unit. The recoverable
amount of goodwill was assessed by comparing the market capitalizationresult of the Group to its book value, among other qualitative factors, when reviewing for indicators of impairment.
There was no impairment of goodwillacquisitions completed during the fiscal years ended June 30, 2018, 2017,year including, primarily Mindville AB (“Mindville”) and 2016.Chart.IO, Inc. (“Chartio”). Additions to goodwill during fiscal year 2020 were as a result of the acquisitions of Code Barrel Pty Ltd (“Code Barrel”), Halp, Inc. (“Halp”) and net working capital adjustments related to the acquisition of AgileCraft LLC (“AgileCraft”). See Note 13, “Business combinations” for additional information regarding acquisitions.
Intangible assets
Intangible assets consisted of the following:
|
| | | | | | | | | | | | | | | | | | | |
| Patents, Trademarks and Other Rights | | Acquired Developed Technology | | Employee Contracts | | Customer Relationships | | Total |
| (U.S. $ in thousands) |
As of June 30, 2017 | |
| | |
| | |
| | |
| | |
|
Opening cost balance | $ | 220 |
| | $ | 75,926 |
| | $ | 3,631 |
| | $ | 484 |
| | $ | 80,261 |
|
Additions | 21,525 |
| | 57,300 |
| | — |
| | 58,200 |
| | 137,025 |
|
Effect of change in exchange rates | — |
| | 103 |
| | — |
| | — |
| | 103 |
|
Closing cost balance | 21,745 |
| | 133,329 |
| | 3,631 |
| | 58,684 |
| | 217,389 |
|
| | | | | | | | | |
Opening accumulated amortization | (135 | ) | | (62,480 | ) | | (3,631 | ) | | (438 | ) | | (66,684 | ) |
Amortization charge | (2,907 | ) | | (14,588 | ) | | — |
| | (12,361 | ) | | (29,856 | ) |
Effect of change in exchange rates | — |
| | (60 | ) | | — |
| | — |
| | (60 | ) |
Closing accumulated amortization | (3,042 | ) | | (77,128 | ) | | (3,631 | ) | | (12,799 | ) | | (96,600 | ) |
Net book amount | $ | 18,703 |
| | $ | 56,201 |
| | $ | — |
| | $ | 45,885 |
| | $ | 120,789 |
|
As of June 30, 2018 | |
| | |
| | |
| | |
| | |
|
Opening cost balance | $ | 21,745 |
| | $ | 133,329 |
| | $ | 3,631 |
| | $ | 58,684 |
| | $ | 217,389 |
|
Effect of change in exchange rates | — |
| | 90 |
| | — |
| | — |
| | 90 |
|
Closing cost balance | 21,745 |
| | 133,419 |
| | 3,631 |
| | 58,684 |
| | 217,479 |
|
| | | | | | | | | |
Opening accumulated amortization | (3,042 | ) | | (77,128 | ) | | (3,631 | ) | | (12,799 | ) | | (96,600 | ) |
Amortization charge | (6,990 | ) | | (21,188 | ) | | — |
| | (29,100 | ) | | (57,278 | ) |
Effect of change in exchange rates | — |
| | (24 | ) | | — |
| | — |
| | (24 | ) |
Closing accumulated amortization | (10,032 | ) | | (98,340 | ) | | (3,631 | ) | | (41,899 | ) | | (153,902 | ) |
Net book amount | $ | 11,713 |
| | $ | 35,079 |
| | $ | — |
| | $ | 16,785 |
| | $ | 63,577 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Patents, Trademarks and Other Rights | | Acquired Developed Technology | | | | Customer Relationships | | | | Total |
| (U.S. $ in thousands) |
As of June 30, 2020 | | | | | | | | | | | |
Opening cost balance | $ | 27,295 | | | $ | 197,093 | | | | | $ | 125,852 | | | | | $ | 350,240 | |
Additions | 500 | | | 18,100 | | | | | 2,650 | | | | | 21,250 | |
Disposals | 0 | | | (449) | | | | | 0 | | | | | (449) | |
| | | | | | | | | | | |
Closing cost balance | 27,795 | | | 214,744 | | | | | 128,502 | | | | | 371,041 | |
| | | | | | | | | | | |
Opening accumulated amortization | (17,828) | | | (118,523) | | | | | (62,914) | | | | | (199,265) | |
Amortization charge | (5,377) | | | (29,072) | | | | | (8,086) | | | | | (42,535) | |
Disposals | 0 | | | 449 | | | | | 0 | | | | | 449 | |
| | | | | | | | | | | |
Closing accumulated amortization | (23,205) | | | (147,146) | | | | | (71,000) | | | | | (241,351) | |
Net book balance | $ | 4,590 | | | $ | 67,598 | | | | | $ | 57,502 | | | | | $ | 129,690 | |
| | | | | | | | | | | |
As of June 30, 2021 | | | | | | | | | | | |
Opening cost balance | $ | 27,795 | | | $ | 214,744 | | | | | $ | 128,502 | | | | | $ | 371,041 | |
Additions | 1,800 | | | 23,005 | | | | | 1,849 | | | | | 26,654 | |
Disposals | (220) | | | (6,900) | | | | | (310) | | | | | (7,430) | |
| | | | | | | | | | | |
Closing cost balance | 29,375 | | | 230,849 | | | | | 130,041 | | | | | 390,265 | |
| | | | | | | | | | | |
Opening accumulated amortization | (23,205) | | | (147,146) | | | | | (71,000) | | | | | (241,351) | |
Amortization charge | (1,124) | | | (21,691) | | | | | (8,939) | | | | | (31,754) | |
Disposals | 220 | | | 6,900 | | | | | 310 | | | | | 7,430 | |
| | | | | | | | | | | |
Closing accumulated amortization | (24,109) | | | (161,937) | | | | | (79,629) | | | | | (265,675) | |
Net book balance | $ | 5,266 | | | $ | 68,912 | | | | | $ | 50,412 | | | | | $ | 124,590 | |
As of June 30, 2018, no2021, 0 development costs have qualified for capitalization, and all development costs have been expensed as incurred.
As of June 30, 2018,2021, the remaining amortization period for patents, trademarks and other rights ranged from one year to ten years. The remaining amortization period for acquired developed technology ranged from approximately one year to threefive years. The remaining amortization period for customer relationships ranged from one year to seven years.
12. Leases
The Group leases various offices in locations including, Sydney, Australia; the San Francisco Bay Area, California, New York, New York, Austin, Texas, and Boston, Massachusetts, in the United States; Amsterdam, the Netherlands; Manila, the Philippines; Bengaluru, India; Yokohama, Japan; Stockholm, Sweden; and Gdansk, Poland under leases expiring within one to eight years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.
The following table sets forth the carrying amounts of our right-of-use assets and lease obligations and the movements during the fiscal years ended June 30, 2021 and 2020:
| | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Right-of-use assets | | | |
Balance at the beginning of period | $ | 217,683 | | | $ | 241,421 | |
Additions | 28,939 | | | 14,270 | |
Disposals | (256) | | | (2,388) | |
Depreciation expense | (37,552) | | | (35,127) | |
Effect of change in exchange rates | 245 | | | (493) | |
Impairment of right-of-use asset | (3,759) | | | 0 | |
Balance at the end of period | $ | 205,300 | | | $ | 217,683 | |
| | | |
Lease obligations | | | |
Balance at the beginning of period | $ | 264,568 | | | $ | 285,973 | |
Additions | 27,042 | | | 13,213 | |
Disposals | (270) | | | (2,388) | |
Interest expense | 7,019 | | | 7,702 | |
Payments | (44,874) | | | (38,125) | |
Effect of change in exchange rates | 3,064 | | | (1,807) | |
Balance at the end of period | $ | 256,549 | | | $ | 264,568 | |
| | | |
Lease obligations, current | $ | 42,446 | | | $ | 34,743 | |
Lease obligations, non-current | 214,103 | | | 229,825 | |
Total lease obligations, as the end of period | $ | 256,549 | | | $ | 264,568 | |
The following table presents supplemental information about our leases: | | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 |
| |
Short-term leases and low value leases expense: | | | |
Short-term leases expense | $ | 336 | | | $ | 2,021 | |
Low value leases expense | $ | 1,436 | | | $ | 336 | |
| | | |
Cash outflows: | | | |
Principal portion of the lease obligations | $ | 37,855 | | | $ | 30,423 | |
Interest portion of the lease obligations | 7,019 | | | 7,702 | |
Short-term leases and low value leases | 2,999 | | | 4,405 | |
Total cash outflows | $ | 47,873 | | | $ | 42,530 | |
As of June 30, 2021, we have entered a lease with future lease payments of $88.9 million that has not yet commenced and is not yet recorded on our consolidated statements of financial position. This lease will commence in fiscal year 2022 with a non-cancelable lease term of 12 years.
13. Business combinations
Fiscal 2018year 2021
The Group did not have any business combinations during the fiscal year ended June 30, 2018.Mindville
Fiscal 2017
Trello
On February 3, 2017, the GroupJuly 24, 2020, we acquired all100% of the outstanding stockequity of Trello, a leading providerMindville, an asset and configuration management company based in Sweden. Total purchase price consideration for Mindville was approximately $36.4 million in cash. In addition, the Company granted $12.0 million worth of projectrestricted shares of the Company to key employees of Mindville, which are subject to future vesting provisions based on service conditions and accounted for as share based compensation. For details of restricted shares, please refer to Note 22, “Share-based Payments.”
With the acquisition of Mindville, Atlassian brings critical configuration management and organization software, for consideration consistingdatabase capabilities to Jira Service Management to better meet the needs of cash and the fair value of equity awards assumed. The Group acquired Trello to expand Atlassian’s teamwork platform by adding a complementary collaboration service to Atlassian’s existing project management, content creation and communication products. The Group hasits IT customers. We have included the financial results of TrelloMindville in itsour consolidated financial statements from the date of acquisition, which have not been material. Pro forma results of operations have not been presented for the twelve months ended June 30, 2021 because the effect of the acquisition was not material to date.the financial statements.
Total purchase price consideration for Trello was approximately $384.0 million, which consisted of approximately $363.8 million in cash and $20.2 million for the fair value of exchanged unvested equity awards held by Trello employees for unvested equity awards of the Company. The fair value of replacement share options issued by the Company was determined using the Black-Scholes option pricing model.
The following table summarizes the preliminary estimated fair values of assets acquired and liabilities assumed as of the date of acquisition:
|
| | | | |
| | Fair Value |
| | (U.S. $ in thousands) |
Cash and cash equivalents | | $ | 1,019 |
|
Trade receivables | | 1,035 |
|
Prepaid expenses and other current assets | | 765 |
|
Deferred tax assets | | 17,074 |
|
Intangible assets | | 127,400 |
|
Goodwill | | 289,171 |
|
Trade and other payables | | (3,532 | ) |
Deferred revenue | | (2,165 | ) |
Deferred tax liabilities | | (46,760 | ) |
Net assets acquired | | $ | 384,007 |
|
| | | | | | | | |
| | Fair Value |
| | (U.S. $ in thousands) |
Cash and cash equivalents | | $ | 1,235 | |
Tax receivables, current | | 166 | |
Prepaid expenses and other current assets | | 668 | |
Property and equipment, net | | 52 | |
Right-of-use assets, net | | 403 | |
Intangible assets | | 9,600 | |
Goodwill | | 30,039 | |
Trade and other payables | | (492) | |
Tax liabilities | | (23) | |
Provisions, current | | (135) | |
Deferred revenue | | (1,300) | |
Lease obligations, current | | (268) | |
Deferred tax liabilities | | (2,694) | |
Lease obligations, non-current | | (136) | |
Other non-current liabilities | | (669) | |
Net assets acquired | | $ | 36,446 | |
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities when integrating Trello’sopportunities. The goodwill balance is deductible in the U.S. and not deductible in Sweden for income tax purposes. The fair values assigned to tangible assets acquired, liabilities assumed and identifiable intangible assets were based on management’s estimates and assumptions. The fair value of acquired receivables approximates the gross contractual amounts receivable. The deferred tax liabilities were primarily a result of the difference in the book basis and tax basis related to the identifiable intangible assets. Transaction costs of $1.1 million were expensed as incurred, which was included in general and administrative expenses.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition:
| | | | | | | | | | | | | | |
| | Fair Value | | Useful Life |
| | (U.S. $ in thousands) | | (years) |
Developed technology | | $ | 8,200 | | | 5 |
Customer relationships | | 1,400 | | | 5 |
Total intangible assets subject to amortization | | $ | 9,600 | | | |
The amount recorded for developed technology represents the estimated fair value of Mindville’s asset and configuration management solution. The amount recorded for customer relationships represents the fair value of the underlying relationships with Mindville’s customers.
Chartio
On February 26, 2021, we acquired 100% of the Group’s other offerings.outstanding equity of Chart.io, Inc. (“Chartio”), a data analytics and visualization tool that allows users to create dashboards and charts using their various data sources. Total purchase price consideration for Chartio was approximately $45.6 million, consisting of $45.0 million in cash and $0.6 million in equity. In addition, the Company granted $4.5 million worth of restricted shares of the Company to key employees of Chartio, which are subject to future vesting provisions based on service conditions and accounted for as share based compensation.
The acquisition of Chartio brings an analytics and data visualization solution to Atlassian’s products, including Jira Software, Jira Align and Jira Service Management. We have included the financial results of Chartio in our consolidated financial statements from the date of acquisition. Pro forma results of operations have not been presented for the twelve months ended June 30, 2021 because the effect of the acquisition was not material to the financial statements.
The following table summarizes the preliminary estimated fair values of assets acquired and liabilities assumed as of the date of acquisition:
| | | | | | | | |
| | Fair Value |
| | (U.S. $ in thousands) |
Cash and cash equivalents | | $ | 1,035 | |
Accounts receivable | | 266 | |
Prepaid and other assets | | 40 | |
Deferred tax assets | | 3,095 | |
Developed technology | | 12,400 | |
Goodwill | | 33,218 | |
Deferred revenue | | (682) | |
Trade and other payables | | (676) | |
Deferred tax liabilities | | (3,128) | |
Net assets acquired | | $ | 45,568 | |
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities. The goodwill balance is not deductible in the U.S. for income tax purposes. The fair values assigned to tangible assets acquired, liabilities assumed and identifiable intangible assets were based on management’s estimates and assumptions. The fair value of acquired receivables approximates the gross contractual amounts receivable. The deferred tax liabilities were primarily a result of the difference in the book basis and tax basis related to the identifiable intangible assets. The amount recorded for developed technology represents the estimated fair value of Chartio’s data visualization technology and is amortized over six years.
Other fiscal year 2021 business combinations
On October 27, 2020, we acquired 100% of the outstanding equity of a privately held company in Poland that primarily provided outsourced software development and support services to Atlassian for a cash consideration of approximately $10.6 million. The purchase price was allocated to net liabilities of $0.7 million and goodwill of $11.3 million. The goodwill balance is primarily attributed to the assembled workforce and is deductible in the U.S. and not deductible in Poland for income tax purposes.
On April 12, 2021, we acquired 100% of the outstanding equity of a privately held company in Australia which sells a no-code/low-code form builder for Jira for a cash consideration of approximately $9.2 million. The purchase price was allocated to net assets of $0.3 million, developed technology of $2.4 million, customer relationship of $0.5 million and goodwill of $6.0 million. The goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities. The goodwill balance is deductible in the U.S. and not deductible in Australia for income tax purposes.
Our purchase price allocations are preliminary and subject to revision as additional information existing as of the respective acquisition dates but unknown to us may become available within the respective measurement periods (up to one year from the respective acquisition dates). The primary areas of the purchase price allocation that are not yet finalized are fair value of contingencies.
Fiscal Year 2020
Code Barrel
On October 15, 2019, we acquired 100% of the outstanding equity of Code Barrel, a workflow automation tool for Jira. Total purchase price consideration for Code Barrel was approximately $39.1 million in cash. In addition, the Company granted $27.0 million worth of restricted shares of the Company to key employees of Code Barrel, which are subject to future vesting provisions based on service conditions and accounted for as share based compensation.
Code Barrel is the creator of ‘Automation for Jira,’ a tool for easily automating several aspects of Jira. The acquisition of Code Barrel enhances Jira by helping customers automate more of the time-consuming and error-prone tasks in Jira. We have included the financial results of Code Barrel in our consolidated financial statements from the date of acquisition, which have not been material. Pro forma results of operations have not been presented for the twelve months ended June 30, 2021 because the effect of the acquisition was not material to the financial statements.
The following table summarizes the estimated fair values of assets acquired and liabilities assumed as of the date of acquisition: | | | | | | | | |
| | Fair Value |
| | (U.S. $ in thousands) |
Cash and cash equivalents | | $ | 1,970 | |
Intangible assets | | 15,900 | |
Goodwill | | 23,124 | |
Trade and other payables | | (617) | |
Deferred revenue | | (600) | |
Deferred tax liabilities | | (639) | |
Net assets acquired | | $ | 39,138 | |
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities. The goodwill balance is deductible in Australia and not deductible in the U.S. for income tax purposes. The fair values assigned to tangible assets acquired, liabilities assumed and identifiable intangible assets were based on management’s estimates and assumptions. The deferred tax liabilities were primarily a result of the difference in the book basis and tax basis related to the identifiable intangible assets.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition:
| | | | | | | | | | | |
| Fair Value | | Useful Life |
| (U.S. $ in thousands) | | (years) |
Developed technology | $ | 13,700 | | | 4 |
Customer relationships | 1,800 | | | 3 |
Trade name | 400 | | | 1 |
Total intangible assets subject to amortization | $ | 15,900 | | | |
The amount recorded for developed technology represents the estimated fair value of Code Barrel’s workflow automation technology. The amount recorded for customer relationships represents the fair value of the underlying relationships with Code Barrel’s customers. The amount recorded for trade name represents the fair value of Code Barrel’s brand recognition as of acquisition date. The purchase price allocation was finalized in fiscal year 2021 without further adjustment.
Halp
On May 11, 2020, we acquired 100% of the outstanding equity of Halp, a message-based conversational help desk ticketing solution. Total purchase price consideration for Halp was approximately $17.6 million, which consisted of approximately $17.0 million in cash and $0.6 million in fair value of replacement shares attributable to service provided prior to acquisition. The Company issued 9,929 replacement shares and the fair value of the replacement shares was based on grant date stock price of the Company. In addition, the Company granted $4.1 million worth of restricted shares of the Company to key employees of Halp, which are subject to future vesting provisions based on service conditions and accounted for as share based compensation.
We acquired Halp to provide customers a standalone solution that allows them to turn their internal messaging tool into a help desk. For customers using Jira Service Management or similar service management tools, Halp integrates their messaging tool seamlessly with their established workflows. We have included the financial results of Halp in our consolidated financial statements from the date of acquisition, which have not been material to date. Pro forma results of operations have not been presented for the twelve months ended June 30, 2020 because the effect of the acquisition was not material to the financial statements.
The following table summarizes the preliminary estimated fair values of assets acquired and liabilities assumed as of the date of acquisition:
| | | | | | | | |
| | Fair Value |
| | (U.S. $ in thousands) |
Cash and cash equivalents | | $ | 664 | |
Trade receivables | | 36 | |
Prepaid expenses and other current assets | | 22 | |
Deferred tax assets | | 475 | |
Intangible assets | | 5,350 | |
Goodwill | | 12,322 | |
Deferred revenue | | (50) | |
Deferred tax liabilities | | (1,237) | |
Net assets acquired | | $ | 17,582 | |
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities. The goodwill balance is not deductible for income tax purposes. The fair values assigned to tangible assets acquired, liabilities assumed and identifiable intangible assets were based on management’s estimates and assumptions. The deferred tax liability established was primarily a result of the difference in the book basis and tax basis related to the identifiable intangible assets. The Group’s purchase price allocation is preliminary and subject to revision as additional information about fair value of assets and liabilities becomes available. If additional information is obtained up to one year fromacquired receivables approximates the acquisition date regarding facts and circumstances that existed as of the acquisition date, the estimated fair values of assets acquired and liabilities assumed will be updated accordingly.
gross contractual amounts receivable.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition.acquisition:
| | | | Fair Value | Useful Life | | Fair Value | | Useful Life |
| | (U.S. $ in thousands) | (years) | | (U.S. $ in thousands) | | (years) |
Developed technology | | $ | 50,600 |
| 3 | Developed technology | $ | 4,400 | | | 6 |
Customer relationships | | 56,900 |
| 2 | Customer relationships | 850 | | | 6 |
Trade names | | 19,900 |
| 3 | |
Trade name | | Trade name | 100 | | | 1 |
Total intangible assets subject to amortization | | $ | 127,400 |
| | Total intangible assets subject to amortization | $ | 5,350 | | |
The amount recorded for developed technology represents the estimated fair value of Trello’s project management and organizationHalp’s message-based help desk ticketing technology. The amount recorded for customer relationships represents the fair valuesvalue of the underlying relationshiprelationships with TrelloHalp’s customers. The amount recorded for trade name represents the fair value of Halp’s brand recognition as of the acquisition date. The purchase price allocation was finalized in fiscal year 2021 without further adjustment.
Other fiscal 2017 business combinations
Fiscal Year 2019
AgileCraft
On July 12, 2016,April 3, 2019, we acquired 100% of the Group acquired StatusPageoutstanding equity of AgileCraft, a leading provider of enterprise agile planning software. Total purchase price consideration for $18.3AgileCraft was approximately $156.6 million, which consisted of approximately $154.9 million in cash netand $1.7 million in fair value of cashreplacement shares attributable to service provided prior to acquisition. The Company issued 24,173 replacement shares and the fair value of the replacement shares was based on grant date stock price of the Company. In addition, the Company granted $12.5 million worth of restricted shares of the Company to key employees of AgileCraft, which are subject to future vesting provisions based on service conditions and accounted for as share based compensation.
The Group acquired AgileCraft to complement its current product offerings and $3.3 millionto help enterprise organizations build and manage a ‘master plan’ of deferred consideration.their most strategic projects and workstreams. The Group has included the financial results of StatusPageAgileCraft in its consolidated financial statements from the date of acquisition, which have not been material to date. In allocatingPro forma results of operations have not been presented for the purchase consideration based ontwelve months ended June 30, 2019 because the effect of the acquisition was not material to the financial statements.
The following table summarizes the estimated fair values of assets acquired and liabilities assumed: | | | | | | | | |
| | Fair Value |
| | (U.S. $ in thousands) |
Cash and cash equivalents | | $ | 1,193 | |
Trade receivables | | 3,614 | |
Prepaid expenses and other current assets | | 270 | |
| | |
Intangible assets | | 52,900 | |
Goodwill | | 101,999 | |
Trade and other payables | | (1,196) | |
Deferred revenue | | (2,230) | |
Net assets acquired | | $ | 156,550 | |
The excess of purchase consideration over the Groupfair value of net tangible and identifiable intangible assets acquired was recorded $8.7 millionas goodwill. The goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities. The goodwill balance is deductible for income tax purposes. The fair values assigned to tangible assets acquired, liabilities assumed and identifiable intangible assets were based on management’s estimates and assumptions. The fair value of acquired receivables approximates the gross contractual amounts receivable. Critical estimates in valuing certain intangible assets withand goodwill include, but are not limited to, future expected cash flows from revenues, technology migration curve and discount rates. The deferred tax liabilities were primarily a result of the difference in the book basis and tax basis related to the identifiable intangible assets. Transaction costs of $1.2 million were expensed as incurred, which was included in general and administrative expenses.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of twothe date of acquisition:
| | | | | | | | | | | |
| Fair Value | | Useful Life |
| (U.S. $ in thousands) | | (years) |
Developed technology | $ | 34,600 | | | 5 |
Customer relationships | 16,900 | | | 7 |
Backlog | 1,400 | | | 3 |
Total intangible assets subject to amortization | $ | 52,900 | | | |
The amount recorded for developed technology represents the estimated fair value of AgileCraft’s enterprise agile planning technology. The amount recorded for customer relationships represents the fair value of the underlying relationships with AgileCraft’s customers. The amount recorded for backlog represents the fair value of AgileCraft’s backlog as of acquisition date. Measurement period adjustments, which were not material, mostly related to five yearsworking capital adjustments. The purchase price allocation was finalized in fiscal year 2020.
OpsGenie
On October 1, 2018, we acquired 100% of the outstanding equity of OpsGenie, Inc., a leader in incident alerting and $15.5on-call schedule management, for cash consideration of $259.5 million. In addition, the Company granted $36.3 million worth of restricted shares of the Company to key employees of OpsGenie, which are subject to future vesting provisions based on service conditions and accounted for as share based compensation. The Group acquired OpsGenie to complement our current product offerings and enable customers to plan for and respond to IT service disruptions. The Group has included the financial results of OpsGenie in its consolidated financial statements from the date of acquisition, which have not been material to date. Pro forma results of operations have not been presented for the twelve months ended June 30, 2019 because the effect of the acquisition was not material to the financial statements.
The following table summarizes the estimated fair values of assets acquired and liabilities assumed as of the date of acquisition:
| | | | | | | | |
| | Fair Value |
| | (U.S. $ in thousands) |
Cash and cash equivalents | | $ | 1,232 | |
Trade receivables | | 1,933 | |
Prepaid expenses and other current assets | | 513 | |
| | |
Intangible assets | | 87,900 | |
Goodwill | | 189,727 | |
Trade and other payables | | (1,533) | |
Deferred revenue | | (1,217) | |
Deferred tax liabilities, net | | (19,010) | |
Net assets acquired | | $ | 259,545 | |
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities. The goodwill balance is not deductible for income tax purposes.
The fair values assigned to tangible assets acquired, liabilities assumed and identifiable intangible assets were based on management’s estimates and assumptions. The fair value of acquired receivables approximates the gross contractual amounts receivable. Critical estimates in valuing certain intangible assets and goodwill include, but are not limited to, future expected cash flows from revenues, technology migration curve, customer attrition rate and discount rates. The deferred tax liabilities were primarily a result of the difference in the book basis and tax basis related to the identifiable intangible assets. Transaction costs of $1.8 million were expensed as incurred, which was included in general and administrative expenses.
13.The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition:
| | | | | | | | | | | |
| Fair Value | | Useful Life |
| (U.S. $ in thousands) | | (years) |
Developed technology | $ | 35,600 | | | 5 |
Customer relationships | 48,600 | | | 10 |
Trade name | 3,700 | | | 5 |
Total intangible assets subject to amortization | $ | 87,900 | | | |
The amount recorded for developed technology represents the estimated fair value of OpsGenie’s incident management and alerting technology. The amount recorded for customer relationships represents the fair value of the underlying relationships with OpsGenie customers. The amount recorded for trade name represents the fair value of OpsGenie trade name. The purchase price allocation was finalized in fiscal year 2020 without further adjustment.
Other fiscal year 2019 business combinations
On April 8, 2019, the Group acquired 100% of the outstanding equity of Good Software Co. Pty Ltd (“Good Software”) for cash consideration of approximately $2.7 million. In addition, the Company granted $1.3 million worth of restricted shares of the Company to a key employee of Good Software, which are subject to future vesting provisions based on service conditions and accounted for as share based compensation. Good Software provides analytics tools for Confluence. The Company acquired Good Software to integrate the analytics tool into Confluence and to complement our current Confluence product. The purchase price was allocated to net tangible assets of $0.2 million, developed technology of $0.6 million, customer relationship of $0.3 million and goodwill of $1.6 million. The goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities when integrating with Confluence. The goodwill balance is partially deductible for income tax purposes. The purchase price allocation was finalized without further adjustment.
On December 10, 2018, the Group acquired the intangible assets of Ludable LLC related to Butler for Trello, a workflow automation tool, for cash consideration of approximately $6.0 million. In addition, the Company granted $3.5 million worth of restricted shares of the Company to the key employee of Ludable LLC, which are subject to future vesting provisions based on service conditions and accounted for as share based compensation. The transaction was accounted for as a business combination in accordance with the relevant guidance. The Company acquired the Butler for Trello assets to complement our existing Trello offerings and to help automate manual and repetitive tasks. The purchase price was allocated to developed technology of $1.5 million and goodwill of $4.5 million. The goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities when integrating with Trello. The goodwill balance is deductible for income tax purposes. The purchase price allocation was finalized without further adjustment.
14. Other Balance Sheet Accounts
Cash and cash equivalents
Cash and cash equivalents consisted of the following: | | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Cash and bank deposits | $ | 739,042 | | | $ | 823,985 | |
Amounts due from third-party credit card processors | 5,272 | | | 7,076 | |
Commercial paper | 149,347 | | | 167,248 | |
Money market funds | 20,966 | | | 439,947 | |
Agency securities | 4,600 | | | 8,749 | |
U.S. treasury securities | 0 | | | 5,599 | |
Corporate debt securities | 0 | | | 27,365 | |
| | | |
| | | |
Total cash and cash equivalents | $ | 919,227 | | | $ | 1,479,969 | |
|
| | | | | | | |
| As of June 30, |
| 2018 | | 2017 |
| (U.S. $ in thousands) |
Cash and bank deposits | $ | 659,668 |
| | $ | 163,107 |
|
U.S. treasury securities | 18,968 |
| | — |
|
Corporate securities | 1,000 |
| | — |
|
Agency securities | 7,989 |
| | — |
|
Commercial paper | 29,118 |
| | 2,749 |
|
Money market funds | 693,596 |
| | 78,564 |
|
Total cash and cash equivalents | $ | 1,410,339 |
| | $ | 244,420 |
|
The majority of the Group’s cash and cash equivalents are held in bank deposits, money market funds and short-term investments which have a maturity of three months or less to enable us to meet our short-term liquidity requirements. Money market funds are quoted in active markets and are subject to insignificant risk of changes in value. The Group only purchases investment grade securities rated A- and above, which are highly liquid and subject to insignificant risk of changes in value.
Prepaid expenses and other current assets
Prepaid expenses and other current assets consisted of the following: | | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Prepaid expenses | $ | 36,866 | | | $ | 31,527 | |
Accrued interest income on short-term investments | 1,411 | | | 3,329 | |
Other receivables | 6,149 | | | 11,305 | |
Other current assets | 3,896 | | | 569 | |
Total prepaid expenses and other current assets | $ | 48,322 | | | $ | 46,730 | |
|
| | | | | | | |
| As of June 30, |
| 2018 | | 2017 |
| (U.S. $ in thousands) |
Prepaid expenses | $ | 19,702 |
| | $ | 12,984 |
|
Accrued interest income on short-term investments | 2,642 |
| | 4,209 |
|
Other receivables | 3,059 |
| | 1,736 |
|
Other current assets | 2,816 |
| | 4,388 |
|
Total prepaid expenses and other current assets | $ | 28,219 |
| | $ | 23,317 |
|
Other receivables generally arise from transactions outsideDuring the normal operating activitiesfourth quarter of the Group. Interest mayfiscal year ended June 30, 2021, the Group committed to a plan to sell our subsidiary, Vertical First Trust, which was established for the construction project associated with our new headquarters building in Sydney, Australia. In July 2021, the Group entered into term sheet with a buyer to effect the sale. The term sheet provides a framework for the buyer to invest in and develop the Group’s headquarters building. The Group will retain a long-term equity interest in the building. The sale is expected to be chargedcompleted within the next 12 months. The assets were presented as held for sale in the consolidated statement of financial position and measured at commercial rates where the termslower of repayment exceed six months. Collateral is not normally required.carrying value or fair value less cost to sell.
The major assets classified as held for sale at June 30, 2021 were as follows:
| | | | | |
| As of June 30, 2021 |
| (U.S. $ in thousands) |
Cash and cash equivalents | $ | 9,317 | |
Property and equipment, net | 34,092 | |
Other non-current assets
Other non-current assets consisted of the following: | | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Marketable equity securities | $ | 110,409 | | | $ | 100,187 | |
Non-marketable equity securities | 11,750 | | | 3,750 | |
| | | |
Security deposits | 4,267 | | | 4,873 | |
Restricted cash | 11,795 | | | 9,174 | |
Other | 21,574 | | | 6,790 | |
Total other non-current assets | $ | 159,795 | | | $ | 124,774 | |
|
| | | | | | | |
| As of June 30, |
| 2018 | | 2017 |
| (U.S. $ in thousands) |
Security deposits | $ | 5,248 |
| | $ | 4,803 |
|
Capped call transactions | 99,932 |
| | — |
|
Other non-current assets | 7,041 |
| | 4,466 |
|
| $ | 112,221 |
| | $ | 9,269 |
|
As of June 30, 20182021 and2017,2020, the Group had certificates of deposit and time deposits totaling $3.7$2.6 million and $4.2$3.3 million, respectively, which were classified as long-term and were included in security deposits. Included in theThe Group’s other non-current assets balance as of June 30, 2018 and 2017 were $6.6 million and $3.3 million respectively, of restricted cash was primarily used for commitments of standby letters of credit related to facility leases and werewas not available for the Group’s use in its operations.
Trade and other payables
Trade and other payables consisted of the following:
|
| | | | | | | |
| As of June 30, |
| 2018 | | 2017 |
| (U.S. $ in thousands) |
Trade payables | $ | 17,119 |
| | $ | 12,464 |
|
Accrued expenses | 42,905 |
| | 24,761 |
|
Accrued compensation and employee benefits | 28,302 |
| | 16,687 |
|
Retention bonus | 410 |
| | 1,906 |
|
Sales and indirect taxes | 8,076 |
| | 6,114 |
|
Operating lease payable | 1,420 |
| | 688 |
|
Deferred acquisition-related consideration | — |
| | 3,300 |
|
Foreign exchange forward contracts | 5,213 |
| | — |
|
Other payables | 9,660 |
| | 7,272 |
|
| $ | 113,105 |
| | $ | 73,192 |
|
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Trade payables | $ | 40,366 | | | $ | 30,738 | |
Accrued expenses | 101,940 | | | 76,358 | |
Accrued compensation and employee benefits | 91,894 | | | 72,627 | |
| | | |
Sales and indirect taxes | 10,152 | | | 9,009 | |
| | | |
Customer deposits | 8,832 | | | 7,897 | |
Other payables | 13,313 | | | 5,941 | |
Total trade and other payables | $ | 266,497 | | | $ | 202,570 | |
Current provisions
Current provisions consisted of the following:
|
| | | | | | | |
| As of June 30, |
| 2018 | | 2017 |
| (U.S. $ in thousands) |
Employee benefits | $ | 7,215 |
| | $ | 6,162 |
|
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Employee benefits | $ | 24,690 | | | $ | 14,291 | |
Dilapidation provision | 458 | | | 0 | |
Total current provisions | $ | 25,148 | | | $ | 14,291 | |
Current provisions for employee benefits include accrued annual leave, and long service leave.leave and retention benefits. Long service leave covers all unconditional entitlements where employees have completed the required period of service and those where employees are entitled to pro rata payments.
Non-current provisions
Non-current provisions consisted of the following:
|
| | | | | | | |
| As of June 30, |
| 2018 | | 2017 |
| (U.S. $ in thousands) |
Employee benefits | $ | 2,094 |
| | $ | 1,415 |
|
Dilapidation provision | 2,269 |
| | 1,918 |
|
| $ | 4,363 |
| | $ | 3,333 |
|
The non-current provision for employee benefits includes long service leave as described above.
The dilapidation provision relates to certain lease arrangements for office space entered into by the Group. These lease arrangements require the Group to restore each premises to its original condition upon lease termination. Accordingly, the Group records a provision for the present value of the estimated future costs to retire long-livedlease related assets at the expiration of these leases.
Non-current provisions
Other non-current liabilities
Other non-current liabilitiesNon-current provisions consisted of the following: | | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Employee benefits | $ | 7,255 | | | $ | 6,036 | |
Dilapidation provision | 5,180 | | | 3,457 | |
Total non-current provisions | $ | 12,435 | | | $ | 9,493 | |
The non-current provision for employee benefits includes long service leave and retention benefits as described above. The dilapidation provision relates to certain lease arrangements for office space entered into by the Group as described above.
|
| | | | | | | |
| As of June 30, |
| 2018 | | 2017 |
| (U.S. $ in thousands) |
Deferred rent | $ | 11,777 |
| | $ | 4,660 |
|
Notes embedded exchange derivative
| 202,553 |
| | — |
|
Other non-current liabilities | 655 |
| | 309 |
|
| $ | 214,985 |
| | $ | 4,969 |
|
15. Revenue
We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which are refundable. The changes in the balances of deferred revenue are as follows: | | | | | | | | | | | | | | | |
| | | Fiscal Year Ended June 30, |
| | | | | 2021 | | 2020 |
| | | | | |
Deferred revenue, beginning of period | | | | | $ | 601,005 | | | $ | 468,820 | |
Additions | | | | | 2,385,722 | | | 1,746,358 | |
Subscription revenue | | | | | (1,324,064) | | | (931,455) | |
Maintenance revenue | | | | | (522,971) | | | (469,350) | |
Perpetual license revenue | | | | | (84,806) | | | (95,162) | |
Other revenue | | | | | (157,291) | | | (118,206) | |
Deferred revenue, end of period | | | | | $ | 897,595 | | | $ | 601,005 | |
14. The additions in the deferred revenue balance are primarily cash payments received or due in advance of satisfying our performance obligations.
For the fiscal years ended June 30, 2021 and 2020, approximately 27% of revenue recognized was from the deferred revenue balances at the beginning of each fiscal year.
Transaction price allocated to remaining performance obligations
Transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized, which includes unearned revenue and unbilled amounts that will be recognized as revenue in future periods. Transaction price allocated to the remaining performance obligations is influenced by several factors, including the timing of renewals, the timing of delivery of software licenses, average contract terms, and foreign currency exchange rates. Unbilled portions of the remaining performance obligations are subject to future economic risks including bankruptcies, regulatory changes and other market factors.
As of June 30, 2021, approximately $928.0 million of revenue is expected to be recognized from transaction price allocated to remaining performance obligations. We expect to recognize revenue on approximately 89% of these remaining performance obligations over the next 12 months with the balance recognized thereafter.
Disaggregated revenue
Marketplace apps revenue totaled approximately $140.3 million, $103.5 million and $77.4 million for the fiscal years ended 2021, 2020, and 2019, respectively, which is included in other revenue.
The Group’s revenues by geographic region based on end-users who purchased our products or services are as follows: | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 | | 2019 |
| (U.S. $ in thousands) |
Americas: | | | | | |
United States | $ | 901,389 | | | $ | 700,893 | | | $ | 528,804 | |
Other Americas | 127,092 | | | 101,606 | | | 75,155 | |
Total Americas | $ | 1,028,481 | | | $ | 802,499 | | | $ | 603,959 | |
| | | | | |
EMEA: | | | | | |
United Kingdom | $ | 139,411 | | | $ | 110,887 | | | $ | 86,027 | |
Other EMEA | 687,034 | | | 522,848 | | | 388,685 | |
Total EMEA | $ | 826,445 | | | $ | 633,735 | | | $ | 474,712 | |
| | | | | |
Asia Pacific | $ | 234,206 | | | $ | 177,939 | | | $ | 131,456 | |
| | | | | |
Total revenues | $ | 2,089,132 | | | $ | 1,614,173 | | | $ | 1,210,127 | |
No one customer has accounted for more than 10% of revenue for the fiscal years ended 2021, 2020, and 2019.
16. Debt
Exchangeable Senior Notes
2023 Exchangeable Senior Notes
In April 2018, Atlassian, Inc. a wholly owned subsidiary of the Company, issued $850 million$1 billion in aggregate principal amount of Notes due on May 1, 2023. In May, 2018, the initial purchasers of the Notes exercised their option to purchase an additional $150 million in aggregate principal amount of the Notes, bringing the total aggregate principal amount of the Notes to $1 billion. The Notes are senior, unsecured obligations of the Company, and are scheduled to mature on May 1, 2023, unless earlier exchanged, redeemed or repurchased. The Notes bear interest at a rate of 0.625% per year payable semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2018. The net proceeds from the offering of the Notes were approximately $990.0 million, after deducting issuance cost.
Under certain circumstances and during certain periods,The Notes are not exchangeable into the Company’s Class A ordinary shares or any other securities under any circumstances. Holders of the Notes may be exchanged at the option of the holdersexchange their Notes solely into cash. The initial exchange rate for the Notes is 12.2663 of the Company’s Class A ordinary shares per $1,000 principal amount of Notes (equivalent to an initial exchange price of approximately $81.52 per share) and will be, subject to customary anti-dilution adjustments. The Notes may also be redeemed under certain circumstances.
In connection with the issuanceHolders of the Notes may exchange, at their option, on or after February 1, 2023. Further, holders of the Company entered into privately negotiated capped call transactions with certain financial institutions. The capped call transactions are expectedNotes may exchange, at their option, prior to generally offset cash payments due February 1, 2023 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2018 (and only during such calendar quarter), limited by a capped price per share. The initial capif the last reported sale price of the capped call transactions is $114.42 per shareClass A ordinary shares for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and is subject to certain adjustments underincluding, the termslast trading day of the capped call transactions.
The net proceeds fromimmediately preceding calendar quarter is greater than or equal to 130% of the offeringexchange price on each applicable trading day; (2) during the five business day period after any 5 consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Class A ordinary shares and the exchange rate for the Notes on each such trading day; (3) if the Company calls any or all of the Notes were approximately $990.0 million, after deductingfor redemption, at any time prior to the initial purchasers’ discountsclose of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. If a fundamental change occurs holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to
100% of the principal amount of the Notes to be repurchased, plus accrued and commissions and estimated offering expenses. unpaid interest, if any, to, but excluding, the fundamental change repurchase date. In addition, if specific corporate events occur prior to the maturity date or following the Company’s delivery of a notice of redemption, we will increase the exchange rate for a holder that elects to exchange its Notes in connection with such a corporate event or during the related redemption period.
The Company used $87.7 million ofmay redeem the net proceeds of the offeringNotes at its option, prior to purchase the capped calls. The remaining net proceeds of the offering will be used for working capital and other general corporate purposes.May 1, 2023, in whole but not in part, in connection with certain tax-related events. The Company may also use a portionredeem the Notes at its option, on or after November 6, 2020, in whole or in part, if the last reported sale price per Class A ordinary share has been at least 130% of the net proceeds to acquire complementary businesses, products, servicesexchange price then in effect for at least 20 trading days (whether or technologies.
Impact of Early Exchange Conditions
The Company assesses whethernot consecutive), including the stock price exchange condition is met at the end of each fiscal quarter. If one of the Notes’ early exchange conditions is met in any fiscal quarter, the Company would classify its net liability under the Notes as a current liability on the consolidated statements of financial position as of the end of that fiscal quarter. If none of the Notes’ early exchange conditions have been met in a future fiscal quarter prior to the one-year periodtrading day immediately preceding the maturity date on which the Company would classify its net liability underprovides notice of redemption, during any 30 consecutive trading day period ending on, and including, the Notes astrading day immediately preceding the date on which the Company provides notice of redemption, at a non-current liability on the consolidated statements of financial position asredemption price equal to 100% of the end of that fiscal quarter. If the note holders elect to convert their Notes prior to maturity, any unamortized discount and transaction fees will be expensed at the time of exchange. As of June 30, 2018, no events were triggered that require the reclassificationprincipal amount of the Notes to a current liability.
As of June 30, 2018,be redeemed, plus accrued and unpaid interest to, but excluding, the if-exchanged value of the Notes to the note holders was less than the principal amount of $1.0 billion. The fair value of the Notes was $1.033 billion as of June 30, 2018. The Notes currently trade at a premium to the if-exchanged value of the Notes.
Notes Embedded Exchange Derivative
redemption date.
The exchange feature of the Notes requires bifurcation from the Notes and is accounted for as a derivative liability. The fair value of the Notes’ embedded exchange derivative at the time of issuance was $177.9 million and was recorded as original debt discount for purposes of accounting for the debt component of the Notes. This discount is amortized as interest expense using the effective interest method over the term of the Notes. The Notes embedded exchange derivative is carried on the consolidated statements of financial position at its estimated fair value and is adjusted at the end of each reporting period, with unrealized gain or loss reflected in the consolidated statements of operations. The fair value of the exchange feature derivative liability was $202.6$760.7 million and $1,283.1 million as of June 30, 2018.2021 and 2020, respectively.
Capped Call Transactions
In connection with the issuance of the Notes, the Company entered into privately negotiated capped call transactions with certain financial institutions. The aggregate cost of the capped calls was $87.7 million. The capped call transactions expire in May 2023 and must be settled in cash. The aggregate costcapped call can be exercised on each exchange date that the related Notes are submitted for exchange. The capped call transactions are expected to generally offset cash payments due, limited by a capped price per share. The initial cap price of the capped calls was $87.7 million.call transactions is $114.42 per share and is subject to certain adjustments under the terms of the capped call transactions. The capped call transactions are accounted for as derivative assets and are carried on the consolidated statements of financial position at their estimated fair value. The capped calls are adjusted to fair value each reporting period, with unrealized gain or loss reflected in the consolidated statements of operations. The fair value of capped call assets was $99.9$124.2 million and $310.6 million as of June 30, 2018.2021 and 2020, respectively.
The current or non-current classification of the Notes embedded exchange derivative liability and the capped calls asset as current or non-currentcorresponds with the classification of the Notes on the consolidated statements of financial position corresponds with theposition. The classification of the Notes, is evaluated at each balance sheet date, and may change from time to time depending on whether the early exchange conditions are met. As of June 30, 2021, the closing price exchange condition has been met and the Notes, exchange derivative liability and the capped call assets are classified as current. Please refer to Note 5, “Financial Assets and Liabilities” for details on the valuation of exchange feature derivative liability and capped call assets.
During fiscal year 2021, we repurchased $643.2 million principal amount of the Notes in privately-negotiated transactions for aggregate consideration of $1,790.4 million in cash. In addition, we settled $4.7 million principal amount of the Notes through early exchange requests for aggregate consideration of $12.8 million during fiscal year 2021. We unwound the corresponding portion of our capped calls for net proceeds of $203.1 million. The settlement of the Notes during fiscal year 2020 was immaterial. As of June 30, 2021, we have received additional exchange requests for $13.7 million principal amount of the Notes that have not been settled yet.
The Notes are Level 2 instruments, and the estimated fair value of the Notes was $1,151 million and $2,234 million as of June 30, 2021 and 2020, respectively.
The principal amount, unamortized debt discount, unamortized issuance costs and net carrying amount of the liability component of the Notes as of June 30, 20182021 and 2020 were as follow:follows: | | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Principal amount | $ | 352,171 | | | $ | 999,999 | |
Unamortized debt discount | (3,224) | | | (105,963) | |
Unamortized issuance cost | (148) | | | (4,853) | |
Net liability | $ | 348,799 | | | $ | 889,183 | |
|
| | | |
| As of June 30, 2018 |
| (U.S. $ in thousands) |
Principal amount | $ | 1,000,000 |
|
Unamortized debt discount | (172,464 | ) |
Unamortized issuance costs | (7,899 | ) |
Net liability | $ | 819,637 |
|
The effective interest rate, contractual interest expense and amortization of debt discount for the Notes for the fiscal year ended June 30, 20182021 and 2020 were as follow:follows: | | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Effective interest rate | 4.83 | % | | 4.83 | % |
Contractual interest expense | $ | 4,859 | | | $ | 6,250 | |
Amortization of debt discount | $ | 102,673 | | | $ | 34,048 | |
Amortization of issuance cost | $ | 4,703 | | | $ | 1,560 | |
Credit Facility
In October 2020, Atlassian, Inc. entered into a $1 billion senior unsecured delayed-draw term loan facility and a $500 million senior unsecured revolving credit facility. The Group will use the net proceeds of the Credit Facility for general corporate purposes, including repayment of existing indebtedness. The Credit Facility matures in October 2025 and bears interest, at the Group’s option, at a base rate plus a margin up to 0.50% or LIBOR rate plus a spread of 0.875% to 1.50%, in each case with such margin being determined by the Group’s consolidated leverage ratio. The Group may draw from the Term Loan Facility up to 5 times within a 12-month period from the closing of the Term Loan Facility. The Revolving Credit Facility may be borrowed, repaid, and re-borrowed until its maturity, and the Group has the option to request an increase of $250 million in certain circumstances. The Credit Facility may be repaid at the Group’s option without penalty.
The Group incurred debt issuance costs of $4.4 million in connection with entering into the Credit Facility. The debt issuance costs were amortized over the terms of the term loan and revolving credit facility. As of June 30, 2021, 0 amounts have been drawn under the Credit Facility. The Company is also obligated to pay a ticking fee and a commitment fee on the undrawn amounts of the Term Loan Facility and Revolving Credit Facility, respectively, at an annual rate ranging from 0.075% to 0.20%, determined by the Group’s consolidated leverage ratio.
The Credit Facility requires compliance with various financial and non-financial covenants, including affirmative and negative covenants. Financial covenant includes a maximum consolidated leverage ratio of 3.5x provided that such ratio increases to 4.5x during the period of four fiscal quarters immediately following a material acquisition. As of June 30, 2021, the Group was in compliance with all related covenants.
|
| | |
| 2018 |
| (U.S. $ in thousands) |
Effective interest rate | 4.83 | % |
Contractual interest expense | 1,075 |
|
Amortization of debt discount | 5,443 |
|
Reconciliation of assets and liabilities arising from financing activities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Capped call assets | | Exchangeable Notes, net | | Embedded exchange feature of Notes | | Credit Facility | | Accrued interest |
| (U.S. $ in thousands)
|
Balance as of June 30, 2019 | $ | (214,597) | | | $ | 853,576 | | | $ | 851,126 | | | $ | 0 | | | $ | 1,042 | |
Cash flows | 0 | | | (1) | | | (1) | | | 0 | | | (6,250) | |
Amortization of debt discount and issuance cost | 0 | | | 35,608 | | | 0 | | | 0 | | | 0 | |
Fair value changes | (96,011) | | | 0 | | | 431,964 | | | 0 | | | 0 | |
Accrual of interest | 0 | | | 0 | | | 0 | | | 0 | | | 6,250 | |
Balance as of June 30, 2020 | $ | (310,608) | | | $ | 889,183 | | | $ | 1,283,089 | | | $ | 0 | | | $ | 1,042 | |
Cash flows | 203,093 | | | (647,760) | | | (1,155,484) | | | (4,445) | | | (6,498) | |
Amortization of debt discount and issuance cost | 0 | | | 107,376 | | | 0 | | | 2,172 | | | 0 | |
Fair value changes | (16,638) | | | 0 | | | 633,084 | | | 0 | | | 0 | |
Accrual of interest | 0 | | | 0 | | | 0 | | | 0 | | | 6,010 | |
Balance as of June 30, 2021 | $ | (124,153) | | | $ | 348,799 | | | $ | 760,689 | | | $ | (2,273) | | | $ | 554 | |
15.
17. Shareholders’ Equity
Share capital | | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, | | As of June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| (number of shares) | | (U.S. $ in thousands) |
Details | | | | | | | |
Class A ordinary shares | 137,037,518 | | | 127,685,599 | | | $ | 13,703 | | | $ | 12,768 | |
Class B ordinary shares | 114,609,645 | | | 119,761,681 | | | 11,461 | | | 11,976 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| 251,647,163 | | | 247,447,280 | | | $ | 25,164 | | | $ | 24,744 | |
|
| | | | | | | | | | | | | |
| As of June 30, | | As of June 30, |
| 2018 | | 2017 | | 2018 | | 2017 |
| (number of shares) | | (U.S. $ in thousands) |
Details | | | |
| | |
| | |
|
Class A ordinary shares | 105,371,800 |
| | 91,979,704 |
| | $ | 10,537 |
| | $ | 9,198 |
|
Class B ordinary shares | 129,942,506 |
| | 135,283,942 |
| | 12,994 |
| | 13,528 |
|
| 235,314,306 |
| | 227,263,646 |
| | $ | 23,531 |
| | $ | 22,726 |
|
Movements in Class A ordinary share capital | | | | | | | | | | | |
| Number of Shares | | Amount |
| | | (U.S. $ in thousands) |
Details | | | |
Balance as of June 30, 2019 | 117,273,566 | | | $ | 11,727 | |
Conversion of Class B ordinary shares | 4,960,878 | | | 496 | |
Exercise of share options | 761,945 | | | 76 | |
Issuance for settlement of RSUs | 4,048,319 | | | 405 | |
Vesting of early exercised shares | 640,891 | | | 64 | |
Balance as of June 30, 2020 | 127,685,599 | | | $ | 12,768 | |
Conversion of Class B ordinary shares | 5,152,036 | | | 515 | |
Exercise of share options | 390,802 | | | 39 | |
Issuance for settlement of RSUs | 3,468,136 | | | 347 | |
Vesting of early exercised shares | 340,945 | | | 34 | |
Balance as of June 30, 2021 | 137,037,518 | | | $ | 13,703 | |
Class A shares as of June 30, 2021 and June 30, 2020 does not include 270,251 and 515,697 shares of restricted stock outstanding, respectively, that are subject to forfeiture or repurchase.
|
| | | | | | |
| Number of Shares | | Amount |
| | | (U.S. $ in thousands) |
Details | |
| | |
|
Balance as of July 1, 2016 | 75,505,973 |
| | $ | 7,550 |
|
Conversion of Class B ordinary shares | 6,326,879 |
| | 633 |
|
Exercise of share options | 5,487,334 |
| | 549 |
|
Issuance for settlement of RSUs | 4,510,995 |
| | 451 |
|
Vesting of share options that were early exercised
| 148,523 |
| | 15 |
|
Balance as of June 30, 2017 | 91,979,704 |
| | 9,198 |
|
Conversion of Class B ordinary shares | 5,861,707 |
| | 587 |
|
Exercise of share options | 1,902,084 |
| | 190 |
|
Issuance for settlement of RSUs | 5,253,809 |
| | 525 |
|
Vesting of share options that were early exercised
| 374,496 |
| | 37 |
|
Balance as of June 30, 2018 | 105,371,800 |
| | $ | 10,537 |
|
Movements in Class B ordinary share capital
|
| | | | | | |
| Number of Shares | | Amount |
| | | (U.S. $ in thousands) |
Details | |
| | |
|
Balance as of July 1, 2016 | 140,696,234 |
| | $ | 14,070 |
|
Exercise of share options | 914,587 |
| | 91 |
|
Conversion to Class A ordinary shares | (6,326,879 | ) | | (633 | ) |
Balance as of June 30, 2017 | 135,283,942 |
| | 13,528 |
|
Exercise of share options | 520,271 |
| | 53 |
|
Conversion to Class A ordinary shares | (5,861,707 | ) | | (587 | ) |
Balance as of June 30, 2018 | 129,942,506 |
| | $ | 12,994 |
|
| | | | | | | | | | | |
| Number of Shares | | Amount |
| | | (U.S. $ in thousands) |
Details | | | |
Balance as of June 30, 2019 | 124,722,559 | | | $ | 12,472 | |
| | | |
Conversion to Class A ordinary shares | (4,960,878) | | | (496) | |
Balance as of June 30, 2020 | 119,761,681 | | | $ | 11,976 | |
| | | |
Conversion to Class A ordinary shares | (5,152,036) | | | (515) | |
Balance as of June 30, 2021 | 114,609,645 | | | $ | 11,461 | |
Ordinary shares
Nominal value
Ordinary shares have a nominal value of $0.10.
Conversion
If the aggregate number of Class B ordinary shares comprises less than 10% of the total shares of the Company then in issue, each Class B ordinary share will automatically convert into one1 Class A ordinary share.
Upon consent of at least 66.66% of the Class B ordinary shares, each Class B ordinary share will convert into one1 Class A ordinary share. A Class B ordinary shareholder may elect at any time to convert any of its Class B ordinary shares into Class A ordinary shares on a one-for-one1-for-one basis. Upon a transfer of Class B ordinary shares to a person or entity that is not a permitted Class B ordinary share transferee as defined in the Company’s articles of association, each Class B ordinary share transferred converts into one Class A ordinary share.
Dividend rights
Any dividend declared by the Company shall be paid on the Class A ordinary shares and the Class B ordinary shares pari passu as if they were all shares of the same class.
Voting rights
Each Class A ordinary share is entitled to one1 vote. Each Class B ordinary share is entitled to 10 votes.
Preference shares
Upon the closing of our IPO, all then-outstanding Series A preference shares automatically converted into an aggregate of 12.4 million Class A ordinary shares and all then-outstanding Series B preference shares automatically converted into an aggregate of 15.0 million Class B ordinary shares.
Restricted shares
Upon the closing of our IPO, all then-outstanding restricted shares automatically converted into an aggregate of 17.2 million Class A ordinary shares.
16. Reserves
Reserves comprise the following:
|
| | | | | | | | | | | |
| As of June 30, |
| 2018 | | 2017 | | 2016 |
| (U.S. $ in thousands) |
Reserves | |
| | |
| | |
|
Share premium | $ | 454,766 |
| | $ | 450,959 |
| | $ | 441,734 |
|
Other capital reserves | 557,100 |
| | 437,346 |
| | 244,335 |
|
Cash flow hedge reserve | (3,624 | ) | | 2,215 |
| | — |
|
Foreign currency translation reserve | 4,407 |
| | 4,289 |
| | 4,149 |
|
Investments at fair value through other comprehensive income reserve | (844 | ) | | (258 | ) | | 550 |
|
Total reserves | $ | 1,011,805 |
| | $ | 894,551 |
| | $ | 690,768 |
|
|
| | | |
| Amount |
| (U.S. $ in thousands) |
Share premium | |
|
Balance as of July 1, 2016 | $ | 441,734 |
|
Share options exercise | 8,858 |
|
Early exercise vesting | 367 |
|
Balance as of June 30, 2017 | 450,959 |
|
Share options exercise | 3,761 |
|
Early exercise vesting | 46 |
|
Balance as of June 30, 2018 | $ | 454,766 |
|
|
| | | |
| Amount |
| (U.S. $ in thousands) |
Other capital reserves | |
Balance as of July 1, 2016 | $ | 244,335 |
|
Share issuance for settlement of RSUs | (451 | ) |
Replacement equity awards related to business combination | 20,193 |
|
Share-based payments | 137,458 |
|
Tax benefit from share plans | 35,811 |
|
Balance as of June 30, 2017 | 437,346 |
|
Share issuance for settlement of RSUs | (525 | ) |
Share-based payments | 162,873 |
|
Tax benefit from share plans | 140 |
|
Reduction in deferred tax assets
| (42,734 | ) |
Balance as of June 30, 2018 | $ | 557,100 |
|
|
| | | |
| Amount |
| (U.S. $ in thousands) |
Cash flow hedge reserve | |
Balance as of July 1, 2016 | $ | — |
|
Net gain on derivative instruments | 2,215 |
|
Balance as of June 30, 2017 | 2,215 |
|
Net loss on derivative instruments | (5,839 | ) |
Balance as of June 30, 2018 | $ | (3,624 | ) |
|
| | | |
| Amount |
| (U.S. $ in thousands) |
Foreign currency translation reserve | |
|
Balance as of July 1, 2016 | $ | 4,149 |
|
Translation adjustment | 140 |
|
Balance as of June 30, 2017 | 4,289 |
|
Translation adjustment | 118 |
|
Balance as of June 30, 2018 | $ | 4,407 |
|
|
| | | |
| Amount |
| (U.S. $ in thousands) |
Investments at fair value through other comprehensive income reserve | |
Balance as of July 1, 2016 | $ | 550 |
|
Net change in unrealized gain (loss) on investments classified at fair value through other comprehensive income, net of tax | (808 | ) |
Balance as of June 30, 2017 | (258 | ) |
Net change in unrealized gain (loss) on investments classified at fair value through other comprehensive income | (586 | ) |
Balance as of June 30, 2018 | $ | (844 | ) |
Share premium
Share premium consists of additional consideration for shares above the nominal value of shares in issue.
Other capital reserves
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Capital redemption reserve | $ | 98 | | | $ | 98 | |
Merger reserve | $ | 34,943 | | | $ | 34,943 | |
Share-based payments reserve | $ | 1,481,568 | | | $ | 1,095,877 | |
Other capital reserves | $ | 1,516,609 | | | $ | 1,130,918 | |
Capital redemption and merger reserves
The Company has capital redemption and merger reserves of $35.0 million in total at June 30, 2018, 20172021, 2020 and 2016.2019. They are comprised of a $98.0$98 thousand capital redemption reserve that is a non-distributable reserve arising on the redemption of redeemable shares and a $34.9 million merger reserve representing the difference between the nominal value of the shares issued by the Company in a prior reorganization and the share capital and share premium account prior to reorganization.
Share-based payments reserve
Share-based payments represent the current period’s expense related to the fair value of RSUs and share options issued to employees. Tax benefits from share plans represent the deferred tax benefit of share-based payments in excess of the expense already recognized over the life of the share-based award. The total deferred tax benefit is determined using the intrinsic value of the share-based award as at the reporting date. Issuance of ordinary shares for settlement of RSUs represents the release of ordinary shares to our employees as RSUs vest. Shares withheld related to net share settlementvest and reduces the share-based payments reserve.
Other components of RSUs represents the portion of employees' RSUs that were withheld to meet their withholding tax obligations upon the IPO vesting event. This settlement option was only offered upon our IPO, and following the IPO, employees’ RSUs are sold in order to cover their tax obligations.
equity
Cash flow hedge reserve
The change in fair value for the Group’s derivatives designated as hedging instruments are recognized in other comprehensive income and accumulated in a separate reserve within equity. The effect of the cash flow hedges determined to be effective is reclassified to the consolidated statements of operations in the same period as the hedged transactions. Gains or losses related to ineffective portion of cash flow hedges, if any, are recognized immediately to the consolidated statements of operations.
Foreign currency translation reserve
Exchange differences arising on translation of foreign subsidiaries are recognized in other comprehensive income and accumulated in a separate reserve within equity. The cumulative amount is reclassified to the consolidated statements of operations when the net investment is disposed.
Investments at fair value through other comprehensive income reserve
The change in fair value for the Group’s financial instruments classified at fair value through other comprehensive income are recognized in other comprehensive income and accumulated in a separate reserve within equity. The cumulative amount related to the Group’s debt investments is reclassified to the consolidated statements of operations upon the sale of the investment or at maturity date.investment. In contrast, the cumulative amount related to the Group’s equity investments will remain in other comprehensive income upon the sale of the investments.
17.18. Earnings Per Share
Basic earnings per share is computed by dividing the net income attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding during the period. Diluted earnings per share is computed by giving effect to all potential weighted-average dilutive shares. The dilutive effect of outstanding awards is reflected in diluted earnings per share by application of the treasury stock method.
Upon the closing of our IPO, all then-outstanding Series A preference shares automatically converted into 12.4 million Class A ordinary shares, all then-outstanding restricted shares automatically converted into 17.2 million Class A ordinary shares and all then-outstanding Series B preference shares automatically converted into an aggregate of 15.0 million Class B ordinary shares.
Prior to the IPO in fiscal year 2016, basic and diluted net income per share attributable to ordinary shareholders was presented in conformity with the two-class method required for participating shares. The Group considered its then outstanding Series A preference shares and Series B preference shares to be participating securities. The rights of the holders of Class A ordinary shares and Class B ordinary shares are identical, except with respect to voting, conversion and transfer rights. Under the two-class method, net income attributable to ordinary shareholders is determined by allocating undistributed earnings, calculated as net income less current period dividends paid to preference shares, between ordinary shares and preference shares based on their respective dividend allocations.
A reconciliation of the calculation of basic and diluted earnings (loss)loss per share is as follows:
|
| | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2018 | | 2017 | | 2016 |
| (U.S. $ in thousands, except per share data) |
Numerator: | |
| | |
| | |
|
Net income (loss) | $ | (119,341 | ) | | $ | (42,504 | ) | | $ | 4,373 |
|
Less: Allocation of earnings to preference shares—basic | — |
| | — |
| | (274 | ) |
Net income (loss) attributable to ordinary shareholders—basic | (119,341 | ) | | (42,504 | ) | | 4,099 |
|
Add: Reallocation of earnings to ordinary shares | — |
| | — |
| | 14 |
|
Net income (loss) attributable to ordinary shareholders—diluted | $ | (119,341 | ) | | $ | (42,504 | ) | | $ | 4,113 |
|
Denominator: | |
| | |
| | |
|
Weighted-average ordinary shares outstanding—basic | 231,184 |
| | 222,224 |
| | 182,773 |
|
Effect of potentially dilutive shares: | |
| | | | |
Share options and RSUs | — |
| | — |
| | 10,708 |
|
Weighted-average ordinary shares outstanding—diluted | 231,184 |
| | 222,224 |
| | 193,481 |
|
Net income (loss) per share attributable to ordinary shareholders: | |
| | |
| | |
|
Basic net income (loss) per share | $ | (0.52 | ) | | $ | (0.19 | ) | | $ | 0.02 |
|
Diluted net income (loss) per share | $ | (0.52 | ) | | $ | (0.19 | ) | | $ | 0.02 |
|
| | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 | | 2019 |
| (U.S. $ and shares in thousands, except per share data) |
Numerator: | | | | | |
Net loss attributable to ordinary shareholders: | $ | (696,315) | | | $ | (350,654) | | | $ | (637,621) | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Denominator: | | | | | |
Weighted-average ordinary shares outstanding—basic | 249,679 | | | 244,844 | | | 238,611 | |
| | | | | |
| | | | | |
Weighted-average ordinary shares outstanding—diluted | 249,679 | | | 244,844 | | | 238,611 | |
Net loss per share attributable to ordinary shareholders: | | | | | |
Basic loss per share | $ | (2.79) | | | $ | (1.43) | | | $ | (2.67) | |
Diluted net loss per share | $ | (2.79) | | | $ | (1.43) | | | $ | (2.67) | |
For fiscal years ended June 30, 20182021, 2020 and June 30, 2017, 12.8 million and 13.8 million, respectively of potentially2019, potential anti-dilutive weighted-average shares were excluded from the computation of net loss per share.share were 5.0 million, 6.8 million and 9.6 million, respectively.
18.19. Commitments
The Group leases various offices in locations such as Amsterdam, the Netherlands; the San Francisco Bay Area, California, New York, New York, and Austin, Texas, United States; Sydney, Australia; Manila, the Philippines; Bengaluru, India; and Yokohama, Japan under non-cancellable operating leases expiring within one to eleven years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. The Group incurred rent expense on its operating leases of $23.6 million, $12.2 million, and $8.3 million during the fiscal years ended June 30, 2018, 2017 and 2016, respectively.
Additionally, the Group has a contractual commitmentcommitments for services with a third-partythird-parties related to its cloud services platform and data centers. These commitments are non-cancellable and expire within one year.
Commitments for minimum lease payments in relation to non-cancellable operating leases andtwo years. The Group also has capital purchase obligations in relation to our colocation data centersfor the construction or purchase of property and equipment. Additionally, there is lease commitment that the Group has entered but the lease has not yet commenced.
The following table sets forth contractual commitments as of June 30, 20182021 and 2020: | | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Capital purchase obligations | $ | 11,076 | | | $ | 9,781 | |
Other purchase obligations | 114,060 | | | 235,002 | |
Obligations for leases that have not yet commenced | 88,855 | | | 94,345 | |
Total purchase obligation | $ | 213,991 | | | $ | 339,128 | |
Maturities of purchase obligations as of June 30, 2021 were as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| Capital purchase obligations | | Other purchase obligations | | Obligations for leases that have not yet commenced | | Total |
| (U.S. $ in thousands) |
Fiscal Period: | | | | | | | |
Year ending 2022 | $ | 11,076 | | | $ | 57,393 | | | $ | 1,438 | | | $ | 69,907 | |
Year ending 2023 - 2024 | 0 | | | 56,667 | | | 12,432 | | | 69,099 | |
Year ending 2025 - 2026 | 0 | | | 0 | | | 14,224 | | | 14,224 | |
Thereafter | 0 | | | 0 | | | 60,761 | | | 60,761 | |
Total commitments | $ | 11,076 | | | $ | 114,060 | | | $ | 88,855 | | | 213,991 | |
|
| | | | | | | | | | | |
| Operating Leases | | Other Contractual Commitments | | Total |
| (U.S. $ in thousands) |
Fiscal Period: | |
| | |
| | |
|
Year ending 2019 | $ | 32,530 |
| | $ | 25,753 |
| | $ | 58,283 |
|
Years ending 2020 - 2023 | 132,543 |
| | — |
| | 132,543 |
|
Thereafter | 163,112 |
| | — |
| | 163,112 |
|
Total commitments | $ | 328,185 |
| | $ | 25,753 |
| | $ | 353,938 |
|
19.20. Related Party Transactions
Key management personnel compensation
All directors and executive management have authority and responsibility for planning, directing and controlling the activities of the Group, and are considered to be key management personnel.
Compensation for the Company'sGroup’s key management personnel is as follows: | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 | | 2019 |
| (U.S. $ in thousands) |
Executive management: | | | | | |
Short-term compensation and benefits | $ | 3,303 | | | $ | 3,334 | | | $ | 3,835 | |
Post-employment benefits | 71 | | | 68 | | | 109 | |
Share-based payments | 12,053 | | | 15,509 | | | 17,144 | |
| $ | 15,427 | | | $ | 18,911 | | | $ | 21,088 | |
| | | | | |
Board of directors: | | | | | |
Cash remuneration | $ | 480 | | | $ | 455 | | | $ | 430 | |
Share-based payments | 1,780 | | | 1,741 | | | 1,772 | |
| $ | 2,260 | | | $ | 2,196 | | | $ | 2,202 | |
|
| | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2018 | | 2017 | | 2016 |
| (U.S. $ in thousands) |
Executive management | |
| | | | |
|
Short-term compensation and benefits | $ | 2,991 |
| | $ | 2,860 |
| | $ | 3,365 |
|
Post-employment benefits | 99 |
| | 100 |
| | 96 |
|
Share-based payments | 9,335 |
| | 26,030 |
| | 15,985 |
|
| $ | 12,425 |
| | $ | 28,990 |
| | $ | 19,446 |
|
Board of directors | |
| | |
| | |
|
Cash remuneration | $ | 362 |
| | $ | 388 |
| | $ | 241 |
|
Share-based payments | 1,577 |
| | 1,825 |
| | 1,482 |
|
| $ | 1,939 |
| | $ | 2,213 |
| | $ | 1,723 |
|
20.21. Geographic Information
The Group’s revenuesnon-current operating assets by geographic region based on end-users who purchased our products or servicesregions are as follows:
|
| | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2018 | | 2017 | | 2016 |
| (U.S. $ in thousands) |
Americas | $ | 435,471 |
| | $ | 312,514 |
| | $ | 232,793 |
|
EMEA | 346,362 |
| | 242,496 |
| | 178,087 |
|
Asia Pacific | 92,117 |
| | 64,926 |
| | 46,178 |
|
| $ | 873,950 |
| | $ | 619,936 |
| | $ | 457,058 |
|
Revenues from the United States totaled approximately $381 million, $276 million, and $206 million for the fiscal years ended June 30, 2018, 2017, and 2016, respectively. Revenues from our country of domicile, the United Kingdom, totaled approximately $63 million, $46 million, and $34 million for the fiscal years ended June 30, 2018, 2017, and 2016, respectively. |
| | | | | | | |
| Fiscal Year Ended June 30, |
| 2018 | | 2017 |
| (U.S. $ in thousands)
|
Non-current operating assets | | | |
United States | $ | 411,188 |
| | $ | 449,504 |
|
Australia | 16,692 |
| | 20,988 |
|
| $ | 427,880 |
| | $ | 470,492 |
|
| | | | | | | | | | | |
| Fiscal Year Ended June 30, |
| 2021 | | 2020 |
| (U.S. $ in thousands) |
Non-current operating assets: | | | |
United States | $ | 1,002,992 | | | $ | 975,446 | |
Australia | 107,015 | | | 102,950 | |
India | 125 | | | 10,233 | |
Total non-current operating assets | $ | 1,110,132 | | | $ | 1,088,629 | |
Non-current operating assets for this purpose consist of property and equipment, right-of-use assets, goodwill, intangible assets and other non-current assets.
21.22. Share-based Payments
The Group maintains four3 share-based employee compensation plans: the 2015 Share Incentive Plan (“2015 Plan”); the 2014 Restricted Share Unit Plan (“2014 Plan”); the Atlassian Corporation Plc 2013 U.S. Share Option Plan (“2013 U.S. Option Plan”); and the Atlassian UK Employee Share Option Plan (together with the 2013 U.S. Option Plan, the “Option Plans”). In October 2015, the BoardCompany’s board of Directorsdirectors approved the 2015 Plan, and in November 2015, our shareholders adopted the 2015 Plan, effective on the date of our IPO, which serves as the successor to the 2014 Plan and the OptionOptions Plans, and provides for the issuance of incentive and nonstatutorynon-statutory share options, share appreciation rights, restricted share awards, RSUs, unrestricted share awards, cash-based awards, performance share awards, performance-based awards to covered employees, and dividend equivalent rights to qualified employees, directors and consultants. Under the 2015 Plan, a total of 20.7 million Class A ordinary shares were initially reserved for the issuance of awards, subject to automatic annual increases.
RSU grants generally vest over four years with 25% vesting on the one year anniversary of the date of grant and 1/12th of the remaining RSUs vest over the remaining three years, on a quarterly basis thereafter. Effective from April 2021, on-going RSU grants to existing employees vest evenly over four years on a quarterly basis. Performance-based RSUs have non-market performance vesting conditions. Individuals must continue to provide services to a Group entity in order to vest.
Prior to our IPO, RSUs issued under the 2014 Plan required the satisfaction of a time-based service condition as well as a liquidity condition, defined as a sale or listing of the Company. The liquidity condition was satisfied upon our IPO. Following our IPO, participants of the 2015 Plan and 2014 Plan must only continue to provide services to a Group entity over the time-based service period to be entitled to the Class A ordinary shares underlying the RSUs. Although no future awards will be granted under the 2014 Plan, it will continue to govern outstanding awards granted thereunder.
The Option Plans allowed for the issuance of options to purchase restricted shares. Effective upon our IPO, all restricted shares automatically converted to Class A ordinary shares and under the Option Plans, the shares underlying the options converted to Class A ordinary shares. Although no0 future awards will be granted under the Option Plans, they will continue to govern outstanding awards granted thereunder.
Under the Option Plans, share options have a contractual life of seven7 to ten10 years and typically follow a standard vesting schedule over a 4four year period: 25% vest on the one year anniversary and 1/48th monthly vesting for the 36 months thereafter. Individuals must continue to provide services to a Group entity in order to vest. Upon termination, all unvested options are forfeited and vested options must generally be exercised within three months.
RSU and Class A ordinary share option activity was as follows:
|
| | | | | | | | | | | | |
| | | Share Options | | |
| Shares Available for Grant | | Outstanding | | Weighted Average Exercise Price | | RSUs Outstanding |
Balance as of July 1, 2016 | 17,529,216 |
| | 9,311,825 |
| | $ | 2.04 |
| | 12,204,353 |
|
Increase in shares authorized: | | | | | | | |
2015 Plan | 10,817,923 |
| | — |
| | — |
| | — |
|
RSUs granted | (5,938,291 | ) | | — |
| | — |
| | 5,938,291 |
|
RSUs canceled | 1,214,176 |
| | — |
| | — |
| | (1,214,176 | ) |
RSUs settled | — |
| | — |
| | — |
| | (4,510,995 | ) |
Replacement share options granted | (980,573 | ) | | 980,573 |
| | 0.72 |
| | — |
|
Share options exercised | — |
| | (5,487,334 | ) | | 1.64 |
| | — |
|
Share options canceled | 162,403 |
| | (162,403 | ) | | 2.70 |
| | — |
|
Equity awards granted in relation to business combination | (1,225,691 | ) | | — |
| | — |
| | — |
|
Repurchase of early exercised options | 18,750 |
| | — |
| | — |
| | — |
|
Balance as of June 30, 2017 | 21,597,913 |
| | 4,642,661 |
| | $ | 2.21 |
| | 12,417,473 |
|
Increase in shares authorized: | | | | | | | |
2015 Plan | 11,423,916 |
| | — |
| | — |
| | — |
|
RSUs granted | (4,390,298 | ) | | — |
| | — |
| | 4,390,298 |
|
RSUs canceled | 1,951,289 |
| | — |
| | — |
| | (1,951,289 | ) |
RSUs settled | — |
| | — |
| | — |
| | (5,253,809 | ) |
Share options exercised | — |
| | (1,902,084 | ) | | 1.93 |
| | — |
|
Share options canceled | 17,395 |
| | (17,395 | ) | | 1.45 |
| | — |
|
Balance as of June 30, 2018 | 30,600,215 |
| | 2,723,182 |
| | 2.41 |
| | 9,602,673 |
|
Share options vested and exercisable as of June 30, 2017 | — |
| | 3,074,737 |
| | $ | 2.31 |
| | |
Share options vested and exercisable as of June 30, 2018 | — |
| | 1,983,464 |
| | $ | 2.50 |
| | |
The 2014 Plan and the Option Plans were terminated in connection with our IPO, and accordingly, no shares are available for issuance under these plans. | | | | | | | | | | | | | | | | | | | | | | | |
| | | Share Options | | |
| Shares Available for Grant | | Outstanding | | Weighted Average Exercise Price | | RSUs Outstanding |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Balance as of June 30, 2019 | 38,128,994 | | | 1,220,826 | | | 2.47 | | | 9,211,611 | |
RSUs granted | (3,083,015) | | | — | | | — | | | 3,083,015 | |
RSUs canceled | 874,564 | | | — | | | — | | | (874,564) | |
RSUs settled | — | | | — | | | — | | | (4,048,319) | |
Share options exercised | — | | | (761,945) | | | 2.37 | | | — | |
Share options canceled | 707 | | | (707) | | | 1.03 | | | — | |
Balance as of June 30, 2020 | 35,921,250 | | | 458,174 | | | $ | 2.65 | | | 7,371,743 | |
RSUs granted | (2,415,324) | | | — | | | — | | | 2,415,324 | |
RSUs canceled | 777,183 | | | — | | | — | | | (777,183) | |
RSUs settled | — | | | — | | | — | | | (3,468,136) | |
Share options exercised | — | | | (390,802) | | | 2.98 | | | — | |
Balance as of June 30, 2021 | 34,283,109 | | | 67,372 | | | $ | 0.75 | | | 5,541,748 | |
Share options vested and exercisable as of June 30, 2021 | | | 67,372 | | | $ | 0.75 | | | |
Share options vested and exercisable as of June 30, 2020 | | | 457,663 | | | $ | 2.65 | | | |
The weighted-average remaining contractual life for options outstanding as of June 30, 20182021 and June 30, 20172020 was 4.13.9 years and 4.73.6 years, respectively.
Options exercisable as of June 30, 20182021 and June 30, 2017,2020, had a weighted-average remaining contractual life of approximately 3.33.9 years and 3.6 years, respectively.
The following table summarizes information about share options outstanding as of June 30, 2018:2021: | | | | | | | | | | | | | | | | | |
| Options Outstanding and Exercisable |
Range of Exercise Prices | Number Outstanding | | Weighted Average Exercise Price | | Weighted Average Remaining Years |
$0.59 - 0.66 | 53,037 | | | $ | 0.61 | | | 3.64 |
$1.14 | 13,606 | | | 1.14 | | | 5.07 |
$3.18 | 729 | | | 3.18 | | | 2.33 |
| 67,372 | | | $ | 0.75 | | | 3.92 |
|
| | | | | | | | | | | | | | | | |
| Options Outstanding | | Options Exercisable |
Range of Exercise Prices | Number Outstanding | | Weighted- Average Exercise Price | | Number Exercisable | | Weighted- Average Exercise Price | | Weighted- Average Remaining Years |
$0.59 - 0.66 | 385,963 |
| | $ | 0.63 |
| | 162,945 |
| | $ | 0.61 |
| | 6.01 |
|
$1.14 - 1.59 | 212,391 |
| | 1.35 |
| | 123,296 |
| | 1.50 |
| | 2.07 |
|
$1.92 - 2.16 | 166,967 |
| | 2.06 |
| | 166,967 |
| | 2.06 |
| | 1.39 |
|
$2.40 - 2.92 | 740,363 |
| | 2.46 |
| | 740,363 |
| | 2.46 |
| | 1.86 |
|
$3.18 | 1,217,498 |
| | 3.18 |
| | 789,893 |
| | 3.18 |
| | 4.75 |
|
| 2,723,182 |
| | $ | 2.41 |
| | 1,983,464 |
| | $ | 2.50 |
| | 3.32 |
|
The following table summarizes information about share options outstanding as of June 30, 2017:2020: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Options Outstanding | | Options Exercisable |
Range of Exercise Prices | Number Outstanding | | Weighted- Average Exercise Price | | Number Exercisable | | Weighted Average Exercise Price | | Weighted Average Remaining Years |
$0.59 - 0.66 | 78,563 | | | $ | 0.62 | | | 78,563 | | | $ | 0.62 | | | 4.86 |
$1.14 | 21,024 | | | 1.14 | | | 20,513 | | | 1.14 | | | 6.07 |
$3.18 | 358,587 | | | 3.18 | | | 358,587 | | | 3.18 | | | 3.23 |
| 458,174 | | | $ | 2.65 | | | 457,663 | | | $ | 2.65 | | | 3.64 |
|
| | | | | | | | | | | | | | | | |
| Options Outstanding | | Options Exercisable |
Range of Exercise Prices | Number Outstanding | | Weighted- Average Exercise Price | | Number Exercisable | | Weighted- Average Exercise Price | | Weighted- Average Remaining Years |
$0.42 - 0.66 | 947,459 |
| | $ | 0.61 |
| | 354,112 |
| | $ | 0.60 |
| | 3.07 |
|
$1.14 - 1.59 | 405,667 |
| | 1.36 |
| | 260,611 |
| | 1.47 |
| | 2.72 |
|
$1.92 - 2.16 | 340,783 |
| | 2.05 |
| | 340,783 |
| | 2.05 |
| | 2.38 |
|
$2.40 - 2.92 | 1,310,942 |
| | 2.46 |
| | 1,302,133 |
| | 2.45 |
| | 2.86 |
|
$3.18 | 1,637,810 |
| | 3.18 |
| | 817,098 |
| | 3.18 |
| | 5.41 |
|
| 4,642,661 |
| | $ | 2.21 |
| | 3,074,737 |
| | $ | 2.31 |
| | 3.50 |
|
Class B ordinaryThe weighted-average grant date fair value of the RSUs issued during the fiscal years ended June 30, 2021 and 2020 was $192.6 and $139.2 per share, option activity was as follows:
|
| | | | | | | | | |
| Shares Available for Grant | | Outstanding Share Options | | Weighted- Average Exercise Price |
Balance as of July 1, 2016 | — |
| | 1,434,858 |
| | $ | 0.56 |
|
Exercised | — |
| | (914,587 | ) | | $ | 0.55 |
|
Balance as of June 30, 2017 | — |
| | 520,271 |
| | $ | 0.63 |
|
Exercised | — |
| | (520,271 | ) | | $ | 0.61 |
|
Balance as of June 30, 2018 | — |
| | — |
| | $ | — |
|
respectively. There were no Class B ordinary0 share options available for exercise asgranted during the fiscal year ended June 30, 2021 and 2020.
Restricted stock
During the fiscal years 2021 and 2020, the Company granted 95,499 and 245,221 shares of restricted stock that were subject to forfeiture, respectively. The weighted average grant fair values of these restricted shares was $200.5 and $135.6, with a weighted average vesting period of 1.7 years and 3 years, respectively. As of June 30, 2018. Class B ordinary share options exercisable2021 and 2020, there were 270,251 and 515,697 shares of restricted stock outstanding, respectively. These outstanding shares of restricted stock are subject to forfeiture or repurchase at the original exercise price during the repurchase period following employee termination, as of June 30, 2017 had a weighted-average remaining contractual life of approximately 0.9 years. Class B ordinary share options are denominated in Australian dollars.applicable.
The following table summarizes information about the Class B ordinary share options outstanding as of June 30, 2017:
|
| | | | | | | | | | | | | | | | |
| Options Outstanding | | Options Exercisable |
Exercise Prices | Number Outstanding | | Weighted- Average Exercise Price | | Number Exercisable | | Weighted- Average Exercise Price | | Weighted- Average Remaining Years |
$0.63 | 520,271 |
| | $ | 0.63 |
| | 520,271 |
| | $ | 0.63 |
| | 0.92 |
|
All share-based payments are measured based on the grant date fair value of the awards and recognized in the consolidated statements of operations over the period during which the employee is required to perform services in exchange for the award (generally the four-year vesting period of the award).
Prior to the IPO, the Group enlisted the assistance of a third-party valuation firm in order to perform the valuation of RSUs using assumptions provided by management. As discussed above, prior to the effectiveness of the IPO, the Group’s RSUs contained a non-time based vesting condition. Pursuant to IFRS 2, Share-based payment, the fair value of RSUs granted prior to the IPO were reduced to reflect the impact of this non-time based vesting condition.
The weighted-average grant date fair value of the RSUs issued during the fiscal years ended June 30, 2018 and 2017 was $41.70 per share and $29.16 per share, respectively.
There were no share options granted during the fiscal year ended June 30, 2018. The Company granted 980,573 replacement share options exercisable for Class A ordinary shares with a weighted-average exercise price of $0.72 per share in connectionaward, with the Group’s acquisitionexception of Trello during the fiscal year ended June 30, 2017. The fair value of the share option grants were estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions and fair value per share:
|
| | | |
| Fiscal Year Ended June 30, |
| 2018 | 2017 | 2016 |
Fair value of underlying shares | n/a | $28.16 | n/a |
Exercise price | n/a | $0.59 - 1.14 | n/a |
Expected volatility | n/a | 41% | n/a |
Expected term (in years) | n/a | 4.5 - 6.0 | n/a |
Risk-free interest rate | n/a | 1.9% | n/a |
Dividend yield | n/a | —% | n/a |
Weighted-average fair value per share option | n/a | $27.51 | n/a |
The exercise price of share options is established on the grant date and is determined by the board of directors. The Company refers to the closing stock price on the grant date to determine the fair value of Class A ordinary shares underlying share options. The Company estimates expected future volatility based on the historical volatility of the Company’s stock price. The estimated term for share options was based on the vesting terms and contractual lives of the optionsRestricted Stock, as well as expectations around employee vesting behavior. The risk-free interest rate is based on the rate for a U.S. government security with the same estimated life at the time of the option grant.
shown above). As of June 30, 2018,2021, the Group had an aggregate of $133.2$326.8 million of future period share-based payment expense related to all equity awards outstanding, net of estimated forfeitures, to be amortized over a weighted-average periodremaining period of 1.4 years.
Early exercises of share options
23. Events after the reporting period
As of June 30, 2018August 2, 2021, we have received exchange requests for $81.7 million principal amount of the Notes that settle during our first quarter of fiscal year 2022.
All conditions for the Notes redemption under the Company right to redeem the Notes on or after November 6, 2020 have been met. Please refer to Note 16, “Debt” for additional information regarding the Notes. On August 2, 2021, the Company submitted an irrevocable redemption notice on the remaining outstanding Notes of $270.5 million principal amount. The redemption price per Note will be equal to 100% of the principal amount of such Notes to be redeemed, plus accrued and 2017, outstanding shares included 827,871 and 1,214,689 shares, respectively, that areunpaid interest to, but excluding, the redemption date of October 7, 2021. The holders of these Notes subject to repurchase as they were early exercised and unvested. The Company retains the rightredemption notice may exchange all or any portion of their Notes at any time prior to repurchase, at the original exercise price, any unvested (but issued) shares during the repurchase period following employee termination. These amounts have been recordedclose of business on the consolidated statementssecond scheduled trading day immediately preceding the related redemption date for cash. The exchange rate to be utilized for the Notes settlement is an adjusted rate of financial position as a liability as of June 30, 2018 and 2017. Amounts reclassified into contributed equity during the fiscal years ended June 30, 2018 and 2017 as a result12.2686 of the vestingCompany’s Class A ordinary shares per $1,000 principal amount of Notes.
In connection with the issuance of the early exercised shares was $0.1Notes redemption notice, the Company executed agreements with the capped call counterparties to terminate the outstanding portion of the capped call transactions corresponding to the Notes to be redeemed or exchanged in respect of the redemption of the Notes. In addition, the Company made the first drawdown of $650 million and $0.4 million, respectively.
from our Term Loan Facility.