To our shareholders, customers,
partners, and all Atlassians—
· We acquired AgileCraft and rebranded it Jira Align.
Jira Align allows enterprises to seamlessly connect the
work of engineering and IT teams to business objectives,
bridging Jira as the system of record of work from
individual teams to the C-Suite.
· We grew the Atlassian family to over 3,600 employees
worldwide, and expanded our presence in Bengaluru,
India, by moving into a new technology center. We are
establishing our Bengaluru office as a world-class R&D
and customer support center. We have already hired
more than 200 employees locally and, over the next
year, expect to more than double our employee base
in Bengaluru.
Customers have always been our guiding light and our
customers are leading us toward the Cloud. Demand for our
Cloud products is increasing, both from new customers and
from existing customers using our on-premises products.
In the coming year, we will continue to focus on improving
and expanding our Cloud offerings. We also plan to invest to
serve larger customers in the Cloud, as well as help existing
Server customers migrate to the Cloud.
Atlassian’s strong customer growth and financial
performance in fiscal 2019 are a testament to the
commitment and the talent of the people who work
here. We are incredibly proud of all the Atlassians who
come together each day to build great products that our
customers love.
We’re also proud of Atlassian’s unwavering commitment
to social good. Atlassian has committed more than
$100 million to the Atlassian Foundation, and Atlassians
themselves volunteered more than 50,000 hours in their
communities this past year. The Atlassian Foundation has
a goal of helping to prepare 10 million disadvantaged youth
for the workforce of the future within the next 10 years.
Thank you for joining us on this journey. We couldn’t be more
excited about the year ahead.
Scott Farquhar and Mike Cannon-Brookes
Co-Founders and Co-Chief Executive Officers
We founded Atlassian in 2002 determined to build a
company that both thrives and endures. So we’ve always
operated with a long-term mindset.
For the past 17 years, Atlassian has helped unleash the
potential of teams around the world. And we continue to
invest with an eye towards the future. It’s this discipline
and focus that provides us the tremendous opportunities
we see ahead.
Our biggest opportunity lies in Atlassian’s Cloud products
and platform. Cloud is our primary focus as we head into
our fiscal 2020. Cloud gives us the foundation to scale and
innovate, and is fundamental to Atlassian’s long-term goal:
100 million monthly active users.
Reaching this goal will require time, persistence and strong
execution, and Atlassians – as they demonstrated again this
year – are up to the challenge. Our fiscal 2019 was another
outstanding year: surpassing 150,000 customers, exceeding
$1 billion in revenue for the first time in a fiscal year, and
generating more than $400 million in free cash flow.
Some exciting product milestones helped underpin
these results:
· Trello reinforced its status as the go-to collaboration tool
in the workplace, serving more than 80% of the Fortune
500. In Okta’s 2019 Businesses @ Work report, Trello was
cited as the most widely adopted project management
app at work. We added a number of new capabilities to
improve Trello for teams and larger organizations. And
we helped end-users more easily connect and automate
workflows across Trello and other applications by adding
automation directly to Trello.
· We improved the overall user experience of our Jira
product family by simplifying the interface for new users
and enhancing more powerful features for advanced
users. This combination of simplicity and power keeps
Jira Software the industry standard for managing work in
software teams.
· The Atlassian Marketplace continues to play a vital role
in satisfying the long tail of custom use cases for our
products through thousands of add-ons and integrations
with non-Atlassian products. In fiscal 2019, purchases of
apps on the Marketplace exceeded $300 million.
· We acquired Opsgenie to spearhead our growth in the
incident management market. Opsgenie complements
Statuspage and the Jira family, and rounds out the most
comprehensive incident lifecycle management solution for
the Fortune 500,000. Opsgenie has continued its strong
momentum since joining the Atlassian family. In the second
half of fiscal 2019, Opsgenie more than doubled its pace of
paid user additions from a year ago.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the fiscal year ended June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-37651
Atlassian Corporation Plc
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
England and Wales
(Jurisdiction of incorporation or organization)
Exchange House
Primrose Street
London EC2A 2EG
c/o Herbert Smith Freehills LLP
415.701.1110
(Address of principal executive offices)
Stuart Fagin
Deputy General Counsel
Atlassian Corporation Plc
Exchange House
Primrose Street
London EC2A 2EG
c/o Herbert Smith Freehills LLP
415.701.1110
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Class A Ordinary Shares
Trading Symbol
TEAM
Name of each exchange on which registered
NASDAQ Global Select Market
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: Class B Ordinary Shares
No
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
As of June 30, 2019, 118,184,933 Class A Ordinary Shares and 124,722,559 Class B Ordinary Shares
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934. Yes
Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations
under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes
No
No
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or an emerging growth company. See definitions of “large
accelerated filer, “accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. :
Accelerated filer
Non-accelerated filer
Emerging growth company
Large accelerated filer
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after
April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP
Standards as issued by the International Accounting Standards Board
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
International Financial Reporting
Item 18
Other
No
ANNUAL REPORT
TABLE OF CONTENTS
INTRODUCTION
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART I
Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Item 3. KEY INFORMATION
Item 4. INFORMATION ON THE COMPANY
Item 4A. UNRESOLVED STAFF COMMENTS
Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Item 8. FINANCIAL INFORMATION
Item 9. THE OFFER AND LISTING
Item 10. ADDITIONAL INFORMATION
Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
PART II
Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
Item 15. CONTROLS AND PROCEDURES
Item 16. RESERVED
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Item 16B. CODE OF ETHICS.
Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
Item 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Item 16G. CORPORATE GOVERNANCE
Item 16H. MINE SAFETY DISCLOSURE
PART III
ITEM 17. FINANCIAL STATEMENTS
ITEM 18. FINANCIAL STATEMENTS
ITEM 19. EXHIBITS
SIGNATURES
CONSOLIDATED FINANCIAL STATEMENTS
4
4
5
5
5
5
34
43
44
61
74
79
79
80
86
87
88
88
88
88
88
88
89
89
89
89
89
90
90
90
90
90
91
93
F-1
3
INTRODUCTION
All references in this annual report to “Atlassian” or the “Company,” “we,” “our,” “us” or similar terms refer to
Atlassian Corporation Plc and its subsidiaries.
Our consolidated financial statements are presented in U.S. dollars. All references in this annual report to “$,”
“U.S. $,” “U.S. dollars” and “dollars” mean U.S. dollars, unless otherwise noted.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements within the meaning of the federal securities laws, which
statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events
or our future financial or operating performance. In some cases, you can identify forward-looking statements because
they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,”
“contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other
similar terms or expressions that articulate our expectations, strategy, plans or intentions. Forward-looking statements
contained in this annual report include, but are not limited to, statements about:
• Our future financial performance, including our revenues, cost of revenues, gross profit or gross margin and
operating expenses;
• The sufficiency of our cash and cash equivalents to meet our liquidity needs;
• Our ability to increase the number of customers using our software;
• Our ability to attract and retain customers to use our products and solutions;
• Our ability to develop new products and enhancements to our existing products;
• Our ability to successfully expand in our existing markets and into new markets;
• Our ability to effectively manage our growth and future expenses;
• Our ability to prevent security breaches and unauthorized access to customer data;
• Our ability to maintain, protect and enhance our intellectual property;
• Our ability to grow our cloud offerings;
• Our future growth and profitability;
• Our ability to comply with modified or new laws and regulations applying to our business, including privacy
and data security regulations;
• Our ability to attract and retain qualified employees and key personnel;
• Future acquisitions of, or investments in, complementary companies, products, services or technologies.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this annual
report.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-
looking statements contained in this annual report primarily on our current expectations and projections about future
events and trends that we believe may affect our business, financial condition, results of operations and prospects.
The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other
factors described in “Risk Factors” and elsewhere in this annual report. Moreover, we operate in a very competitive
and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us
to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this
annual report. The results, events and circumstances reflected in the forward-looking statements may not be achieved
or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking
statements.
The forward-looking statements made in this annual report relate only to events as of the date on which the
statements are made. We undertake no obligation to update any forward-looking statements made in this annual report
to reflect events or circumstances after the date of this annual report or to reflect new information or the occurrence
of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations
disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements.
4
Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers,
dispositions, or investments.
PART I
Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
Item 3. KEY INFORMATION
A. Selected Financial Data
The following tables summarize our selected consolidated financial and other data. We prepare our consolidated
financial statements 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. We derived the consolidated statements of operations data for the fiscal years ended
June 30, 2019, 2018 and 2017 and the consolidated summary of financial position data as of June 30, 2019 and
2018 from our audited consolidated financial statements included elsewhere in this annual report. The selected
statements of operations data for the fiscal years ended June 30, 2016 and 2015 and the consolidated statements of
financial position data as of June 30, 2017, 2016 and 2015 are derived from our audited consolidated financial
statements that are not included in this annual report. The selected summary data for the years ended June 30, 2019,
2018 and 2017 reflects the adoption of IFRS 15, Revenue from Contracts with Customers (“IFRS 15”). See Note 2,
“Summary of significant accounting policies”, of the notes to our consolidated financial statements for more details.
The selected summary data for the years ended June 30, 2016 and 2015 does not reflect the adoption of IFRS 15.
You should read the following selected consolidated financial data in conjunction with “Item 4. Information on the
Company” and our consolidated financial statements and related notes included elsewhere in this annual report.
5
Consolidated Statements of Operations Data:
Revenues:
Subscription
Maintenance
Perpetual license
Other
Total revenues
Cost of revenues (1) (2)
Gross profit
Operating expenses:
Research and development (1) (2)
Marketing and sales (1) (2)
General and administrative (1)
Total operating expenses
Operating loss
Other non-operating expense, net
Finance income
Finance costs
Loss before income tax expense
Income tax (expense) benefit
Net (loss) income
Net (loss) income per share attributable to ordinary
shareholders:
Fiscal Year Ended June 30,
2019
2018
2017
2016
2015
(U.S. $ and shares in thousands, except per share data)
*As Adjusted
*As Adjusted
$ 633,950 $ 410,694 $ 249,823 $ 146,659 $ 85,891
160,373
57,373
15,884
319,521
52,932
266,589
394,526
93,593
88,058
1,210,127
210,285
999,842
326,511
83,171
60,602
880,978
172,690
708,288
264,453
74,058
38,350
626,684
119,161
507,523
218,848
65,487
26,064
457,058
75,783
381,275
579,134
268,356
215,714
1,063,204
(63,362)
(535,453)
33,500
(40,241)
(605,556)
(32,065)
415,776
187,315
151,242
754,333
(46,045)
(15,157)
9,877
(6,806)
(58,131)
(55,301)
$ (637,621) $(113,432) $ (37,449) $
310,169
134,404
118,784
563,357
(55,834)
(1,342)
4,851
(75)
(52,400)
14,951
208,306
93,391
85,458
387,155
(5,880)
(1,072)
2,116
(71)
(4,907)
9,280
4,373 $
140,853
67,989
56,033
264,875
1,714
(2,615)
226
(74)
(749)
7,524
6,775
Basic
Diluted
$
$
(2.67) $
(2.67) $
(0.49) $
(0.49) $
(0.17) $
(0.17) $
0.02 $
0.02 $
0.04
0.04
Weighted-average shares outstanding used to
compute net (loss) income per share attributable to
ordinary shareholders:
Basic
Diluted
238,611
238,611
231,184
231,184
222,224
222,224
182,773
193,481
144,008
145,500
* Adjusted IFRS balances to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 of the notes to our consolidated financial statements for
further details.
(1)
Amounts include share-based payment expense, as follows:
Cost of revenues
Research and development
Marketing and sales
General and administrative
$
17,450 $ 11,955 $
6,856 $
5,371 $
149,049
39,303
51,960
98,609
23,605
28,704
79,384
17,395
33,813
35,735
11,945
22,429
2,862
22,842
6,670
9,160
(2)
Amounts include amortization of acquired intangible assets, as follows:
27,997 $ 21,188 $ 14,587 $
—
36,090
—
15,269
60
28,744
7,405 $
—
86
6,417
—
40
Cost of revenues
Research and development
Marketing and sales
$
6
Consolidated Statements of Financial Position Data:
Cash and cash equivalents
$ 1,268,441 $ 1,410,339 $
244,420 $
259,709
$
187,094
2019
2018
2017
2016
2015
As of June 30,
(U.S. $ in thousands)
*As Adjusted
*As Adjusted
Short-term investments
Derivative assets
Working capital
Total assets
Deferred revenue
Derivative liabilities
Exchangeable senior notes, net
Total liabilities
Share capital
Total equity
1,377,145
296,984
2,421,828
1,282,117
445,046
215,233
(287,597)
2,977,258
468,820
855,079
853,576
323,134
99,995
342,871
207,970
819,637
2,411,791
1,514,508
24,199
565,467
23,531
907,320
305,499
483,405
30,251
3,252
245,195
—
—
379,424
22,726
902,693
—
542,038
990,973
181,068
—
—
259,310
21,620
731,663
—
50,477
397,161
136,565
—
—
207,107
18,461
190,054
* Adjusted IFRS balances to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 of the notes to our consolidated financial statements for
further details.
Non-IFRS Financial Results
Our reported results include certain non-IFRS financial measures, including non-IFRS gross profit, non-IFRS
operating income, non-IFRS net income, non-IFRS net income per diluted share, and free cash flow. Management
believes that the use of these non-IFRS financial measures provides consistency and comparability with our past
financial performance, facilitates period-to-period comparisons of our results of operations, and also facilitates
comparisons with peer companies, many of which use similar non-IFRS or non-GAAP financial measures to supplement
their IFRS or GAAP results. Non-IFRS results are presented for supplemental informational purposes only to aid in
understanding our operating results. The non-IFRS results should not be considered a substitute for financial information
presented in accordance with IFRS, and may be different from non-IFRS or non-GAAP measures used by other
companies.
Our non-IFRS financial measures include:
• Non-IFRS gross profit. Excludes expenses related to share-based compensation and amortization of acquired
intangible assets;
• Non-IFRS operating income. Excludes expenses related to share-based compensation and amortization of
acquired intangible assets;
• Non-IFRS net income and non-IFRS net income per diluted share. Excludes expenses related to share- based
compensation, amortization of acquired intangible assets, non-coupon impact related to our exchangeable
senior notes (the “Notes”) and capped calls, the related income tax effects on these items, and changes in
our assessment regarding the realizability of our deferred tax assets; and
• Free cash flow. Free cash flow is defined as net cash provided by operating activities less capital expenditures,
which consists of purchases of property and equipment.
Our non-IFRS financial measures reflect adjustments based on the items below:
• Share-based compensation;
• Amortization of acquired intangible assets;
• Non-coupon impact related to the Notes and capped calls:
Amortization of the Notes discount and issuance costs;
Mark to fair value of the Notes exchange feature;
Mark to fair value of the related capped call transactions; and
7
• The related income tax effects on these items and changes in our assessment regarding the realizability of
our deferred tax assets.
We exclude expenses related to share-based compensation, amortization of acquired intangible assets, non-
coupon impact related to the Notes and capped calls, the related income tax effects on these items, and changes in
our assessment regarding the realizability of our deferred tax assets from certain of our non-IFRS financial measures
as we believe this helps investors understand our operational performance. In addition, share-based compensation
expense can be difficult to predict and varies from period to period and company to company due to differing valuation
methodologies, subjective assumptions, and the variety of equity instruments, as well as changes in stock price.
Management believes that providing non-IFRS financial measures that exclude share-based compensation expense,
amortization of acquired intangible assets, non-coupon impact related to the Notes and capped calls, the related
income tax effects on these items, and changes in our assessment regarding the realizability of our deferred tax assets
allow for more meaningful comparisons between our operating results from period to period.
Management considers free cash flow to be a liquidity measure that provides useful information to management
and investors about the amount of cash generated by our business that can be used for strategic opportunities, including
investing in our business, making strategic acquisitions, and strengthening our statement of financial position.
Management uses non-IFRS gross profit, non-IFRS operating income, non-IFRS net income, non-IFRS net
income per diluted share, and free cash flow:
• As measures of operating performance, because these financial measures do not include the impact of items
not directly resulting from our core operations;
• For planning purposes, including the preparation of our annual operating budget;
• To allocate resources to enhance the financial performance of our business;
• To evaluate the effectiveness of our business strategies; and
•
In communications with our board of directors and investors concerning our financial performance.
We understand that although non-IFRS gross profit, non-IFRS operating income, non-IFRS net income, non-
IFRS net income per diluted share and free cash flow are frequently used by investors and securities analysts in their
evaluation of companies, these measures have limitations as analytical tools, and you should not consider them in
isolation or as substitutes for analysis of our results of operations as reported under IFRS.
The following tables provide reconciliations of non-IFRS financial measures to the most directly comparable
financial measures calculated and presented in accordance with IFRS for the fiscal years ended June 30, 2019, 2018,
2017, 2016 and 2015. The data for the years ended June 30, 2019, 2018 and 2017 reflect the adoption of IFRS 15.
The data for the years ended June 30, 2016 and 2015 does not reflect the adoption of IFRS 15.
8
Gross profit
IFRS gross profit
Fiscal Year Ended June 30,
2019
2018
2017
2016
2015
(U.S. $ and shares in thousands, except per share data)
*As Adjusted
*As Adjusted
$ 999,842 $ 708,288 $ 507,523 $ 381,275 $ 266,589
Plus: Share-based payment expense
Plus: Amortization of acquired intangible assets
17,450
27,997
11,955
21,188
6,856
14,587
5,371
7,405
2,862
6,417
Non-IFRS gross profit
$1,045,289 $ 741,431 $ 528,966 $ 394,051 $ 275,868
Operating income
IFRS operating (loss) income
$ (63,362) $ (46,045) $ (55,834) $ (5,880) $
1,714
Plus: Share-based payment expense
Plus: Amortization of acquired intangible assets
257,762
56,801
162,873
137,448
57,278
29,856
75,480
7,491
41,534
6,457
Non-IFRS operating income
$ 251,201 $ 174,106 $ 111,470 $ 77,091 $ 49,705
Net income
IFRS net (loss) income
Plus: Share-based payment expense
Plus: Amortization of acquired intangible assets
Plus: Non-coupon impact related to the Notes and
capped calls
$ (637,621) $(113,432) $ (37,449) $
4,373 $
6,775
257,762
56,801
162,873
137,448
57,278
29,856
75,480
7,491
41,534
6,457
567,847
19,892
—
—
—
Less: Income tax effects and adjustments
(30,243)
(2,150)
(39,864)
(16,018)
(9,244)
Non-IFRS net income
$ 214,546 $ 124,461 $ 89,991 $ 71,326 $ 45,522
Net income per share
IFRS net (loss) income per share - diluted
Plus: Share-based payment expense
Plus: Amortization of acquired intangible assets
Plus: Non-coupon impact related to the Notes and
capped calls
Less: Income tax effects and adjustments
Non-IFRS net income per share - diluted
$
$
(2.67) $
1.05
0.23
2.37
(0.12)
0.86 $
0.68
0.25
0.08
(0.01)
(0.49) $
(0.17) $
0.02 $
0.59
0.13
—
0.37
0.04
—
0.04
0.26
0.04
—
(0.17)
(0.08)
(0.06)
0.51 $
0.38 $
0.35 $
0.28
Weighted-average diluted shares outstanding
Weighted-average shares used in computing diluted
IFRS net loss per share
Plus: Dilution from share options and RSUs (1)
Plus: Dilution from share options and RSUs granted
in periods prior to IPO (2)
Weighted-average shares used in computing diluted
non-IFRS net income per share
238,611
231,184
222,224
193,481
145,500
9,609
12,801
13,833
—
—
—
—
—
8,205
17,573
248,220
243,985
236,057
201,686
163,073
* Adjusted IFRS balances to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 of the notes to our consolidated financial statements for
further details.
(1) The effects of these dilutive securities were not included in the IFRS calculation of diluted net loss per share for
the fiscal year ended June 30, 2019, 2018 and 2017 because the effect would have been anti-dilutive.
(2) Gives effect to share options and RSUs in periods prior to our IPO for comparability.
9
Free cash flow
IFRS net cash provided by operating activities
Less: Capital expenditures
Free cash flow
Fiscal Year Ended June 30,
2019
2018
2017
2016
2015
(U.S. $ in thousands)
$ 466,342 $ 311,456 $ 199,381 $ 129,542 $ 98,221
(44,192)
(30,209)
(15,129)
(34,213)
(31,776)
$ 422,150 $ 281,247 $ 184,252 $ 95,329 $ 66,445
10
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Risks Related to Our Business and Industry
A description of the risks and uncertainties associated with our business is set forth below. You should carefully consider
such risks and uncertainties, together with the other information contained in this annual report, and in our other public
filings. If any such risks and uncertainties actually occur, our business, financial condition or operating results could
differ materially from the plans, projections and other forward-looking statements included elsewhere in this annual
report and in our other public filings. In addition, if any of the following risks and uncertainties, or if any other risks and
uncertainties, actually occur, our business, financial condition, or operating results could be harmed substantially.
Our rapid growth makes it difficult to evaluate our future prospects and may increase the risk that we will not
continue to grow at or near historical rates.
We have been growing rapidly over the last several years, and as a result, our ability to forecast our future
results of operations is subject to a number of uncertainties, including our ability to effectively plan for and model future
growth. Our recent and historical growth should not be considered indicative of our future performance. We have
encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing
companies in rapidly changing industries. If our assumptions regarding these risks and uncertainties, which we use
to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our operating
and financial results could differ materially from our expectations, our growth rates may slow, and our business would
suffer.
We may not be able to sustain our revenue growth rate or achieve profitability in the future.
Our historical growth rate should not be considered indicative of our future performance and may decline in the
future. In future periods, our revenue could grow more slowly than in recent periods or decline for a number of reasons,
including any reduction in demand for our products, increase in competition, limited ability to, or our decision not to,
increase pricing, contraction of our overall market, or our failure to capitalize on growth opportunities. In addition, we
expect expenses to increase substantially in the near term, particularly as we continue to make significant investments
in research and development and technology infrastructure for our cloud offerings, expand our operations globally and
develop new products and features for, and enhancements of, our existing products. As a result of these significant
investments, and in particular share-based compensation associated with our growth, we do not expect to achieve
IFRS profitability in the near term and may not be able to achieve IFRS profitability in future periods. In addition, the
additional expenses we will incur may not lead to sufficient additional revenue to maintain historical revenue growth
rates and profitability.
The markets in which we participate are intensely competitive, and if we do not compete effectively, our
business, results of operations, and financial condition could be harmed.
The markets for our solutions are fragmented, rapidly evolving, highly competitive, and have relatively low
barriers to entry. We face competition from both traditional, larger software vendors offering full collaboration and
productivity suites and smaller companies offering point products for features and use cases. Our principal competitors
vary depending on the product category and include Microsoft, IBM, Google, ServiceNow, salesforce.com, Zendesk,
PagerDuty and Github (acquired by Microsoft). In addition, some of our competitors have made acquisitions to offer
a more comprehensive product or service offering, which may allow them to compete more effectively with our products.
We expect this trend to continue as companies attempt to strengthen or maintain their market positions in an evolving
industry. Following such potential consolidations, companies may create more compelling product offerings and be
able to offer more attractive pricing options, making it more difficult for us to compete effectively.
Our competitors, particularly our competitors with greater financial and operating resources, may be able to
respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or
customer requirements. With the introduction of new technologies, the evolution of our products, and new market
entrants, we expect competition to intensify in the future. For example, as we expand our focus into new use cases
11
or other product offerings beyond software development teams, we expect competition to increase. Pricing pressures
and increased competition generally could result in reduced sales, reduced margins, losses, or the failure of our
products to achieve or maintain more widespread market acceptance, any of which could harm our business, results
of operations and financial condition.
Many of our current and potential competitors have greater resources than we do, with established marketing
relationships, large enterprise sales forces, access to larger customer bases, pre-existing customer relationships, and
major distribution agreements with consultants, system integrators and resellers. Additionally, some current and
potential customers, particularly large organizations, have elected, and may in the future elect, to develop or acquire
their own internal collaboration and productivity software tools that would reduce or eliminate the demand for our
solutions.
Our products seek to serve multiple markets, and we are subject to competition from a wide and varied field of
competitors. Some competitors, particularly new and emerging companies, could focus all their energy and resources
on one product line or use case and, as a result, any one competitor could develop a more successful product or
service in a particular market which could decrease our market share and harm our brand recognition and results of
operations. For all of these reasons and others we cannot anticipate today, we may not be able to compete successfully
against our current and future competitors, which could harm our business, results of operations, and financial condition.
Our distribution model of offering and selling on-premises offerings of certain of our products, in addition to
offering and selling cloud offerings of these products, increases our expenses, may impact revenue recognition
timing, and may pose other challenges to our business.
We offer and sell both on-premises and cloud offerings of certain of our products. For these products, our cloud
offering enables quick setup and subscription pricing, while our on-premises offering permits more customization, a
perpetual or term license fee structure, and complete application control. Historically, these products were developed
in the context of the on-premises offering, and we have less operating experience offering and selling these products
via our cloud offering. Although a substantial majority of our revenue has historically been generated from customers
using our on-premises products, we believe that over time more customers will move to our cloud offering, and our
cloud offering will become more central to our distribution model. As more of our customers transition to the cloud, we
may be subject to additional competitive pressures, which may harm our business. Further, as more customers elect
our cloud offerings as opposed to our on-premises offerings, revenues from such customers is typically lower in the
initial year, which may impact our near-term revenue growth rates. If our cloud offering does not develop as quickly
as we expect, or if we are unable to continue to scale our systems to meet the requirements of a successful large,
cloud offering, our business may be harmed. We are directing a significant portion of our financial and operating
resources to implement a robust cloud offering for our products, but even if we continue to make these investments,
we may be unsuccessful in growing or implementing our cloud offerings that compete successfully against our current
and future competitors and our business, results of operations, and financial condition could be harmed.
Our business depends on our customers renewing their subscriptions and maintenance plans and purchasing
additional licenses or subscriptions from us. Any decline in our customer retention or expansion would harm
our future results of operations.
In order for us to maintain or improve our results of operations, it is important that our customers renew their
subscriptions and maintenance plans when existing contract terms expire and that we expand our commercial
relationships with our existing customers. Our customers have no obligation to renew their subscriptions or maintenance
plans, and our customers may not renew subscriptions or maintenance plans with a similar contract period or with the
same or greater number of users. Our customers generally do not enter into long-term contracts, rather they primarily
have monthly or annual terms. Some of our customers have elected not to renew their agreements with us and it is
difficult to accurately predict long-term customer retention.
Our customer retention and expansion may decline or fluctuate as a result of a number of factors, including our
customers’ satisfaction with our products, new market entrants, our product support, our prices and pricing plans, the
prices of competing software products, reductions in our customers’ spending levels, new product releases and changes
to packaging of our product offerings, mergers and acquisitions affecting our customer base, or the effects of global
economic conditions. We may be unable to timely address any retention issues with specific customers, which could
harm our results of operations. If our customers do not purchase additional licenses or subscriptions or renew their
subscriptions or maintenance plans, renew on less favorable terms, or fail to add more users, our revenue may decline
or grow less quickly, which would harm our future results of operations and prospects.
12
If we are not able to develop new products and enhancements to our existing products that achieve market
acceptance and that keep pace with technological developments, our business and results of operations
would be harmed.
Our ability to attract new customers and increase revenue from existing customers depends in large part on
our ability to enhance and improve our existing products and to introduce compelling new products that reflect the
changing nature of our markets. The success of any enhancement to our products depends on several factors, including
timely completion and delivery, competitive pricing, adequate quality testing, integration with existing technologies and
our platform, and overall market acceptance. Any new product that we develop may not be introduced in a timely or
cost-effective manner, may contain bugs, or may not achieve the market acceptance necessary to generate significant
revenue. If we are unable to successfully develop new products, enhance our existing products to meet customer
requirements, or otherwise gain market acceptance, our business, results of operations, and financial condition would
be harmed.
If we cannot continue to expand the use of our products beyond our initial focus on software developers, our
ability to grow our business may be harmed.
Our ability to grow our business depends in part on our ability to persuade current and future customers to
expand their use of our products to additional use cases beyond software developers, including business teams and
IT teams. If we fail to predict customer demands or achieve further market acceptance of our products within these
additional areas and teams, or if a competitor establishes a more widely adopted product for these applications, our
ability to grow our business may be harmed.
We invest significantly in research and development, and to the extent our research and development
investments do not translate into new products or material enhancements to our current products, or if we
do not use those investments efficiently, our business and results of operations would be harmed.
A key element of our strategy is to invest significantly in our research and development efforts to develop new
products and enhance our existing products to address additional applications and markets. In fiscal years 2019 and
2018, our research and development expenses were 48% and 47% of our revenue, respectively. If we do not spend
our research and development budget efficiently or effectively on compelling innovation and technologies, our business
may be harmed and we may not realize the expected benefits of our strategy. Moreover, research and development
projects can be technically challenging and expensive. The nature of these research and development cycles may
cause us to experience delays between the time we incur expenses associated with research and development and
the time we are able to offer compelling products and generate revenue, if any, from such investment. Additionally,
anticipated customer demand for a product we are developing could decrease after the development cycle has
commenced, and we would nonetheless be unable to avoid substantial costs associated with the development of any
such product. If we expend a significant amount of resources on research and development and our efforts do not
lead to the successful introduction or improvement of products that are competitive in our current or future markets, it
would harm our business and results of operations.
If we fail to effectively manage our growth, our business and results of operations could be harmed.
We have experienced and expect to continue to experience rapid growth, which has placed, and may continue
to place, significant demands on our management, operational, and financial resources. In addition, we operate globally,
sell our products to customers in approximately 190 countries, and have employees in Australia, the United States,
the United Kingdom, the Netherlands, the Philippines, India, Turkey, Canada, Japan, Germany and France. We plan
to continue to expand our operations into other countries in the future, which will place additional demands on our
resources and operations. We have also experienced significant growth in the number of customers, users, transactions
and data that our products and our associated infrastructure support. If we fail to successfully manage our anticipated
growth and change, the quality of our products may suffer, which could negatively affect our brand and reputation and
harm our ability to retain and attract customers. Finally, our organizational structure is becoming more complex and if
we fail to scale and adapt our operational, financial, and management controls and systems, as well as our reporting
systems and procedures, to manage this complexity, our business, results of operations, and financial condition would
be harmed. We will require significant capital expenditures and the allocation of management resources to grow and
change in these areas.
If our current marketing model is not effective in attracting new customers, we may need to incur additional
expenses to attract new customers and our business and results of operations could be harmed.
Unlike traditional enterprise software vendors, who rely on direct sales methodologies and face long sales
cycles, complex customer requirements and substantial upfront sales costs, we primarily utilize a viral marketing model
13
to target new customers. Through this word-of-mouth marketing, we have been able to build our brand with relatively
low marketing and sales costs. We also build our customer base through various online marketing activities as well
as targeted web-based content and online communications. This strategy has allowed us to build a substantial customer
base and community of users who use our products and act as advocates for our brand and solutions, often within
their own corporate organizations. Attracting new customers and retaining existing customers requires that we continue
to provide high-quality products at an affordable price and convince customers of our value proposition. If we do not
attract new customers through word-of-mouth referrals, our revenue may grow more slowly than expected, or decline.
In addition, high levels of customer satisfaction and market adoption are central to our marketing model. Any decrease
in our customers’ satisfaction with our products, including as a result of actions outside of our control, could harm word-
of-mouth referrals and our brand. If our customer base does not continue to grow through word-of-mouth marketing
and viral adoption, we may be required to incur significantly higher marketing and sales expenses in order to acquire
new subscribers, which could harm our business and results of operations.
If our security measures are breached or unauthorized access to customer data is otherwise obtained, our
products may be perceived as insecure, we may lose existing customers or fail to attract new customers, and
we may incur significant liabilities.
Use of our solutions involves the storage, transmission, and processing of our customers’ proprietary data,
including potentially personal or identifying information. Unauthorized access to, or security breaches of, our products
could result in unauthorized access to data and information, and the loss, compromise or corruption of such data and
information. In the event of a security breach, we could suffer loss of business, severe reputational damage adversely
affecting customer or investor confidence, regulatory investigations and orders, litigation, indemnity obligations,
damages for contract breach, penalties for violation of applicable laws or regulations, significant costs for remediation,
and other liabilities. We have incurred and expect to incur significant expenses to prevent security breaches, including
costs related to deploying additional personnel and protection technologies, training employees, and engaging third-
party solution providers and consultants. Our errors and omissions insurance coverage covering certain security and
privacy damages and claim expenses may not be sufficient to compensate for all liabilities we may incur.
Although we expend significant resources to create security protections that shield our customer data against
potential theft and security breaches, such measures cannot provide absolute security. We have in the past experienced
breaches of our security measures. Certain breaches have resulted in unauthorized access to certain data processed
through our products. Our products are at risk for future breaches, including, without limitation, breaches that may
occur as a result of third-party action, or employee, vendor or contractor error or malfeasance, and other causes.
As we further transition selling our products via our cloud offering, continue to collect more personal and sensitive
information, and operate in more countries, the risk that real or perceived vulnerabilities of our systems could seriously
harm our business and our financial performance, by tarnishing our reputation and brand and limiting the adoption of
our products, is likely to increase.
Because the techniques used to obtain unauthorized access or to sabotage systems change frequently and
generally are not identified until they are launched against a target, we may be unable to anticipate these techniques
or to implement adequate preventative measures. We may also experience security breaches that may remain
undetected for an extended period and, therefore, have a greater impact on the products we offer, the proprietary data
processed through our services, and, ultimately, on our business.
One of our marketing strategies is to offer free trials or a limited free version or affordable starter license for
certain products, and we may not be able to realize the benefits of this strategy.
We offer free trials, a limited free version or an affordable starter license for certain products in order to promote
additional usage, brand and product awareness, and adoption. Historically, a majority of users never convert to a paid
version of our products from these free trials or limited free versions or upgrade beyond the starter license. Our
marketing strategy also depends in part on persuading users who use the free trials, free versions or starter licenses
of our products to convince others within their organization to purchase and deploy our products. To the extent that
these users do not become, or lead others to become, customers, we will not realize the intended benefits of this
marketing strategy, and our ability to grow our business may be harmed.
Our business model relies on a high volume of transactions and affordable pricing. As lower cost or free
products are introduced by our competitors, our ability to generate new customers could be harmed.
Our business model is based in part on selling our products at prices lower than competing products from other
commercial vendors. For example, we offer entry-level pricing for certain products for small teams at a price that
typically does not require capital budget approval and is orders-of-magnitude less than the price of traditional enterprise
14
software. As a result, our software is frequently purchased by first-time customers to solve specific problems and not
as part of a strategic technology purchasing decision. As competitors enter the market with low cost or free alternatives
to our products, it may become increasingly difficult for us to compete effectively and our ability to garner new customers
could be harmed. We have historically, and will continue to, increase prices from time to time. Additionally, some
customers may consider our products to be discretionary purchases, which may contribute to reduced demand for our
offerings in times of economic uncertainty. If we are unable to sell our software in high volume, across new and existing
customers, our business, results of operations and financial condition could be harmed.
We derive approximately two thirds of our revenue from a limited number of software products.
We derive approximately two thirds of our revenue from Jira Software and Confluence. As such, the market
acceptance of these products is critical to our success. Demand for these products and our other products is affected
by a number of factors, many of which are beyond our control, such as continued market acceptance of our products
by customers for existing and new use cases; the timing of development and release of new products, features,
functionality and lower cost alternatives introduced by our competitors; technological changes and developments within
the markets we serve; and growth or contraction in our addressable markets. If we are unable to continue to meet
customer demands or to achieve more widespread market acceptance of our products, our business, results of
operations, and financial condition could be harmed.
If the Atlassian Marketplace does not continue to be successful, our business and results of operations could
be harmed.
We operate Atlassian Marketplace, an online marketplace, for selling third-party, as well as Atlassian-built, apps.
We rely on the Atlassian Marketplace to supplement our promotional efforts and build awareness of our products, and
believe that third-party apps from the Atlassian Marketplace facilitate greater usage and customization of our products.
If these vendors and developers stop developing or supporting the apps that they sell on Atlassian Marketplace, our
business could be harmed.
Interruptions or performance problems associated with our technology and infrastructure may harm our
business and results of operations.
Our continued growth depends in part on the ability of our existing and potential customers to access our
solutions at any time and within an acceptable amount of time. In addition, we rely almost exclusively on our websites
for the downloading of and payment for all our products. We have experienced, and may in the future experience,
disruptions, data loss and corruption, outages and other performance problems with our infrastructure and websites
due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software
errors, capacity constraints, denial of service attacks, or other security-related incidents. In some instances, we may
not be able to identify the cause or causes of these performance problems within an acceptable period of time. It may
become increasingly difficult to maintain and improve our performance, especially during peak usage times and as
our products and websites become more complex and our user traffic increases. If our products and websites are
unavailable or if our users are unable to access our products within a reasonable amount of time, or at all, our business
would be harmed. Moreover, we depend on services from various third parties, including Amazon Web Services, to
maintain our infrastructure and distribute our products via the Internet. Any disruptions in these services, including as
a result of actions outside of our control, would significantly impact the continued performance of our products. In the
future, these services may not be available to us on commercially reasonable terms, or at all. Any loss of the right to
use any of these services could result in decreased functionality of our products until equivalent technology is either
developed by us or, if available from another provider, is identified, obtained and integrated into our infrastructure. To
the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually
develop our technology and network architecture to accommodate actual and anticipated changes in technology, our
business, results of operations and financial condition could be harmed.
15
Real or perceived errors, failures, vulnerabilities or bugs in our products or in the products on Atlassian
Marketplace could harm our business and results of operations.
Errors, failures, vulnerabilities, or bugs may occur in our products, especially when updates are deployed or
new products are rolled out. Our solutions are often used in connection with large-scale computing environments with
different operating systems, system management software, equipment, and networking configurations, which may
cause errors, failures of products, or other negative consequences in the computing environment into which they are
deployed. In addition, deployment of our products into complicated, large-scale computing environments may expose
errors, failures, vulnerabilities, or bugs in our products. Any such errors, failures, vulnerabilities, or bugs may not be
found until after they are deployed to our customers. Real or perceived errors, failures, vulnerabilities, or bugs in our
products could result in negative publicity, loss or unauthorized access to customer data, loss of or delay in market
acceptance of our products, loss of competitive position, or claims by customers for losses sustained by them, all of
which could harm our business and results of operations.
In addition, third-party apps on Atlassian Marketplace may not meet the same quality standards that we apply
to our own development efforts and, to the extent they contain bugs, vulnerabilities, or defects, they may create
disruptions in our customers’ use of our products lead to data loss or unauthorized access to customer data, damage
our brand and reputation, and affect the continued use of our products, any of which could harm our business, results
of operations and financial condition.
Any failure to offer high-quality product support may harm our relationships with our customers and our
business, results of operations, and financial condition.
In deploying and using our products, our customers depend on our product support teams to resolve complex
technical and operational issues. We may be unable to respond quickly enough to accommodate short-term increases
in customer demand for product support. We also may be unable to modify the nature, scope and delivery of our
product support to compete with changes in product support services provided by our competitors. Increased customer
demand for product support, without corresponding revenue, could increase costs and harm our results of operations.
In addition, as we continue to grow our operations and reach a global and vast customer base, we need to be able to
provide efficient product support that meets our customers’ needs globally at scale. The number of our customers has
grown significantly and that has put additional pressure on our support organization. In order to meet these needs, we
have relied in the past and will continue to rely on third-party vendors and self-service product support to resolve
common or frequently asked questions, which supplement our customer support teams. If we are unable to provide
efficient product support globally at scale, including through the use of third-party vendors and self-service support,
our ability to grow our operations may be harmed and we may need to hire additional support personnel, which could
harm our results of operations. Our sales are highly dependent on our business reputation and on positive
recommendations from our existing customers. Any failure to maintain high-quality product support, or a market
perception that we do not maintain high-quality product support, could harm our reputation, our ability to sell our
products to existing and prospective customers, and our business, results of operations and financial condition.
Our sales model does not rely primarily on a direct enterprise sales force, which may impede the growth of
our business.
Our sales model does not rely primarily on traditional, quota-carrying sales personnel. Although we believe our
business model can continue to scale without a large, direct enterprise sales force, our viral marketing model may not
continue to be as successful as we anticipate and the absence of a large, direct, traditional sales function may impede
our future growth. As we continue to scale our business, a more traditional sales infrastructure could assist in reaching
larger enterprise customers and growing our revenue. Identifying, recruiting, and training such a qualified sales force
would require significant time, expense and attention and would significantly impact our business model. In addition,
expanding our sales infrastructure would considerably change our cost structure and results of operations, and we
may have to reduce other expenses, such as our research and development expenses, in order to accommodate a
corresponding increase in marketing and sales expenses and maintain positive free cash flow. If our lack of a large,
direct enterprise sales force limits us from reaching larger enterprise customers and growing our revenue and we are
unable to hire, develop, and retain talented sales personnel in the future, our revenue growth and results of operations
may be harmed.
16
Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our
business.
Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our
control. If our quarterly financial results fall below the expectations of investors or any securities analysts who follow
us, the price of our Class A ordinary shares could decline substantially. Factors that may cause our revenue, results
of operations and cash flows to fluctuate from quarter to quarter include, but are not limited to:
• Our ability to attract new customers, retain and increase sales to existing customers, and satisfy our
customers’ requirements;
• The timing of customer renewals;
• Changes in our or our competitors’ pricing policies and offerings;
• New products, features, enhancements, or functionalities introduced by our competitors;
• The amount and timing of operating costs and capital expenditures related to the operations and expansion
of our business;
• Significant security breaches, technical difficulties, or interruptions to our products;
• The number of new employees added;
• Changes in foreign currency exchange rates or adding additional currencies in which our sales are
denominated;
• The amount and timing of acquisitions or other strategic transactions;
• Extraordinary expenses such as litigation or other dispute-related settlement payments;
• General economic conditions that may adversely affect either our customers’ ability or willingness to
purchase additional licenses, subscriptions, and maintenance plans, delay a prospective customer’s
purchasing decision, reduce the value of new license, subscription, or maintenance plans, or affect customer
retention;
• Potential exchanges of our Notes for payment of cash due to the triggering of the conditional exchange
feature of the Notes;
• Non-coupon impact related to the Notes and related capped call transactions;
• Seasonality in our operations;
• The impact of new accounting pronouncements and associated system implementations; and
• The timing of the grant or vesting of equity awards to employees, contractors, or directors.
Many of these factors are outside of our control, and the occurrence of one or more of them might cause our
revenue, results of operations, and cash flows to vary widely. As such, we believe that quarter-to-quarter comparisons
of our revenue, results of operations, and cash flows may not be meaningful and should not be relied upon as an
indication of future performance.
If we are unable to develop and maintain successful relationships with our solution partners and resellers,
our business, results of operations, and financial condition could be harmed.
We have established relationships with certain solution partners and resellers to distribute our products. We
believe that continued growth in our business is dependent upon identifying, developing and maintaining strategic
relationships with our existing and potential solution partners and resellers that can drive substantial revenue and
provide additional value-added services to our customers. Our agreements with our existing solution partners and
resellers are non-exclusive, meaning our solution partners and resellers may offer customers the products of several
different companies, including products that compete with ours. They may also cease marketing our products with
limited or no notice and with little or no penalty. We expect that any additional solution partners and resellers we identify
and develop will be similarly non-exclusive and unbound by any requirement to continue to market our products. If we
fail to identify additional solution partners and resellers in a timely and cost-effective manner, or at all, or are unable
to assist our current and future solution partners and resellers in independently distributing and deploying our products,
our business, results of operations, and financial condition could be harmed. If our solution partners and resellers do
not effectively market and sell our products, or fail to meet the needs of our customers, our reputation and ability to
grow our business may also be harmed.
17
Acquisitions of other businesses, products, or technologies could disrupt our business, and we may be unable
to integrate acquired businesses and technologies successfully or achieve the expected benefits of such
acquisitions.
We have completed a number of acquisitions and strategic investments and continue to evaluate and consider
additional strategic transactions, including acquisitions of, or investments in, businesses, technologies, services,
products, and other assets in the future. We also may enter into strategic relationships with other businesses to expand
our products, which could involve preferred or exclusive licenses, additional channels of distribution, discount pricing
or investments in other companies.
Any acquisition, investment or business relationship may result in unforeseen operating difficulties and
expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies,
products, personnel, or operations of the acquired companies, particularly if the key personnel of the acquired
companies choose not to work for us, their software and services are not easily adapted to work with our products, or
we have difficulty retaining the customers of any acquired business due to changes in ownership, management or
otherwise. Acquisitions may also disrupt our business, divert our resources, and require significant management
attention that would otherwise be available for development of our existing business. We may not successfully evaluate
or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition transaction,
including accounting charges. Moreover, the anticipated benefits of any acquisition, investment, or business relationship
may not be realized or we may be exposed to unknown risks or liabilities.
In the future, we may not be able to find suitable acquisition candidates, and we may not be able to complete
acquisitions on favorable terms, if at all. Our previous and future acquisitions may not achieve our goals, and any
future acquisitions we complete could be viewed negatively by users, customers, developers or investors.
Negotiating these transactions can be time consuming, difficult and expensive, and our ability to complete these
transactions may often be subject to approvals that are beyond our control. Consequently, these transactions, even
if announced, may not be completed. For one or more of those transactions, we may:
Issue additional equity securities that would dilute our existing shareholders;
•
• Use cash that we may need in the future to operate our business;
•
•
• Encounter difficulties retaining key employees of the acquired company or integrating diverse software
Incur large charges, expenses, or substantial liabilities;
Incur debt on terms unfavorable to us or that we are unable to repay;
codes or business cultures; and
• Become subject to adverse tax consequences, substantial depreciation, impairment, or deferred
compensation charges.
If we are not able to maintain and enhance our brand, our business, results of operations, and financial
condition may be harmed.
We believe that maintaining and enhancing our reputation as a differentiated and category-defining company
is critical to our relationships with our existing customers and to our ability to attract new customers. The successful
promotion of our brand attributes will depend on a number of factors, including our, and our solution partners’ and
resellers’, marketing efforts, our ability to continue to develop high-quality products, and our ability to successfully
differentiate our products from competitive products. In addition, independent industry analysts often provide reviews
of our products, as well as the products offered by our competitors, and perception of the relative value of our products
in the marketplace may be significantly influenced by these reviews. If these reviews are negative, or less positive as
compared to those of our competitors’ products, our brand may be harmed.
The promotion of our brand requires us to make substantial expenditures, and we anticipate that the expenditures
will increase as our market becomes more competitive, as we expand into new markets, and as more sales are
generated through our solution partners and resellers. To the extent that these activities yield increased revenue, this
revenue may not offset the increased expenses we incur. If we do not successfully maintain and enhance our brand,
our business may not grow, we may have reduced pricing power relative to competitors, and we could lose customers
or fail to attract new customers, any of which would harm our business, results of operations, and financial condition.
18
Because our products rely on the movement of data across national boundaries, global privacy and data
security concerns could result in additional costs and liabilities to us or inhibit sales of our products globally.
Privacy and data security have become significant issues in the United States, Europe and in many other
jurisdictions where we offer our products. The regulatory framework for the collection, use, safeguarding, sharing, and
transfer of information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future.
Globally, virtually every jurisdiction in which we operate has established its own data security and privacy
frameworks with which we, or our customers, must comply, including, for example, in the European Union, Directive
95/46/EC on the protection of individuals with regard to the processing of personal data and on the free movement of
such data, along with applicable implementing data protection legislation of individual European Union member states.
In addition, data protection regulation is an area of increased focus and changing requirements. On April 27,
2016, the European Union adopted the General Data Protection Regulation 2016/679, or GDPR, that took effect on
May 25, 2018, replacing the current data protection laws of each European Union member state. GDPR applies to
any company established in the European Union as well as to those outside the European Union if they collect and
use personal data in connection with the offering of goods or services to individuals in the European Union or the
monitoring of their behavior. GDPR enhances data protection obligations for processors and controllers of personal
data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention
of information, mandatory data breach notification requirements, and extensive new obligations on services providers.
Interpretation and enforcement of GDPR remains uncertain. Non-compliance with GDPR can trigger steep fines of up
to €20 million or 4% of total worldwide annual turnover, whichever is higher. Similar regulations have also come into
effect and been proposed around the world. For example, the California Consumer Privacy Act, or CCPA, goes into
effect in 2020. Record-breaking enforcement actions globally have shown that regulators do wield their right to impose
substantial fines for violations of privacy regulations, and these enforcement actions could result in guidance from
regulators that would require changes to our current compliance strategy. Given the breadth and depth of changes
in data protection obligations, complying with global data protection requirements requires time, resources, and a
review of our technology and systems currently in use against regulatory requirements.
We currently rely on the EU-U.S. Privacy Shield and standard contractual clauses approved by the European
Commission as our legal mechanism for onward transfers of data from Europe. The EU-U.S. Privacy Shield program
underwent its second annual review by European Union regulatory authorities in October 2018, which re-affirmed the
EU-U.S. Privacy Shield as a valid framework for transferring data from the European Union to the United States.
Nonetheless, the review reported a number of recommendations for improvement in the program before the next
annual review, and there continue to be concerns about whether the EU-U.S. Privacy Shield and other transfer
mechanisms will face additional challenges. Similarly, the validity of standard contractual clauses is currently under
review by the European Court of Justice. In order to diversify our data transfer strategy, we will continue to explore
other options managing data from Europe, including without limitation, amending standard contractual clauses where
required, and considering suppliers that house data in Europe, which may involve substantial expense and distraction
from other aspects of our business. We may, however, be unsuccessful in establishing an adequate mechanism for
data transfer, and will be at risk of enforcement actions taken by a European Union data protection authority until such
point in time that we ensure an adequate mechanism for European data transfers, which could damage our reputation,
inhibit sales and harm our business. Despite actions we have taken or will be taking to diversify our data transfer
strategies, we may be unsuccessful in establishing a conforming means of transferring data due to ongoing legislative
activity that could vary the current data transfer landscape. As we expand into new markets and grow our customer
base, we will need to comply with any new requirements. If we cannot comply with, or if we incur a violation of one or
more of these requirements, some customers may be limited in their ability to purchase our products, particularly our
cloud products. Growth could be harmed, and we could incur significant liabilities.
In addition to government regulation, privacy advocates and industry groups may propose new and different
self-regulatory standards that either legally or contractually apply to us. Further, our customers may require us to
comply with more stringent privacy and data security contractual requirements or obtain certifications that we do not
currently have, and any failure to obtain these certifications could reduce the demand for our products and our business
may be harmed. If we were required to obtain additional industry certifications, we may incur significant additional
expenses and have to divert resources, which could slow the release of new products, all of which could harm our
ability to effectively compete.
The interpretation and application of many privacy and data protection laws are, and will likely remain, uncertain,
and it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data
19
management practices or product features. If so, in addition to the possibility of fines, lawsuits and other claims and
penalties, we could be required to fundamentally change our business activities and practices or modify our products,
which could harm our business. Any inability to adequately address privacy and data security concerns or comply with
applicable privacy or data security laws, regulations and policies could result in additional cost and liability to us,
damage our reputation, inhibit sales, and harm our business.
Our global operations subject us to risks that can harm our business, results of operations, and financial
condition.
A key element of our strategy is to operate globally and sell our products to customers around the world.
Operating globally requires significant resources and management attention and subjects us to regulatory, economic,
geographic, and political risks. In particular, our global operations subject us to a variety of additional risks and
challenges, including:
•
Increased management, travel, infrastructure, and legal compliance costs associated with having operations
in many countries;
• Difficulties in enforcing contracts, including so-called “clickwrap” contracts that are entered into online, on
which we have historically relied as part of our product licensing strategy, but which may be subject to
additional legal uncertainty in some foreign jurisdictions;
Increased financial accounting and reporting burdens and complexities;
•
• Requirements or preferences within other regions for domestic products, and difficulties in replacing
products offered by more established or known regional competitors;
• Differing technical standards, existing or future regulatory and certification requirements, and required
features and functionality;
• Communication and integration problems related to entering and serving new markets with different
languages, cultures, and political systems;
• Compliance with foreign privacy and security laws and regulations and the risks and costs of non-
compliance;
• Compliance with laws and regulations for foreign operations, including anti-bribery laws (such as the U.S.
Foreign Corrupt Practices Act, the U.S. Travel Act, and the U.K. Bribery Act), import and export control
laws, tariffs, trade barriers, economic sanctions, and other regulatory or contractual limitations on our ability
to sell our products in certain foreign markets, and the risks and costs of non-compliance;
• Heightened risks of unfair or corrupt business practices in certain geographies that may impact our financial
results and result in restatements of our consolidated financial statements;
• Fluctuations in currency exchange rates and related effects on our results of operations;
• Difficulties in repatriating or transferring funds from, or converting currencies in certain countries;
• Weak economic conditions which could arise in each country or region in which we operate or sell our
products, or general political and economic instability around the world;
• Differing labor standards, including restrictions related to, and the increased cost of, terminating employees
in some countries;
• Difficulties in recruiting and hiring employees in certain countries;
• The preference for localized software and licensing programs and localized language support;
• Reduced protection for intellectual property rights in some countries and practical difficulties associated
with enforcing our legal rights abroad; and
• Compliance with the laws of numerous foreign taxing jurisdictions, including withholding obligations, and
overlapping of different tax regimes.
Compliance with laws and regulations applicable to our global operations substantially increases our cost of
doing business in foreign jurisdictions. We may be unable to keep current with changes in government requirements
as they change from time to time. Failure to comply with these laws and regulations could harm our business. In many
countries, it is common for others to engage in business practices that are prohibited by our internal policies and
procedures or other regulations applicable to us. Although we have implemented policies and procedures designed
to ensure compliance with these regulations and policies, there can be no assurance that all of our employees,
contractors, business partners and agents will comply with these regulations and policies. Violations of laws, regulations
or key control policies by our employees, contractors, business partners, or agents could result in delays in revenue
recognition, financial reporting misstatements, enforcement actions, reputational harm, disgorgement of profits, fines,
civil and criminal penalties, damages, injunctions, other collateral consequences, or the prohibition of the importation
or exportation of our products and could harm our business, results of operations, and financial condition.
20
We depend on our executive officers and other key employees and the loss of one or more of these employees
or the inability to attract and retain highly skilled employees could harm our business.
Our success depends largely upon the continued services of our executive officers and key employees. We
rely on our leadership team and other key employees in the areas of research and development, products, strategy,
operations, security, marketing, IT, support, and general and administrative functions. From time to time, there may
be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt
our business. In addition, we do not have employment agreements with our executive officers or other key personnel
that require them to continue to work for us for any specified period and, therefore, they could terminate their employment
with us at any time. The loss of one or more of our executive officers, especially our Co-Chief Executive Officers, or
other key employees could harm our business.
In addition, in order to execute our growth plan, we must attract and retain highly qualified personnel. Competition
for these personnel in Sydney, Australia, the San Francisco Bay Area, and in other locations where we maintain offices,
is intense, especially for engineers experienced in designing and developing software and cloud-based services. We
have from time to time experienced, and we expect to continue to experience, difficulty hiring and retaining employees
with appropriate qualifications. In particular, recruiting and hiring senior product engineering personnel has been, and
we expect to continue to be, challenging. If we are unable to hire talented product engineering personnel, we may be
unable to scale our operations or release new products in a timely fashion and, as a result, customer satisfaction with
our products may decline.
Many of the companies with which we compete for experienced personnel have greater resources than we
have. If we hire employees from competitors or other companies, these employers may attempt to assert that the
employees or we have breached certain legal obligations, resulting in a diversion of our time and resources. In addition,
job candidates and existing employees often consider the value of the equity awards they receive in connection with
their employment. If the value or perceived value of our equity awards declines, it may harm our ability to recruit and
retain highly skilled employees. If we fail to attract new personnel or fail to retain and motivate our current personnel,
our business, results of operations and financial condition could be harmed.
Our corporate values have contributed to our success, and if we cannot maintain these values as we grow,
we could lose the innovative approach, creativity, and teamwork fostered by our values, and our business
could be harmed.
We believe that a critical contributor to our success has been our corporate values, which we believe foster
innovation, teamwork, and an emphasis on customer-focused results. In addition, we believe that our values create
an environment that drives and perpetuates our product strategy and low-cost distribution approach. As we grow and
continue to develop the infrastructure of a public company, we may find it difficult to maintain our corporate values.
Any failure to preserve our values could harm our future success, including our ability to retain and recruit personnel,
innovate and operate effectively, and execute on our business strategy.
We face exposure to foreign currency exchange rate fluctuations.
While we primarily sell our products in U.S. dollars, we incur expenses in currencies other than the U.S. dollar,
which exposes us to foreign currency exchange rate fluctuations. A large percentage of our expenses are denominated
in the Australian dollar, and fluctuations could have a material negative impact on our results of operations. Moreover,
our subsidiaries, other than our U.S. subsidiaries, maintain net assets that are denominated in currencies other than
the U.S. dollar. In addition, we recently began to transact in non-U.S. dollar currencies for our products, and, accordingly,
changes in the value of non-U.S. dollar currencies relative to the U.S. dollar could affect our revenue and results of
operations due to transactional and translational remeasurements that are reflected in our results of operations.
We have a foreign exchange hedging program to hedge a portion of certain exposures to fluctuations in non-
U.S. dollar currency exchange rates. We use derivative instruments, such as foreign currency forward contracts, to
hedge the exposures. The use of such hedging instruments may not fully offset the adverse financial effects of
unfavorable movements in foreign currency exchange rates over the limited time the hedges are in place. Moreover,
the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such
instruments or if we are unable to forecast hedged exposures accurately.
21
We are subject to government regulation, including import, export, economic sanctions, and anti-corruption
laws and regulations, that may expose us to liability and increase our costs.
Various of our products are subject to U.S. export controls, including the U.S. Department of Commerce’s Export
Administration Regulations and economic and trade sanctions regulations administered by the U.S. Treasury
Department’s Office of Foreign Assets Controls. These regulations may limit the export of our products and provision
of our services outside of the United States, or may require export authorizations, including by license, a license
exception, or other appropriate government authorizations, including annual or semi-annual reporting and the filing of
an encryption registration. Export control and economic sanctions laws may also include prohibitions on the sale or
supply of certain of our products to embargoed or sanctioned countries, regions, governments, persons and entities.
In addition, various countries regulate the importation of certain products through import permitting and licensing
requirements, and have enacted laws that could limit our ability to distribute our products. The exportation, reexportation,
and importation of our products, and the provision of services, including by our solution partners and resellers, must
comply with these laws or else we may be adversely affected through reputational harm, government investigations,
penalties, and a denial or curtailment of our ability to export our products or provide services. Complying with export
control and sanctions laws can be time consuming and complex and may result in the delay or loss of sales opportunities.
Although we take precautions to prevent our products from being provided in violation of such laws, we are aware of
previous exports of certain of our products to a small number of persons and organizations that are the subject of U.S.
sanctions or located in countries or regions subject to U.S. sanctions. If we are found to be in violation of U.S. sanctions
or export control laws, it could result in substantial fines and penalties for us and for the individuals working for us.
Changes in export or import laws or corresponding sanctions may delay the introduction and sale of our products in
international markets, or, in some cases, prevent the export or import of our products to certain countries, regions,
governments, persons or entities altogether, which could adversely affect our business, financial condition and results
of operations.
We are also subject to various domestic and international anti-corruption laws, such as the U.S. Foreign Corrupt
Practices Act and the U.K. Bribery Act, as well as other similar anti-bribery and anti-kickback laws and regulations.
These laws and regulations generally prohibit companies and their employees and intermediaries from authorizing,
offering, or providing improper payments or benefits to officials and other recipients for improper purposes. We rely
on certain third parties to support our sales and regulatory compliance efforts and can be held liable for their corrupt
or other illegal activities, even if we do not explicitly authorize or have actual knowledge of such activities. Although
we take precautions to prevent violations of these laws, our exposure for violating these laws increases as our
international presence expands and as we increase sales and operations in foreign jurisdictions.
We recognize certain revenue streams over the term of our subscription and maintenance contracts.
Consequently, downturns in new sales may not be immediately reflected in our results of operations and may
be difficult to discern.
We generally recognize subscription and maintenance revenue from customers ratably over the terms of their
contracts. As a result, a significant portion of the revenue we report in each quarter is derived from the recognition of
deferred revenue relating to subscription and maintenance plans entered into during previous quarters. Consequently,
a decline in new or renewed licenses, subscriptions, and maintenance plans in any single quarter may only have a
small impact on our revenue results for that quarter. However, such a decline will negatively affect our revenue in future
quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our products, and potential
changes in our pricing policies or rate of expansion or retention, may not be fully reflected in our results of operations
until future periods. We may also be unable to reduce our cost structure in line with a significant deterioration in sales.
In addition, a significant majority of our costs are expensed as incurred, while a significant portion of our revenue is
recognized over the life of the agreement with our customer. As a result, increased growth in the number of our
customers could continue to result in our recognition of more costs than revenue in the earlier periods of the terms of
certain of our customer agreements. Our subscription and maintenance revenue also makes it more difficult for us to
rapidly increase our revenue through additional sales in any period, as revenue from certain new customers must be
recognized over the applicable term.
If we fail to integrate our products with a variety of operating systems, software applications, platforms and
hardware that are developed by others, our products may become less marketable, less competitive, or
obsolete and our results of operations would be harmed.
Our products must integrate with a variety of network, hardware, and software platforms, and we need to
continuously modify and enhance our products to adapt to changes in hardware, software, networking, browser and
database technologies. In particular, we have developed our products to be able to easily integrate with third-party
applications, including the applications of software providers that compete with us, through the interaction of application
22
programming interfaces, or APIs. In general, we rely on the fact that the providers of such software systems continue
to allow us access to their APIs to enable these customer integrations. To date, we have not relied on long-term written
contracts to govern our relationship with these providers. Instead, we are subject to the standard terms and conditions
for application developers of such providers, which govern the distribution, operation and fees of such software systems,
and which are subject to change by such providers from time to time. Our business may be harmed if any provider of
such software systems:
• Discontinues or limits our access to its APIs;
• Modifies its terms of service or other policies, including fees charged to, or other restrictions on us or other
application developers;
• Changes how customer information is accessed by us or our customers;
• Establishes more favorable relationships with one or more of our competitors; or
• Develops or otherwise favors its own competitive offerings over ours.
We believe a significant component of our value proposition to customers is the ability to optimize and configure
our products with these third-party applications through our respective APIs. If we are not permitted or able to integrate
with these and other third-party applications in the future, demand for our products could decline and our business
and results of operations would be harmed.
In addition, an increasing number of organizations and individuals within organizations are utilizing mobile
devices to access the Internet and corporate resources and to conduct business. We have designed and continue to
design mobile applications to provide access to our products through these devices. If we cannot provide effective
functionality through these mobile applications as required by organizations and individuals that widely use mobile
devices, we may experience difficulty attracting and retaining customers. Failure of our products to operate effectively
with future infrastructure platforms and technologies could also reduce the demand for our products, resulting in
customer dissatisfaction and harm to our business. If we are unable to respond to changes in a cost-effective manner,
our products may become less marketable, less competitive or obsolete and our results of operations may be harmed.
We may be sued by third parties for alleged infringement or misappropriation of their intellectual property
rights.
There is considerable patent and other intellectual property development activity in our industry. Our future
success depends in part on not infringing upon or misappropriating the intellectual property rights of others. From time
to time, our competitors or other third parties have claimed or may claim that we are infringing upon or misappropriating
their intellectual property rights, and we may be found to be infringing upon or misappropriating such rights. We may
be unaware of the intellectual property rights of others that may cover some or all of our technology, or technology
that we obtain from third parties. Any claims or litigation could cause us to incur significant expenses and, if successfully
asserted against us, could require that we pay substantial damages or ongoing royalty or license payments, prevent
us from offering our products or using certain technologies, require us to implement expensive work-arounds, refund
fees to customers or require that we comply with other unfavorable terms. In the case of infringement or misappropriation
caused by technology that we obtain from third parties, any indemnification or other contractual protections we obtain
from such third parties, if any, may be insufficient to cover the liabilities we incur as a result of such infringement or
misappropriation. We may also be obligated to indemnify our customers or business partners in connection with any
such claims or litigation and to obtain licenses, modify our products or refund fees, which could further exhaust our
resources. Even if we were to prevail in the event of claims or litigation against us, any claim or litigation regarding our
intellectual property could be costly and time-consuming and divert the attention of our management and other
employees from our business operations and disrupt our business.
Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual
property infringement and other losses.
Our agreements with customers and other third parties may include indemnification or other provisions under
which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of
intellectual property infringement, damages caused by us to property or persons, or other liabilities relating to or arising
from our products or other acts or omissions. The term of these contractual provisions often survives termination or
expiration of the applicable agreement. Large indemnity payments or damage claims from contractual breach could
harm our business, results of operations and financial condition. Although we generally contractually limit our liability
with respect to such obligations, we may still incur substantial liability related to them. Any dispute with a customer
with respect to such obligations could have adverse effects on our relationship with that customer and other current
and prospective customers, reduce demand for our products, damage our reputation and harm our business, results
of operations and financial condition.
23
We use open source software in our products that may subject our products to general release or require us
to re-engineer our products, which may harm our business.
We use open source software in our products and expect to continue to use open source software in the future.
There are uncertainties regarding the proper interpretation of and compliance with open source software licenses.
Consequently, there is a risk that the owners of the copyrights in such open source software may claim that the open
source licenses governing their use impose certain conditions or restrictions on our ability to use the software that we
did not anticipate. Such owners may seek to enforce the terms of the applicable open source license, including by
demanding release of the source code for the open source software, derivative works of such software, or, in some
cases, our proprietary source code that uses or was developed using such open source software. These claims could
also result in litigation, require us to purchase a costly license or require us to devote additional research and
development resources to change our products, any of which could result in additional cost and liability to us, reputational
damage and harm to our business and results of operations. In addition, if the license terms for the open source
software we utilize change, we may be forced to re-engineer our products or incur additional costs to comply with the
changed license terms or to replace the affected open source software. Although we have implemented policies and
tools to regulate the use and incorporation of open source software into our products, we cannot be certain that we
have not incorporated open source software in our products in a manner that is inconsistent with such policies.
Any failure to protect our intellectual property rights could impair our ability to protect our proprietary
technology and our brand.
Our success and ability to compete depend in part upon our intellectual property. We primarily rely on a
combination of patent, copyright, trade secret and trademark laws, trade secret protection and confidentiality or license
agreements with our employees, customers, business partners and others to protect our intellectual property rights.
However, the steps we take to protect our intellectual property rights may be inadequate. We make business decisions
about when to seek patent protection for a particular technology and when to rely upon trade secret protection, and
the approach we select may ultimately prove to be inadequate. Even in cases where we seek patent protection, there
is no assurance that the resulting patents will effectively protect every significant feature of our products. In addition,
we believe that the protection of our trademark rights is an important factor in product recognition, protecting our brand
and maintaining goodwill and if we do not adequately protect our rights in our trademarks from infringement, any
goodwill that we have developed in those trademarks could be lost or impaired, which could harm our brand and our
business. In any event, in order to protect our intellectual property rights, we may be required to spend significant
resources to monitor and protect these rights.
For example, in order to promote the transparency and adoption of our downloadable software, we provide our
customers with the ability to request a copy of the source code of those products, which they may customize for their
internal use under limited license terms, subject to confidentiality and use restrictions. If any of our customers misuses
or distributes our source code in violation of our agreements with them, or anyone else obtains access to our source
code, it could cost us significant time and resources to enforce our rights and remediate any resulting competitive
harms.
Litigation brought to protect and enforce our intellectual property rights could be costly, time consuming and
distracting to management. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses,
counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights, which could
result in the impairment or loss of portions of our intellectual property rights. Our failure to secure, protect and enforce
our intellectual property rights could harm our brand and our business.
Our global operations and structure subject us to potentially adverse tax consequences.
We generally conduct our global operations through subsidiaries and report our taxable income in various
jurisdictions worldwide based upon our business operations in those jurisdictions. A change in our global operations
or changes in tax laws or interpretations of such tax laws could result in higher effective tax rates, reduced cash flows
and lower overall profitability. In particular, our intercompany relationships are subject to complex transfer pricing
regulations administered by taxing authorities in various jurisdictions. The relevant revenue and taxing authorities may
disagree with positions we have taken generally, or our determinations as to the value of assets sold or acquired or
income and expenses attributable to specific jurisdictions. In addition, in the ordinary course of our business we are
subject to tax audits from various taxing authorities. If such a disagreement were to occur, and our position was not
sustained, or if a tax audit resulted in an adverse finding, we could be required to pay additional taxes, interest and
penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall
profitability of our operations.
24
Certain government agencies in jurisdictions where we do business have had an extended focus on issues
related to the taxation of multinational companies. In addition, the Organization for Economic Cooperation and
Development has completed the base erosion and profit shifting project which seeks to establish certain international
standards for taxing the worldwide income of multinational companies. The measures have been endorsed by the
leaders of the world’s 20 largest economies. Also, in March 2018, the European Commission proposed a series of
measures aimed at ensuring a fair and efficient taxation of digital businesses operating within the European Union. As
a result of these developments and the increasing focus by government taxing authorities on multinational companies,
the tax laws of certain countries in which we do business could change on a prospective or retroactive basis, and any
such changes could increase our liabilities for taxes, interest and penalties, lead to higher effective tax rates, and
therefore could harm our cash flows, results of operations and financial position.
U.S. federal income tax reform could adversely affect us.
On December 22, 2017, the United States passed legislation commonly known as the Tax Cuts and Jobs Act
that significantly reforms the Internal Revenue Code of 1986, as amended (the “Code”). The Tax Cuts and Jobs Act,
among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on the
deductibility of interest and executive compensation, allows for the expensing of capital expenditures and puts into
effect the migration from a worldwide system of taxation to a territorial system. We do not expect the Tax Cuts and
Jobs Act to have a material impact to our projection of minimal cash taxes. However, the full impact of this tax reform
on our business in future years is still uncertain and could adversely affect us.
Taxing authorities may successfully assert that we should have collected or in the future should collect sales
and use, value-added or similar taxes, and we could be subject to liability with respect to past or future sales,
which could harm our results of operations.
We do not collect sales and use, value-added and similar taxes in all jurisdictions in which we have sales, based
on our understanding that such taxes are not applicable. Sales and use, value-added and similar tax laws and rates
vary greatly by jurisdiction. Certain jurisdictions in which we do not collect such taxes may assert that such taxes are
applicable, which could result in tax assessments, penalties, and interest, and we may be required to collect such
taxes in the future. Such tax assessments, penalties and interest, or future requirements may harm our results of
operations.
Changes in laws and regulations related to the Internet or changes in the Internet infrastructure itself may
diminish the demand for our products, and could harm our business.
The future success of our business depends upon the continued use of the Internet as a primary medium for
commerce, communication, and business applications. Federal, state, or foreign government bodies or agencies have
in the past adopted, and may in the future adopt, laws or regulations affecting the use of the Internet as a commercial
medium. Changes in these laws or regulations could require us to modify our products in order to comply with these
changes. In addition, government agencies or private organizations have imposed and may impose additional taxes,
fees, or other charges for accessing the Internet or commerce conducted via the Internet. These laws or charges could
limit the growth of Internet-related commerce or communications generally, or result in reductions in the demand for
Internet-based products such as ours. In addition, the use of the Internet as a business tool could be harmed due to
delays in the development or adoption of new standards and protocols to handle increased demands of Internet activity,
security, reliability, cost, ease-of-use, accessibility, and quality of service. The performance of the Internet and its
acceptance as a business tool has been harmed by phishing attacks, cyber-attacks, viruses, worms, and similar
malicious programs and the Internet has experienced a variety of outages and other delays as a result of damage to
portions of its infrastructure. If the use of the Internet is adversely affected by these issues, demand for our products
could decline and our business could be harmed.
We are exposed to credit risk and fluctuations in the market values of our investment portfolio.
Given the global nature of our business, we have diversified U.S. and non-U.S. investments. Credit ratings and
pricing of our investments can be negatively affected by liquidity, credit deterioration, financial results, economic risk,
political risk, sovereign risk or other factors. As a result, the value and liquidity of our investments may fluctuate
substantially. Therefore, although we have not realized any significant losses on our investments, future fluctuations
in their value could result in a significant realized loss.
25
Catastrophic events may disrupt our business.
Natural disasters or other catastrophic events may cause damage or disruption to our operations, international
commerce and the global economy, and thus could harm our business. We have a large employee presence and
operations in the San Francisco Bay Area, California. The west coast of the United States contains active earthquake
zones. In the event of a major earthquake, hurricane or catastrophic event such as fire, power loss, telecommunications
failure, cyber-attack, war or terrorist attack, we may be unable to continue our operations and may endure system
interruptions, reputational harm, delays in our application development, lengthy interruptions in our product availability,
breaches of data security and loss of critical data, all of which could harm our business, results of operations and
financial condition.
Additionally, we rely on our network and third-party infrastructure and applications, internal technology systems,
and our websites for our development, marketing, operational support, hosted services and sales activities. If these
systems were to fail or be negatively impacted as a result of a natural disaster or catastrophic event, our ability to
conduct normal business operations and deliver products to our customers would be impaired.
As we grow our business, the need for business continuity planning and disaster recovery plans will grow in
significance. If we are unable to develop adequate plans to ensure that our business functions continue to operate
during and after a disaster or catastrophic event, and successfully execute on those plans, our business and reputation
would be harmed.
If we are deemed to be an investment company under the Investment Company Act of 1940, our results of
operations could be harmed.
We are not registered as an investment company under the Investment Company Act of 1940, as amended
(“Investment Company Act”) as we believe that we meet all the requirements for exemption provided under Rule 3a-8
under the Investment Company Act. If we were obligated to register as an investment company, we would have to
comply with a variety of substantive requirements under the Investment Company Act that impose, among other things,
limitations on capital structure, restrictions on specified investments, prohibitions on transactions with affiliates, and
compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would increase
our operating expenses and may harm our results of operations.
Adverse economic conditions could negatively impact our business.
Our results of operations may vary based on the impact of changes in our industry or the global economy on
us or our customers. Our business depends on demand for business software applications generally and for
collaboration software solutions in particular. In addition, the market adoption of our products and our revenue is
dependent on the number of users of our products. To the extent that weak economic conditions reduce the number
of personnel providing development or engineering services or that limit the available budgets within organizations for
software products, demand for our products may be harmed. If economic conditions deteriorate, our customers and
prospective customers may elect to decrease their information technology budgets, which would limit our ability to
grow our business and harm our results of operations.
We may require additional capital to support our operations or the growth of our business and we cannot be
certain that we will be able to secure this capital on favorable terms, or at all.
We may require additional capital to respond to business opportunities, challenges, acquisitions, the repayment
of our Notes, a decline in the level of license, subscription or maintenance revenue for our products, or other unforeseen
circumstances. We may not be able to timely secure debt or equity financing on favorable terms, or at all. Any debt
financing obtained by us could involve restrictive covenants relating to financial and operational matters, which may
make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential
acquisitions. If we raise additional funds through further issuances of equity, convertible debt securities or other
securities convertible into equity, our existing shareholders could suffer significant dilution in their percentage ownership
of Atlassian, and any new equity securities we issue could have rights, preferences and privileges senior to those of
holders of our Class A ordinary shares. If we are unable to obtain adequate financing or financing on terms satisfactory
to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges
could be significantly limited.
26
Risks Related to Ownership of Our Class A Ordinary Shares
The dual class structure of our ordinary shares has the effect of concentrating voting control with certain
shareholders, in particular, our Co-Chief Executive Officers and their affiliates, which will limit our other
shareholders ability to influence the outcome of important transactions, including a change in control.
Our Class B ordinary shares have ten votes per share and our Class A ordinary shares have one vote per share.
As of June 30, 2019, shareholders who hold our Class B ordinary shares collectively hold approximately 91% of the
voting power of our outstanding share capital and in particular, our Co-Chief Executive Officers, Michael Cannon-
Brookes and Scott Farquhar, collectively hold approximately 90% of the voting power of our outstanding share capital.
The holders of our Class B ordinary shares will collectively continue to control a majority of the combined voting power
of our share capital and therefore be able to control substantially all matters submitted to our shareholders for approval
so long as our Class B ordinary shares represent at least 10% of all of our outstanding Class A ordinary shares and
Class B ordinary shares in the aggregate. These holders of our Class B ordinary shares may also have interests that
differ from holders of our Class A ordinary shares and may vote in a way which may be adverse to such interests. This
concentrated control may have the effect of delaying, preventing or deterring a change in control of Atlassian, could
deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of Atlassian and
might ultimately affect the market price of our Class A ordinary shares.
If Messrs. Cannon-Brookes and Farquhar retain a significant portion of their holdings of our Class B ordinary
shares for an extended period of time, they will control a significant portion of the voting power of our share capital for
the foreseeable future. As members of our board of directors, Messrs. Cannon-Brookes and Farquhar each owe
statutory and fiduciary duties to Atlassian and must act in good faith and in a manner they consider would be most
likely to promote the success of Atlassian for the benefit of shareholders as a whole. As shareholders, Messrs. Cannon-
Brookes and Farquhar are entitled to vote their shares in their own interests, which may not always be in the interests
of our shareholders generally.
The market price of our Class A ordinary shares may be volatile or may decline regardless of our operating
performance resulting in substantial losses for our Class A ordinary shareholders.
The trading price of our Class A ordinary shares is volatile and could continue to fluctuate significantly regardless
of our operating performance in response to numerous factors, many of which are beyond our control, including:
• Actual or anticipated fluctuations in our results of operations;
• The financial projections we may provide to the public, any changes in these projections or our failure to
meet these projections;
• Failure of securities analysts to initiate or maintain coverage of Atlassian, publication of inaccurate or
unfavorable research about our business, changes in financial estimates or ratings changes by any
securities analysts who follow Atlassian or our failure to meet these estimates or the expectations of
investors;
• Announcements by us or our competitors of significant technical innovations, new products, acquisitions,
strategic partnerships, joint ventures or capital commitments;
• Changes in operating performance and stock market valuations of other technology companies generally,
or those in our industry in particular;
• Price and volume fluctuations in the overall stock market from time to time, including as a result of trends
in the economy as a whole;
• Actual or anticipated developments in our business or our competitors’ businesses or the competitive
landscape generally;
• Developments or disputes concerning our intellectual property or our products, or third-party proprietary
rights;
• Changes in accounting standards, policies, guidelines, interpretations or principles;
• New laws or regulations, new interpretations of existing laws, or the new application of existing regulations
to our business;
• Changes in tax laws or regulations;
• Any major change in our board of directors or management;
27
• Additional Class A ordinary shares being sold into the market by us or our existing shareholders or the
anticipation of such sales;
• Arbitrage or hedging strategy by purchasers of our Notes and certain financial institutions in connection
with our capped call transactions;
• Cyber-security and privacy breaches;
•
Lawsuits threatened or filed against us; and
• Other events or factors, including those resulting from war, incidents of terrorism, or responses to these
events.
In addition, the stock markets, and in particular the market on which our Class A ordinary shares are listed,
have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices
of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a
manner unrelated or disproportionate to the operating performance of those companies. In the past, shareholders
have instituted securities class action litigation following periods of market volatility. If we were to become involved in
securities litigation, it could subject us to substantial costs, divert resources and the attention of management from
operating our business, and harm our business, results of operations and financial condition.
Substantial future sales of our Class A ordinary shares could cause the market price of our Class A ordinary
shares to decline.
The market price of our Class A ordinary shares could decline as a result of substantial sales of our Class A
ordinary shares, particularly sales by our directors, executive officers and significant shareholders, or the perception
in the market that holders of a large number of shares intend to sell their shares. As of June 30, 2019, we had 118,184,933
outstanding Class A ordinary shares and 124,722,559 outstanding Class B ordinary shares.
We have also registered Class A ordinary shares that we issue under our employee equity incentive plans.
These shares may be sold freely in the public market upon issuance.
Certain holders of our Class A ordinary shares and our Class B ordinary shares, including our founders, have
rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their
shares in registration statements that we may file for ourselves or our shareholders. Sales of our Class A ordinary
shares pursuant to these registration rights may make it more difficult for us to sell equity securities in the future at a
time and at a price that we deem appropriate. These sales also could cause the market price of our Class A ordinary
shares to fall and make it more difficult for our investors to sell our Class A ordinary shares at a price that they deem
appropriate.
The requirements of being a public company may strain our resources, divert management’s attention, and
affect our ability to attract and retain executive officers and qualified board members.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing
requirements of NASDAQ Global Select Market and other applicable securities rules and regulations. Compliance with
these rules and regulations has increased our legal and financial compliance costs, making some activities more
difficult, time-consuming, and costly, and has increased demand on our systems and resources. Such demands would
likely continue to increase, particularly if we were to lose our status as a “foreign private issuer” as discussed below.
The Exchange Act requires, among other things, that we file annual reports with respect to our business and results
of operations. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls
and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure
controls and procedures and internal control over financial reporting to meet this standard, significant resources and
management oversight is required. As a result of the complexity involved in complying with the rules and regulations
applicable to public companies, our management’s attention may be diverted from other business concerns, which
could harm our business, results of operations and financial condition. In addition, the pressures of operating a public
company may divert management’s attention to delivering short-term results, instead of focusing on long-term strategy.
As a public company it is more expensive for us to maintain adequate director and officer liability insurance,
and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These
factors could also make it more difficult for us to attract and retain qualified executive officers and members of our
board of directors.
28
If we are unable to maintain effective internal control over financial reporting in the future, investors may lose
confidence in the accuracy and completeness of our financial reports and the market price of our Class A
ordinary shares may be harmed.
As a public company, we are required to maintain internal controls over financial reporting and to report any
material weaknesses in such internal controls. We are required to furnish a report by management on the effectiveness
of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. If we identify material
weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of
Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent
registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over
financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the
market price of Class A ordinary shares could be negatively affected, and we could become subject to investigations
by the stock exchange on which our securities are listed, the Securities and Exchange Commission (“SEC”) or other
regulatory authorities, which could require additional financial and management resources.
We do not expect to declare dividends in the foreseeable future.
We currently anticipate that we will retain future earnings for the development, operation and expansion of our
business, and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to
shareholders will therefore be limited to the increase, if any, of our share price, which may never occur.
Risks Related to Our Outstanding Notes
Paying amounts due in cash in respect of our outstanding Notes on interest payment dates, at maturity and
upon exchange thereof will require a significant amount of cash. We may not have sufficient cash flow from
our business to pay when due, or raise the funds necessary to pay when due, amounts owed in respect of
the Notes, which could adversely affect our business and results of operations.
The ability to make scheduled payments of interest on, and principal of, to satisfy exchanges for cash in respect
of, and/or to refinance, our outstanding Notes depends on our future performance, which is subject to economic,
financial, competitive and other factors beyond our control. If we are unable to generate enough cash flow to make
payments on the Notes when due, we may be required to adopt one or more alternatives, such as selling assets or
obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive. Our ability to
refinance the Notes, which we may need to do in order to satisfy our obligations thereunder, will depend on the capital
markets and our financial condition at such time. We may not be able to engage in any of these activities or engage
in these activities on desirable terms, which could result in a default on the Notes.
The holders of the Notes have the right to require us to repurchase their Notes upon the occurrence of a
fundamental change (as defined in the indenture governing the Notes (the “Indenture”)) at a repurchase price equal
to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any. Upon
repurchase of the Notes, we will be required to make cash payments in respect of the Notes being repurchased. In
addition, upon a holder’s exchange of the Notes for cash in accordance with the terms of the Indenture, we would be
required to make cash payments in respect of the Notes being exchanged in the manner set forth in the Indenture.
We may not have enough available cash or be able to obtain financing at the time we are required to make repurchases
of, or exchange of, the Notes for cash. Our failure to repurchase the Notes or exchange the Notes for cash at a time
when the repurchase or exchange is required by the Indenture governing the Notes would constitute a default under
such Indenture.
In addition, our indebtedness on the Notes, combined with our other financial obligations and contractual
commitments, could have other important consequences. For example, it could:
• Make us more vulnerable to adverse changes in government regulation and in the worldwide economic,
industry and competitive environment;
•
Limit our flexibility in planning for, or reacting to, changes in our business and our industry;
• Place us at a disadvantage compared to our competitors who have less debt;
Limit our ability to borrow additional amounts to fund acquisitions, for working capital and for other general
•
corporate purposes; and
• Make an acquisition of the Company less attractive or more difficult.
29
Any of these factors could harm our business, results of operations and financial condition. In addition, if we
incur additional indebtedness, the risks related to our business and our ability to repay our indebtedness on the Notes
would increase.
The conditional exchange feature of the Notes, when triggered, may adversely affect our liquidity and operating
results.
When the conditional exchange feature of the Notes is triggered, holders of Notes are entitled to exchange the
Notes at any time during specified periods, at their option. The conditional exchange feature of the Notes was triggered
as of June 30, 2019, and the Notes are currently exchangeable at the option of the holders, in whole or in part, between
July 1, 2019 and September 30, 2019. If holders elect to exchange their Notes during such fiscal quarter, we would
be required to settle our exchange obligation through the payment of cash, which could adversely affect our liquidity.
In addition, even without holders electing to exchange their Notes during such fiscal quarter, we were required under
applicable accounting rules to reclassify the outstanding principal of the Notes as a current rather than long-term liability
as of June 30, 2019, resulting in a material reduction of our net working capital.
Whether the Notes will be exchangeable following such fiscal quarter will depend on the continued satisfaction
of this condition or another exchange condition in the future. If holders elect to exchange their Notes during future
periods following the satisfaction of an exchange condition, we would be required to settle our exchange obligation
through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to
exchange their Notes during such future periods, we could be required under applicable accounting rules to reclassify
all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result
in a material reduction of our net working capital.
The accounting for the Notes may result in volatility to our reported financial results, which could adversely
affect the price at which our Class A ordinary shares trade.
We will settle exchanges of the Notes entirely in cash. Accordingly, the exchange feature that is part of the
Notes will be accounted for as a derivative pursuant to accounting standards relating to derivative instruments and
hedging activities. In general, this will result in an initial valuation of the exchange feature, which will be bifurcated from
the debt component of the Notes, resulting in an original issue discount. The original issue discount will be amortized
and recognized as a component of interest expense over the term of the Notes, which will result in an effective interest
rate reported in our consolidated statements of operations significantly in excess of the stated interest rate of the Notes.
Although this accounting treatment will not affect the amount of cash interest paid to holders of the Notes or our cash
flows, it will reduce our earnings and could adversely affect the price at which our Class A ordinary shares trade.
Additionally, for each financial statement period after issuance of the Notes, a derivative gain or loss will be
reported in our consolidated statements of operations to the extent the valuation of the exchange feature changes
from the previous period. The capped call transactions described below and elsewhere in this annual report will also
be accounted for as derivative instruments. The valuation of the exchange feature of the Notes and capped call
transactions utilizes significant observable and unobservable market inputs, including stock price, stock price volatility,
and time to expiration of the Notes. The change of inputs at period end from the previous period may result in a material
change of the valuation and the gain or loss resulting from the exchange feature of the Notes and capped call
transactions may not completely offset each other. As such, there may be a material net impact to our consolidated
statements of operations, which could adversely affect the price at which our Class A ordinary shares trade.
The arbitrage or hedging strategy by purchasers of the Notes and Option Counterparties in connection with
our capped call transactions may affect the value of our Class A ordinary shares.
We expect that many investors in, and potential purchasers of the Notes will employ, or seek to employ, an
arbitrage strategy with respect to the Notes. Investors would typically implement such a strategy by selling short our
Class A ordinary shares underlying the Notes and dynamically adjusting their short position while continuing to hold
the Notes. Investors may also implement this type of strategy by entering into swaps on our Class A ordinary shares
in lieu of or in addition to selling short our Class A ordinary shares. This activity could decrease (or reduce the size of
any increase in) the market price of our Class A ordinary shares at that time.
In connection with the pricing of the Notes, we entered into privately negotiated capped call transactions with
certain financial institutions (the “Option Counterparties”). The capped call transactions are expected generally to offset
cash payments due upon exchange of the Notes in excess of the principal amount thereof in the event that the market
30
value per Class A ordinary share of the Company is at the time of exchange of the Notes greater than the strike price
under the capped call transactions, with such offset subject to a cap based on the cap price. We believe the Option
Counterparties, in connection with establishing their initial hedges of the capped call transactions, purchased our Class
A ordinary shares and/or entered into various derivative transactions with respect to our Class A ordinary shares
concurrently with or shortly after the pricing of the Notes. The Option Counterparties may modify these initial hedge
positions by entering into or unwinding various derivatives with respect to our Class A ordinary shares and/or purchasing
or selling our Class A ordinary shares or other securities of ours in secondary market transactions prior to the maturity
of the Notes. This activity could decrease, or reduce the size of any increase in the market price of our Class A ordinary
shares at that time.
We are subject to counterparty risk with respect to the capped call transactions.
The Option Counterparties are financial institutions, and we are subject to the risk that they might default under
the capped call transactions. Our exposure to the credit risk of the Option Counterparties is not secured by any collateral.
If an Option Counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those
proceedings, with a claim equal to our exposure at that time under the capped call transactions with that Option
Counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated
to an increase in the market price and in the volatility of our Class A ordinary shares. In addition, upon a default by an
Option Counterparty, we may suffer adverse tax consequences and may, on a net basis, have to pay more cash to
settle exchanges of the Notes. We can provide no assurances as to the financial stability or viability of the Option
Counterparties.
Risks Related to being a Foreign Private Issuer or an English Company
As a foreign private issuer, we are permitted to report our financial results under IFRS, are exempt from certain
rules under the U.S. securities laws and are permitted to file less information with the SEC than a U.S. company,
and our Class A ordinary shares are not listed, and we do not intend to list our shares, on any market in the
United Kingdom, our country of incorporation. This may limit the information available to holders of our Class A
ordinary shares.
We are a “foreign private issuer,” as defined in the SEC’s rules and regulations and, consequently, we are not
subject to all of the disclosure requirements applicable to public companies organized within the United States. For
example, we are exempt from certain rules under the Exchange Act that regulate disclosure obligations and procedural
requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under
the Exchange Act, including the U.S. proxy rules under Section 14 of the Exchange Act. In addition, our officers and
directors are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act
and related rules with respect to their purchases and sales of our securities. Moreover, while we have been, and expect
to continue to, voluntarily submit quarterly interim consolidated financial data to the SEC under cover of the SEC’s
Form 6-K, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly
as U.S. public companies and are not required to file quarterly reports on Form 10-Q or current reports on Form 8-K
under the Exchange Act. If some investors find our Class A ordinary shares less attractive because of these exemptions,
there may be a less active trading market for our Class A ordinary shares and our share price may be more volatile.
Furthermore, our shares are not listed and we do not currently intend to list our shares on any market in the
United Kingdom, our country of incorporation. As a result, we are not subject to the reporting and other requirements
of companies listed in the United Kingdom. Accordingly, there will be less publicly available information concerning
Atlassian than there would be if we were a public company organized in the United States.
In addition, we report our financial statements under IFRS. There have been and there may in the future be
certain significant differences between IFRS and GAAP, including differences related to revenue recognition, share-
based compensation expense, income tax and earnings per share. As a result, our financial information and reported
earnings for historical or future periods could be significantly different if they were prepared in accordance with GAAP.
As a result, it may be difficult to meaningfully compare our financial statements under IFRS with those companies that
prepare financial statements under GAAP.
31
As a foreign private issuer, we are permitted to follow certain home country corporate governance practices
in lieu of certain requirements under the NASDAQ listing standards. This may afford less protection to holders
of our Class A ordinary shares than U.S. regulations.
As a foreign private issuer whose shares are listed on the NASDAQ Global Select Market, we are permitted to
follow English corporate law and the Companies Act 2006 (“Companies Act”) with regard to certain aspects of corporate
governance in lieu of certain requirements under the NASDAQ listing standards.
A foreign private issuer must disclose in its annual reports filed with the SEC each requirement under the
NASDAQ listing standards with which it does not comply, followed by a description of its applicable home country
practice. Our home country practices differ in significant respects from the corporate governance requirements
applicable to U.S. domestic issuers listed on the NASDAQ Global Select Market and may, therefore, afford less
protection to holders of our Class A ordinary shares.
We may rely on exemptions available under the NASDAQ listing standards to a foreign private issuer and follow
our home country practices in the future, and as a result, our shareholders may not be provided with the benefits of
certain corporate governance requirements of the NASDAQ listing standards.
We may lose our foreign private issuer status in the future, which could result in significant additional cost
and expense.
In order to maintain our current status as a foreign private issuer, either
(i) a majority of voting power of our shares must be either directly or indirectly owned of record by non-residents
of the United States
or
(ii) (a) a majority of our executive officers or directors must not be U.S. citizens or residents, (b) more than 50%
of our assets cannot be located in the United States, and (c) our business must be administered principally outside
the United States.
If we lose this status, we would be required to comply with the Exchange Act reporting and other requirements
applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private
issuers. We would also be required under current SEC rules to prepare our financial statements in accordance with
GAAP and modify certain of our corporate governance practices in accordance with various SEC rules and the NASDAQ
listing standards. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply
with the reporting requirements applicable to a U.S. domestic issuer will likely be higher than the cost we would incur
as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal
and financial compliance costs. We also expect that if we were required to comply with the rules and regulations
applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain director and officer
liability insurance. These rules and regulations could also make it more difficult for us to attract and retain qualified
members of our board of directors.
Provisions contained in our articles of association and under the laws of England may frustrate or prevent
an attempt to obtain control of us.
Provisions in our articles of association, as amended and restated, may have the effect of delaying or preventing
a change of control or changes in our management. Our amended and restated articles of association include provisions
that:
• Specify that general meetings of our shareholders can be called only by our board of directors, the chair
of our board of directors, or one of our Co-Chief Executive Officers (or otherwise by shareholders in
accordance with the Companies Act); and
• Provide that vacancies on our board of directors may be filled only by a majority of directors then in office,
even though less than a quorum.
Provisions of the laws of England may also have the effect of delaying or preventing a change of control or
changes in our management. The Companies Act includes provisions that:
• Require that any action to be taken by our shareholders be effected at a duly called general meeting
(including the annual general meeting) and not by written consent; and
32
• Require the approval of the holders of at least 75% of the voting power of our outstanding shares to amend
the provisions of our articles of association.
These provisions may frustrate or prevent any attempts by our shareholders to replace or remove our current
management by making it more difficult for shareholders to replace members of our board of directors, which is
responsible for appointing the members of our management.
In addition, because we are a public limited company whose registered office is in the United Kingdom, we may
become subject to the U.K. City Code on Takeovers and Mergers (“Takeover Code”), which is issued and administered
by the U.K. Panel on Takeovers and Mergers (“Takeover Panel”). The Takeover Code applies, among other things, to
an offer for a public company whose registered office is in the United Kingdom and whose securities are admitted to
trading on a regulated market or multilateral trading facility in the United Kingdom (and for these purposes NASDAQ
does not fall within the definition of regulated market or multilateral trading facility), or to an offer for a public company
whose registered office is in the United Kingdom if Atlassian is considered by the Takeover Panel to have its place of
central management and control in the United Kingdom. Although we believe that the Takeover Code does not apply
to us, the Takeover Panel will be responsible for determining whether we have our place of central management and
control in the United Kingdom by looking at various factors, including the structure of our board of directors and where
they are resident.
If at the time of a takeover offer the Takeover Panel determines that we have our place of central management
and control in the United Kingdom, or if at that time we have our shares admitted to trading on a regulated market or
multilateral trading facility in the United Kingdom (or a regulated market in one or more member states of the European
Economic Area), we would be subject to a number of rules and restrictions, including, but not limited to, the following:
(i) our ability to enter into deal protection arrangements with a bidder would be extremely limited; (ii) we may not,
without the approval of our shareholders, be able to perform certain actions that could have the effect of frustrating an
offer, such as issuing shares or carrying out acquisitions or disposals; and (iii) we would be obliged to provide equality
of information to all bona-fide competing bidders.
The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation.
We are incorporated under English law. The rights of holders of Class A ordinary shares are governed by English
law, including the provisions of the Companies Act, and by our articles of association. These rights differ in certain
respects from the rights of shareholders in typical U.S. corporations organized under Delaware law.
Shareholders in certain jurisdictions may not be able to exercise their pre-emptive rights if we increase our
share capital.
Under the Companies Act, our shareholders generally have the right to subscribe and pay for a sufficient number
of our shares to maintain their relative ownership percentages prior to the issuance of any new shares in exchange
for cash consideration. Shareholders in certain jurisdictions may not be able to exercise their pre-emptive rights unless
securities laws have been complied with in such jurisdictions with respect to such rights and the related shares, or an
exemption from the requirements of the securities laws of these jurisdictions is available. We currently do not intend
to register the Class A ordinary shares under the laws of any jurisdiction other than the United States, and no assurance
can be given that an exemption from the securities laws requirements of other jurisdictions will be available to
shareholders in these jurisdictions. To the extent that such shareholders are not able to exercise their pre-emptive
rights, the pre-emptive rights would lapse, and the proportional interests of such shareholders would be reduced.
Further, the Companies Act provides that in certain circumstances the pre-emptive rights available to
shareholders can be overridden, including where there is an issue of shares for non-cash consideration or the
disapplication of the pre-emptive rights is approved by the holders of at least 75% of our outstanding shares. Our
shareholders have approved the disapplication of these pre-emptive rights for a period of five years from our fiscal
2017 annual shareholder meeting.
U.S. holders of our shares could be subject to material adverse tax consequences if we are considered a
“passive foreign investment company” for U.S. federal income tax purposes.
We do not believe that we are a passive foreign investment company, and we do not expect to become a passive
foreign investment company. 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 passive foreign investment company for the current taxable year or
any future taxable years. If we were a passive foreign investment company for any taxable year while a taxable U.S.
holder held our shares, such U.S. holder would generally be taxed at ordinary income rates on any sale of our shares
33
and on any dividends treated as “excess distributions.” An interest charge also generally would apply based on any
taxation deferred during such U.S. holder’s holding period in the shares.
U.S. investors may have difficulty enforcing civil liabilities against us, our directors, or our executive officers.
Under English law, a director owes various statutory and fiduciary duties to us, and not, except in certain limited
circumstances, to shareholders. This means that under English law generally we, rather than the shareholders, are
the proper claimant in an action in respect of a wrong done to us by a director. Notwithstanding this general position,
the Companies Act provides that a court may allow a shareholder to bring a derivative claim, which is an action in
respect of and on behalf of us, in respect of a cause of action arising from a director’s negligence, default, breach of
duty or breach of trust. The ability to bring a derivative claim is, however, subject to compliance with a number of
procedural requirements, which may in practice be difficult for shareholders to comply with.
We are a public limited company incorporated under the laws of England. Certain of our directors and executive
officers reside outside the United States. In addition, a substantial portion of our assets and a substantial portion of
the assets of such directors and executive officers, are located outside the United States. As a result, it may be difficult
for an investor to serve legal process on us or our directors and executive officers or have any of them appear in a
U.S. court.
It may not be possible to bring proceedings or enforce a judgment of a U.S. court in respect of civil liabilities
predicated on the U.S. federal securities laws in England. The English courts will not enforce, either directly or indirectly,
a penal, revenue or other public law of a foreign state. In addition, awards of punitive damages in actions brought in
the United States or elsewhere may be unenforceable in England. An award of damages is usually considered to be
punitive if it does not seek to compensate the claimant for loss or damage suffered and is instead intended to punish
the defendant. In addition to public policy aspects of enforcement, the enforceability of any judgment in England will
depend on the particular facts of the case such as the nature of the judgment and whether the English court considered
the U.S. court to have had jurisdiction. It will also depend on the laws and treaties in effect at that time. The United
States and the United Kingdom do not currently have a treaty or convention providing for the reciprocal recognition
and enforcement of judgments, other than arbitration awards, in civil and commercial matters. Therefore, to enforce
a judgment of a U.S. court, the party seeking to enforce the judgment must bring an action at common law in respect
of the amount due under the judgment.
Item 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
Corporate Information
Atlassian Corporation Plc was incorporated and registered in the United Kingdom in November 2013 as a
public company limited by shares. Our registered office is located at Exchange House, Primrose Street, London EC2A
2EG, c/o Herbert Smith Freehills LLP. Our principal offices are located at Level 6, 341 George St., Sydney, NSW, 2000
Australia for Atlassian Pty Ltd and at 350 Bush Street, Floor 13, San Francisco, California 94104 for Atlassian, Inc.
Atlassian Corporation Plc is a holding company and we conduct substantially all of our business through certain
of our subsidiaries, including Atlassian Pty Ltd and Atlassian, Inc.
The principal laws and legislation under which we operate and under which the Class A ordinary shares and
Class B ordinary shares are issued is the Companies Act and the regulations made thereunder.
In October 2018, we acquired OpsGenie, Inc. (“OpsGenie”), a leader in incident alerting and on-call schedule
management. The total purchase price was approximately $259.5 million in cash consideration. The acquisition of
OpsGenie complements our current product offerings and enables customers to plan for and respond to IT service
disruptions.
Additionally, in April 2019 we acquired AgileCraft LLC (“AgileCraft”), a leading provider of enterprise agile
planning software. The total purchase price was approximately $154.0 million in cash and $1.7 million in fair value of
replacement shares attributable to service provided prior to acquisition.The acquisition of AgileCraft complements our
current product offerings and helps enterprise organizations build and manage a ‘master plan’ of their most strategic
projects and workstreams. AgileCraft was rebranded as “Jira Align” after the acquisition.
34
The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC. Our website address is atlassian.com.
The information contained on our website is not part of this annual report.
B. Business Overview
Our mission is to unleash the potential of every team.
Our company was founded in 2002 to help software teams work better together. But from the beginning, our
products were also designed to help developers collaborate with non-developer teams involved in software innovation.
As more non-developer teams have gained exposure to our products, and as we add to our portfolio through research
and development and acquisitions, teams are adopting and extending our products to novel use cases, bringing our
products to more users and business teams in their organizations. This trend has created an expansive market
opportunity for us.
Our products help teams organize, discuss, and complete their work – delivering superior outcomes for their
organizations. Our primary products include Jira Software, targeting software teams, and Jira Core, targeting other
business teams (collectively, “Jira”) for planning and project management, Confluence for content creation and sharing,
Trello for capturing and adding structure to fluid, fast-forming work for teams, Bitbucket for code sharing and
management, Jira Service Desk for team service and support applications, Opsgenie for incident management, and
Jira Align for enterprise agile planning. Together, our products form an integrated system for organizing, discussing
and completing shared work, becoming deeply entrenched in how people collaborate and 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 practice of opaque pricing and discounting that is typical in the
enterprise software industry. We pursue customer volume, targeting every organization, regardless of size, industry,
or geography. This allows us to operate at unusual scale for an enterprise software company, with more than 150,000
customers across virtually every industry sector in approximately 190 countries as of June 30, 2019. Our customers
range from small organizations that have adopted one of our products for a small group of users, to over two-thirds of
the Fortune 500, many of which use a combination of our products across thousands of users.
We take a long-term view of our customer relationships and our opportunity. We recognize that users drive the
adoption and proliferation of our products and, as a result, we focus on enabling a self-service, low-friction distribution
model that makes it easy for users to try, adopt, and use our products. We are relentlessly focused on measuring and
improving user satisfaction as we know that one happy user will beget another, thereby expanding the large and organic
word-of-mouth community that helps drive our growth.
The Atlassian Way
Our product strategy, distribution model and Company culture work in concert to create unique value for our
customers and competitive advantages for our Company.
We invest significantly in developing and refining versatile products that can be used in myriad ways, helping
teams achieve their full potential. Our products are easy to adopt and use, which allows them to be distributed organically
and efficiently.
Because our products are easy to purchase and are offered at affordable price points, they can be sold through
a high-velocity, low-friction online distribution model. This model allows us to generate demand from word-of-mouth
and viral expansion within organizations, rather than having to rely on a traditional sales infrastructure. Our model is
designed to operate at scale and serve millions of customers.
Our culture of innovation, transparency, and dedication to our customers drives our success in implementing
and refining this unique approach. We believe this approach creates a self-reinforcing effect that fosters innovation,
quality, customer satisfaction, 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.
35
Our Product Strategy
We have developed and acquired a broad portfolio of products that help teams large and small to organize,
discuss, and complete their work in a new way that is coordinated, efficient and innovative. Our products serve the
needs of teams of software developers, IT professionals, and knowledge workers. While these products provide a
range of distinct functionality to users, they share certain core attributes:
• Built for Teams - Our products are singularly designed to help teams work better together and achieve more.
We design products that help our customers collaborate more effectively, be more transparent and operate in
a coordinated manner.
• Easy to Adopt and Use - We invest significantly in research and development to enable our products to be
both powerful and extremely easy to use. Our software is designed to be accessed from the Internet and
immediately put to work. By reducing the friction that usually accompanies the purchasing process of business
software and eliminating the need for complicated and costly implementation and training, we believe we
attract more people to try, buy, and derive value from our software.
• Versatile and Adaptable - We design simple products that are useful in a broad range of workflows and
projects. We believe that our products can improve any process involving teams, multiple workstreams, and
deadlines. For example, Jira, which enables software teams to plan, build, and ship code, is also used by
thousands of our customers to manage workflows related to product design, supply chain management,
expense management, and legal document review.
•
Integrated - Our products are integrated and designed to work well together. For example, the status of an
IT service ticket generated in Jira Service Desk can be viewed in Confluence, providing visibility to business
stakeholders.
• Open - We are dedicated to making our products open and interoperable with a range of other platforms and
applications, such as Slack, salesforce.com, Workday, and Dropbox. In order to provide a platform for our
partners and to promote useful products for our users, in 2012 we introduced the Atlassian Marketplace, an
online marketplace that features thousands of apps created by a growing global network of independent
developers and vendors. The Atlassian Marketplace provides customers a wide range of additional capabilities
they use to extend or enhance our products, further increasing the value of our platform.
Our Distribution Model
Our high-velocity, low-friction distribution model is designed to drive exceptional customer scale by making
affordable products available online. We focus on product quality, automated distribution, transparent pricing, and
customer service in lieu of a costly traditional sales infrastructure. We primarily rely on word-of-mouth and low-touch
demand generation to drive trial, adoption, and expansion of our products.
The following are key attributes of our unique model:
•
Innovation-driven - Relative to other enterprise software companies, we invest significantly in research and
development rather than marketing and sales. Our goal is to focus our spending on measures that improve
quality, ease of adoption, and expansion, and create organic customer demand for our products. We also
invest in ways to automate and streamline distribution and customer support functions to enhance our customer
experience and improve our efficiency.
In addition, a portion of our research and development spending is directed towards demand generation and
customer conversion. For example, we have invested in the development of an internal platform that analyzes
customer behavior and promotes additional products directly to users in the context of their activity.
• Simple and Affordable - We offer our products at affordable prices in a simple and transparent format. For
example, a customer coming to our website can evaluate, purchase and set up a Jira license, for 10 users or
50,000+ users, based on a transparent list price, without any interaction with a sales person. This approach,
which stands in contrast to the opaque and complex pricing plans offered by most traditional enterprise software
36
vendors, is designed to complement the easy-to-use, easy-to-adopt nature of our products and accelerate
adoption by large volumes of new customers.
• Organic and Expansive - Our model benefits significantly from customer word-of-mouth driving traffic to our
website. The vast majority of our transactions are conducted on our website, which drastically reduces our
customer acquisition costs. We also benefit from distribution leverage via our network of solution partners,
who resell and customize our products. Once we have landed within a customer team, the networked nature
and flexibility of our products tend to lead to adoption by other teams and departments, resulting in user growth,
new use cases, and the adoption of our other products.
• Scale-oriented - Our model is designed to generate and benefit from significant customer scale and our goal
is to maximize the number of individual users of our software. With more than 150,000 customers using our
software today, we are able to reach a vast number of users, gather insights to refine our offerings, and generate
revenue growth by expanding within our customer accounts. With 4,091 customers paying us in excess of
$50,000 during fiscal year 2019, many of whom started as significantly smaller customers, we have
demonstrated our ability to grow within our existing customer base. Ultimately, our model is designed to serve
millions of customers and to benefit from the data, network effects, and customer insights that emerge from
such scale.
• Data-driven - Our scale and the design of our model allows us to gather insights into and improve the customer
experience. We track, test, nurture and refine every step of the customer journey and our users' experience.
This allows us to intelligently manage our funnel of potential users, drive conversion, and promote additional
products to existing users. Our scale has enabled us to experiment with various approaches to these tasks
and constantly tune our strategies for user satisfaction and growth.
Our Culture
Our company culture is exemplified by our core values:
The following are the key elements of our corporate culture that contribute to our ability to drive customer value
and achieve competitive differentiation:
• Openness and Innovation - We value transparency and openness as an organization. We believe that putting
product pricing and documentation online promotes trust and makes customers more comfortable engaging
with our low-touch model. In addition, we are dedicated to innovation and encourage our employees to invent
new applications, uses, and improvements for our software. We run our Company using our own products,
which promotes open communication and transparency throughout the organization.
• Dedication to the Customer - Customer service and support is at the core of our business. Our customer
support teams strive to provide unparalleled service to our customers. We also encourage our service teams
to build scalable, self-service solutions that customers will love, as we believe superior service drives greater
customer happiness, which in turn breeds positive word-of-mouth.
• Team-driven - As our mission is to unleash the potential of every team, we value teamwork highly. We
encourage our employees to be both team oriented and entrepreneurial in identifying problems and inventing
solutions. Dedication to teamwork starts at the top of our organization with our unique co-CEO structure, and
is celebrated throughout our Company.
37
• Long-term Focused - We believe that we are building a company that can grow and prosper for decades to
come. Our model, in which we expand across our customers’ organizations over time, requires a patient, long-
term approach, and a dedication to continuous improvement. This is exemplified by our investment in research
and development, which is significant relative to traditional software models and is designed to drive the long-
term sustainability of our product leadership. Given the choice between short-term results and building long-
term scale, we choose the latter.
Our Financial Model
By developing a product strategy, distribution model, and culture that are designed around the needs of our
customers and users, we believe that we have established a financial model that is favorable for our shareholders.
Our model has allowed us to grow customers and revenue steadily while generating positive free cash flow for each
of the last 14 fiscal years. Our model relies on rapidly and efficiently landing new customers and expanding our
relationship with them over time. The following are the key elements of our model:
• Significant Investment in Ongoing Product Development and Sales Automation - Our research and
development investments enable us to rapidly build new products, continuously enhance our existing products,
acquire and integrate technologies, obtain data-driven insights, and further automate and streamline our
approach to customer acquisition.
• Rapid and Efficient Acquisition of New Customers - By building products that are affordable and easy to
adopt and use, we are able to attract customers rapidly without relying primarily on a traditional sales force,
thereby lowering the cost of customer acquisition significantly.
• Continued Expansion - Our success is dependent on our ability to expand the relationship with our existing
base of customers through the addition of more users, teams and products.
• Predictability of Sales - As we are not dependent on a traditional sales force and primarily rely on a high-
velocity, low-friction online distribution model, we have historically experienced a linear quarterly sales cycle.
Once teams begin working together with our software, we become embedded in their workflows, becoming a
system for engagement within organizations. This degree of integration makes our products difficult to displace
and provides us with steady and predictable revenue.
• Positive Free Cash Flow - By reducing customer acquisition costs and establishing a revenue model that
has scaled linearly, our model has allowed us to have positive free cash flow for more than the last 14 fiscal
years.
Our Products
We offer a range of team collaboration products, including:
•
Jira for team planning and project management;
• Confluence for team content creation and sharing;
• Trello for capturing and adding structure to fluid, fast-forming work for teams;
• Bitbucket for team code sharing and management;
•
Jira Service Desk for team service and support applications;
• Opsgenie for incident management; and
•
Jira Align for enterprise agile planning.
These products can be deployed by users through the cloud and many of our products can be deployed behind
the firewall on the customers' own infrastructure.
38
Jira. Jira provides a sophisticated and flexible workflow management system that helps teams plan, organize, track
and manage their work and projects. Jira’s customizable dashboards and powerful reporting features keep teams
aligned and on track.
Confluence. Confluence is a social and flexible content collaboration platform used to create, share, organize, and
discuss projects. Through Confluence’s rich and dynamic editor, our customers create and share their work - meeting
notes, blogs, product requirements, file lists, company information, or project plans - with their team or external
customers. Confluence’s collaborative capabilities enable teams to stay up to date and on the same page.
Trello. Trello is a collaboration and organization product that captures and adds structure to fluid, fast-forming work
for teams. A project management application that can organize your tasks into lists and boards, Trello can tell users
and their teams what is being worked on, by whom, and how far along the task or project is. At the same time, Trello
is extremely simple and flexible, which allows it to serve a vast number of other collaboration and organizational needs.
Bitbucket. Bitbucket is a code management and collaboration product for teams using distributed version control
systems. Bitbucket empowers teams to build, store, test, collaborate and deploy shared code.
Jira Service Desk. Jira Service Desk is an intuitive and flexible service desk product for creating and managing service
experiences for a variety of service team providers, including IT, legal, and HR teams. Jira Service Desk features an
elegant self-service portal, best-in-class team collaboration, ticket management, integrated knowledge, service level
agreement support, and real-time reporting.
Opsgenie. Opsgenie is an incident management tool that enables IT teams to plan for and respond to service
disruptions. Opsgenie quickly routes alerts to the appropriate IT teams, speeding diagnosis and resolution, and reducing
downtime.
Jira Align. Jira Align helps enterprise organizations build and manage a ‘master plan’ that maps strategic projects to
the various work streams required to deliver them. Jira Align provides business leaders with better visibility into
bottlenecks, risks, and dependencies, as well as more accuracy around capacity planning and measuring return on
investment.
Other Products
We also offer additional tools, including Atlassian Access, Bamboo, Crowd, Crucible, Fisheye, Jira Portfolio,
Sourcetree and Statuspage.
In July 2018, we announced a strategic partnership with Slack. With this partnership, we exited the real-time
communications space. Slack acquired the intellectual property for Stride and Hipchat Cloud, both of which were
discontinued.
Key Technologies and Capabilities
Our products and technology infrastructure are designed to provide simple-to-use and versatile products with
industry-standard security and data protection that scales to organizations of all sizes, from five user teams to large
organizations with thousands of users. Maintaining the security and integrity of our infrastructure is critical to our
business. As such, we leverage standard security and monitoring tools to ensure performance across our network.
The Atlassian Platform
Our products are built upon a platform of shared components and services that provide a common system for
user management, add-ons, search, user interfaces and more. Over time, our strategy is to build more common micro
services shared across our platform. This approach allows us to develop and introduce new products faster, as we
can leverage common foundational services that already exist. This also allows our products to more seamlessly
integrate with one another, and provides customers better experiences when using multiple products.
One component of our platform is the Atlassian User Interface (“AUI”), a library of JavaScript, CSS, templates
and other resources for quickly creating interfaces that conform to Atlassian design guidelines. AUI is integrated into
39
our products, and is also available externally so third-party developers can build products that conform to our interface
specifications.
Atlassian Connect
Open APIs and extensibility have been a hallmark of our products for many years. We offer a broad set of
representational state transfer (REST)-based APIs to interact with many of our products features and data. Atlassian
Connect is a framework to build apps for our products. An app may be an integration with another existing service, a
set of new features for an Atlassian application, or an entirely new product that runs within an application. Atlassian
Connect add-ons operate remotely over HTTP and can be written with any programming language and web framework.
Atlassian Connect apps must conform to a set of approval guidelines administered by us and can be publicly
offered by third parties and sold via the Atlassian Marketplace.
The Atlassian Marketplace and Ecosystem
The Atlassian Marketplace is a hosted online marketplace for free and purchasable apps to our products. The
Atlassian Marketplace offers thousands of apps from a large and growing ecosystem of third-party vendors and
developers.
We offer the Atlassian Marketplace to customers to simplify the discovery and purchase of add-on capabilities
for our products and to third-party vendors and developers to more easily reach our customer base, and to simplify
license management and renewals. Our portion of revenue derived from each add-on sale to the vendors is typically
25%. In fiscal year 2019, the Atlassian Marketplace generated over $300 million in purchases.
Marketing
Our go-to-market approach is driven by the strength and innovation of our products and organic user demand.
Our model focuses on a land-and-expand strategy, automated and low-touch customer service, superior product quality,
and disruptive pricing. We make our products easy to set up and try, which facilitates rapid and widespread adoption
of our software. Our products are built for teams, and thus have natural network effects that help them spread virally,
through word-of-mouth, across teams and departments. This word-of-mouth marketing increases as more individual
users and teams discover our products.
Our marketing efforts focus on growing our company brand, building broader awareness and increasing demand
for each of our products. We invest in brand and product promotion, demand generation through direct marketing and
advertising, and content development to help educate the market about the benefits of our products. We also leverage
insights gathered from our users and customers to improve our targeting and ultimately the return-on-investment from
our marketing activities. Data-driven marketing is an important part of our business model, which focuses on continuous
product improvement and automation in customer engagement and service.
Sales
Our website is our primary forum for sales, and supports thousands of commercial transactions daily. We share
a wide variety of information directly with prospective customers, including detailed product information and product
pricing. Our sales model focuses on enabling customer self-service, data-driven targeting and automation. As a result,
we do not rely primarily on a traditional, commissioned direct sales force. We focus on allowing purchasing to be
coordinated online through an automated, easy-to-use web-based process that permits payment using a credit card
or bank/wire transfer. We augment rigorous and continuously-improving automated processes with a customer service
team to help customers where needed and identify future automation improvements.
We also have a global network of solution partners with unique expertise, services and products that complement
the Atlassian portfolio, such as deployment and customization services, localized purchasing assistance around
currency, and language and specific in-country compliance requirements. Sales programs consist of activities and
teams focused on supporting our solution partners, tracking channel sales activity, supporting and servicing our largest
customers by helping optimize their experience across our product portfolio, helping customers expand their use of
our products across their organizations and helping product evaluators learn how they can use our tools most effectively.
40
Community and Ecosystem
We are deeply committed to our global community, with over 25,000 third-party developers on the Atlassian
platform and a network of over 500 solution partners. We foster a sense of community with our users through our
Atlassian Community Events (“ACE”) program, where users can meet in their local cities at annual live customer and
developer events, including Atlassian Summit, Atlassian Open, Atlas Camp, and Atlassian Community, our online
community which features user-generated questions and answers with in-depth discussion of our products.
ACEs are community-led meetups held around the world that we sponsor and are run by a network of enthusiastic
and committed customers who develop an agenda covering wide-ranging topics for users to discuss together.
The Atlassian Summit is our user event where our users can engage and learn from thousands of other users
and hundreds of product experts. We use the event to share future product themes, deeper how-tos and customer-
lead adoption best practices. The event also features product demos and hands-on training courses and is a large
networking opportunity for customers to meet each other, our partner ecosystem, and our employees.
Atlassian Open is a multi-city event where users can learn how to make teams more open, powerful, effective
and happier. During these events we share how we’re creating the future of teamwork.
Atlas Camp is our developer conference which provides an opportunity for the developer community to enhance
their skills and knowledge of our products, including the integration capabilities of our platform, and meet with product
specialists.
Customer Support and Services
We focus on designing products that are easy to set up, adopt, and use without support. We provide maintenance
and support for all of our licensed customers through our global, multi-channel technical support and services group.
Customers are entitled to technical support through an active subscription to our cloud products, or through an active
annual maintenance agreement for our on-premises products. This maintenance and support provides customers with
new features and improvements, and 24x7 access to our phone and online support teams.
Our automated support services enable our customers to help themselves and include the following resources:
• Technical Documentation - Users can access documentation and instruction for all versions of our products.
• Knowledge Base - We offer troubleshooting and how-to tips for all of our products, with links to all our product-
specific knowledge bases.
• Atlassian University - Atlassian University offers step-by-step interactive tutorials and videos that instruct
users and admins on how to use our product.
• Over-the-web Hands-on Training - Webinars, led by our skilled training instructors, teach users how to
use each product.
• Atlassian Community - Atlassian Community is our online community for users to ask questions and provide
answers and contribute in-depth discussions on our products and features.
• Purchasing FAQ - We offer a simple guide to the online purchasing and account management service.
We also offer premier hands-on support from a team of dedicated senior support engineers and technical
account managers who act as a single point of contact for our support, product and engineering teams.
Further customized support and professional services are provided through Atlassian solution partners. We
have over 500 solution partners worldwide dedicated to handling specific needs of our customers, such as translating
documentation, providing on-site demos or training, building add-ons, tuning deployments, assisting with complex
enterprise solutions, and 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 hands-on system integrations,
deployments, and upgrades.
41
Competition
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.
Our competitors range from large technology vendors to new and emerging businesses in each of the markets
we serve:
• Software Teams - Our competitors include large technology vendors, including Microsoft and IBM, and smaller
companies like GitHub (acquired by Microsoft) and Gitlab that offer project management, collaboration and
developer tools.
•
IT Teams - Our competitors range from cloud vendors, including ServiceNow, salesforce.com, PagerDuty,
Freshworks, and Zendesk, to legacy vendors such as BMC Software (Remedy) that offer service desk solutions.
• Business Teams - Our competitors range from large technology vendors, including Microsoft, IBM and Google,
that offer a suite of products, to smaller companies like Asana, which offer point solutions for enterprise
collaboration.
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 sales force. 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, 2019, 2018 and 2017 we had 3,616, 2,638, and 2,193 employees, respectively.
Employees
42
C. Organizational Structure
Atlassian Corporation Plc is a holding company and we conduct substantially all of our business through certain
of our subsidiaries. As of June 30, 2019, our subsidiaries, all of which are wholly-owned, are as follows:
Name
Atlassian (UK) Limited
Atlassian (UK) Holdings Limited
Atlassian (Australia) Limited
Atlassian (Global) Limited (1)
Atlassian (UK) Operations Limited
Atlassian, Inc.
Atlassian Network Services, Inc.
Dogwood Labs, Inc.
Trello, Inc.
AgileCraft LLC
AgileCraft Australia Pty Ltd
OpsGenie, Inc.
iFountain, LLC
Atlassian Australia 1 Pty Ltd
Atlassian Australia 2 Pty Ltd
Atlassian Corporation Pty. Ltd.
Atlassian Pty Ltd
Good Software Co. Pty. Ltd.
Atlassian Capital Pty. Ltd.
MITT Australia Pty Ltd
MITT Trust
Atlassian K.K.
Atlassian Germany GmbH
Atlassian Holdings B.V.
Atlassian Philippines, Inc.
Atlassian France SAS
Atlassian B.V.
Atlassian Canada Inc.
Atlassian India LLP
Country of Incorporation
United Kingdom, United States of America
United Kingdom, United States of America
United Kingdom, United States of America
United Kingdom
United Kingdom
United States of America
United States of America
United States of America
United States of America
United States of America
Australia
United States of America
Turkey
United States of America
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Japan
Germany
Netherlands
Philippines
France
Netherlands
Canada
India
(1) Atlassian (Global) Limited is currently in liquidation.
D. Property, Plant and Equipment
We lease approximately 238,000 square feet of office space in Sydney, Australia under various lease
agreements. We lease approximately 419,000 square feet of office space in the San Francisco Bay Area, California,
under various lease agreements. We also lease other office facilities around the world, including in Austin, Texas; New
York, New York; Boston, Massachusetts; the Netherlands; Japan; the Philippines; India; and Turkey.
We anticipate leasing additional office space in future periods to support our growth. We intend to further expand
our facilities or add new facilities as we add employees and enter new geographic markets, and we believe that suitable
additional or alternative space will be available as needed to accommodate any such growth. However, we expect to
incur additional expenses in connection with such new or expanded facilities.
Item 4A. Unresolved Staff Comments
Not applicable.
43
Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Our mission is to unleash the potential of every team.
Our products help teams organize, discuss and complete shared work—delivering superior outcomes for their
organizations.
Our products serve teams of all shapes and sizes, in virtually every industry. Our primary products include Jira
for planning and project management, Confluence for content creation and sharing, Trello for capturing and adding
structure to fluid, fast-forming work for teams, Bitbucket for code sharing and management, Jira Service Desk for team
service and support applications, Opsgenie for incident management, and Jira Align for enterprise agile planning.
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, we do not follow the common practice of opaque pricing and discounting that is typical in the enterprise software
industry. We pursue customer volume, targeting every organization, regardless of size, industry or geography.
To reach this expansive market, we primarily distribute and sell our products online without traditional sales
infrastructure where our customers can get started in minutes without the need for assistance. We focus on enabling
a self-service, low-friction model that makes it easy for customers to try, adopt and use our products. By making our
products simple, powerful, affordable and easy to adopt, we generate demand from word-of-mouth and viral expansion
within organizations.
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 solution partners and resellers. Our solution partners and resellers primarily focus on customers in regions that
require local language support. Sales through indirect channels comprised over one-third of total revenues for fiscal
year 2019. 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 license and other sources.
Customers typically pay us 100% of the initial perpetual license fee as maintenance revenue annually, beginning in
the first year. Maintenance provides our customers with access to new product features and customer support.
Maintenance revenue combined with a subscription revenue business, through our cloud and Data Center products,
results in a large recurring revenue base. In each of the past three fiscal years, more than 75% of our total revenues
have been of a recurring nature from either maintenance fees or subscriptions.
Key Business Metrics
We review the following key metrics to evaluate our business, measure our performance, identify trends affecting
our business, formulate business plans and make strategic decisions.
Customers
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.
As of June 30, 2019, we had 152,727 customers. With these customers using our software today, we are able
to reach a vast number of users, gather insights to refine our offerings and generate growing revenue by expanding
within our customer base. No single customer contributed more than 1% of our total revenues during the fiscal year
ended June 30, 2019.
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
44
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 152,727 customers.
The following table sets forth our number of customers:
Customers
As of June 30,
2019
152,727 ***
2018
125,796 **
2017
89,237*
* Includes an increase in customers of 12,789 in February 2017 as a result of our acquisition of Trello.
** Includes an increase in customers of 14,263 due primarily to Bitbucket Cloud pricing changes as we moved
from a tiered pricing model to a per-user pricing model. As a result, certain organizations using Bitbucket Cloud
who had not previously met our definition of a “customer” now qualify as customers.
*** Includes an increase of 1,396 customers as a result of our acquisition of OpsGenie and an increase of
approximately 2,500 Trello customers as a result of the open board limits we introduced for Trello.
Free cash flow
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.
Net cash provided by operating activities
Less: Capital expenditures
Free cash flow
Fiscal Year Ended June 30,
2019
2018
2017
$ 466,342 $ 311,456 $ 199,381
(44,192)
(30,209)
(15,129)
$ 422,150 $ 281,247 $ 184,252
Free cash flow increased by $140.9 million during the fiscal year ended June 30, 2019 due to a $154.9
million increase of net cash provided by operating activities, offset by a $14.0 million increase of capital
expenditures as we continue to invest in our facilities.
For more information about net cash provided by operating activities, please see “Liquidity and Capital
Resources”.
A. Operating Results
Components of Results of Operations
Sources of Revenues
The Group adopted IFRS 15 as of July 1, 2018, using the full retrospective method. Accordingly, the results for
the prior comparable periods were adjusted to conform to the current period measurement and recognition of results.
For details of IFRS 15 adoption, please refer to Note 2, “Summary of Significant Accounting Policies,” of the notes to
our consolidated financial statements.
45
Subscription revenues
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. We also sell on-premises term
license agreements for our Data Center products, which consists of software licensed for a specified period, and
includes support and maintenance service that is bundled with the license for the term of the license period. Subscription
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, with a majority being
one month. For cloud-based services, subscription revenue is recognized ratably as services are performed,
commencing with the date the service is made available to customers. For on-premises term-based licenses, we
recognize revenue upfront for the portion that relates to the delivery of the term license and the support and related
revenue is recognized ratably as the services are delivered over the term of the arrangement.
Maintenance revenues
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 revenues
Perpetual license revenues represent fees earned from the license of software to customers for use on the
customer’s premises other than Data Center products. Software is licensed on a perpetual basis. Perpetual license
revenues consist of the revenues recognized from sales of licenses to new customers and additional licenses to existing
customers. We recognize revenue on the license portion of perpetual license arrangements on the date of license
delivery in substantially all situations.
Other revenues
Other revenues include fees received for sales of third-party apps in the Atlassian Marketplace, technical account
management, and training services. Revenue from the sale of third-party vendor products via the Atlassian Marketplace
is recognized at the date of product delivery given that all of our obligations have been met at that time and net of the
vendor liability portion, as we 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 training is recognized
as delivered or as the rights to receive training expire.
Cost of Revenues
Cost of revenues primarily consists of employee-related costs, including share-based payment expense,
associated with our customer support and infrastructure service teams; expenses related to hosting our cloud
infrastructure, which includes third-party hosting fees and depreciation associated with computer equipment and
software; payment processing fees; amortization of product technologies; and facilities and related overhead costs.
To support our cloud-based infrastructure, we utilize third-party managed hosting facilities and self-managed data
centers. We allocate share-based payment expense to personnel costs based on the expense category in which the
employee works. We allocate overhead such as information technology infrastructure, rent and occupancy charges
in each expense category based on headcount in that category. As such, general overhead expenses are reflected in
cost of revenues and operating expense categories.
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 and Gross Margin
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.
46
Operating Expenses
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-related 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 allocate share-based payment expense to personnel costs based on the expense category in which the
employee works. We recognize our share-based payments as an expense in the consolidated statements of operations
based on their fair values and vesting periods.
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 restricted share units (“RSUs”) in 2014. Prior to our 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 U.S. Generally Accepted Accounting Principles.
During the fiscal years ended 2019 and 2018 we recognized share-based payment expense of $257.8 million
and $162.9 million, respectively. As of June 30, 2019, the aggregate share-based payment expense remaining to be
amortized to cost of revenues and operating expenses, over a weighted-average period of 1.4 years, was $285.3
million. We expect this share-based payment expense balance to be amortized as follows: $190.1 million during fiscal
2020; $69.5 million during fiscal 2021; $22.4 million during fiscal 2022 and $3.3 million thereafter. The expected
amortization reflects only outstanding share awards as of June 30, 2019.
Research and development
Research and development expenses consist primarily of salaries and related expenses, including share-based
payment expense, contract software development costs, and facilities and related overhead costs. We continue to
focus our research and development efforts on building new products, adding new features and services, integrating
acquired technologies, increasing functionality, enhancing our cloud infrastructure, and developing our mobile
capabilities. We have not capitalized any research and development costs.
Marketing and sales
Marketing and sales expenses consist primarily of salaries and related expenses, including share-based
payment expense, for our marketing and sales employees, marketing and sales programs and facilities and related
overhead costs. Marketing programs consist of advertising, promotional events, corporate communications, brand
building and product marketing activities such as online lead generation. Sales programs consist of activities and
teams focused on supporting our partners, tracking channel sales activity, supporting and servicing our largest
customers by helping optimize their experience across our product portfolio, helping customers expand their use of
our products across their organizations, and helping product evaluators learn how they can use our tools most effectively.
General and administrative
General and administrative expenses consist of salaries and related expenses, including share-based payment
expense, for finance, legal, human resources, and information technology personnel, as well as external legal,
accounting, and other professional fees, other corporate expenses, and facilities and related overhead costs.
Income taxes
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.
47
We generally conduct our international operations through wholly-owned subsidiaries and report our taxable
income in various jurisdictions.
Net loss
We incurred a net loss on an IFRS basis in fiscal year 2019 as we continued to make significant investments
in research and development and technology infrastructure for our cloud-based offerings, expand our operations
globally and develop new products and features for, and enhancements of, our existing products. The net loss was
also attributable to the mark to fair value of the Notes and capped call. Please refer to Note 15, “Exchangeable Senior
Notes,” of the notes to our consolidated financial statements for details of our Notes and capped call.
48
Results of Operations
Our results of operations discussion includes comparisons of fiscal year ended June 30, 2019 as compared
to fiscal year ended June 30, 2018 and the results for both fiscal 2019 and 2018 have been accounted for and presented
to reflect our adoption of IFRS 15. Our consolidated financial statements for the fiscal years ended, and as of June
30, 2018 and 2017 included elsewhere in this Annual Report have been retrospectively restated to reflect the adoption
of IFRS 15. The results of fiscal 2018 as compared to fiscal 2017 are included under Item 5.A. in our Annual Report
on Form 20-F for fiscal year ended June 30, 2018, which were filed with the SEC on August 30, 2018. The adoption
of IFRS 15 did not have a material impact on the comparability of our results of operations for fiscal 2018 relative to
fiscal 2017 as presented in Item 5.A. of our Annual Report on Form 20-F for fiscal year ended June 30, 2018.
The following table sets forth our results of operations for the periods indicated:
Revenues:
Subscription
Maintenance
Perpetual license
Other
Total revenues
Cost of revenues (1) (2)
Gross profit
Operating expenses:
Research and development (1) (2)
Marketing and sales (1) (2)
General and administrative (1)
Total operating expenses
Operating loss
Other non-operating expense, net
Finance income
Finance costs
Loss before income tax expense
Income tax expense
Net loss
Net loss attributable to:
Owners of Atlassian Corporation Plc
Net loss per share attributable to ordinary shareholders:
Basic
Diluted
Weighted-average shares outstanding used to compute net loss per share attributable
to ordinary shareholders:
Basic
Diluted
Fiscal Year Ended June 30,
2019
2018
*As Adjusted
$
633,950 $
394,526
93,593
88,058
1,210,127
210,285
999,842
410,694
326,511
83,171
60,602
880,978
172,690
708,288
579,134
268,356
215,714
1,063,204
(63,362)
(535,453)
33,500
(40,241)
(605,556)
(32,065)
415,776
187,315
151,242
754,333
(46,045)
(15,157)
9,877
(6,806)
(58,131)
(55,301)
$ (637,621) $ (113,432)
$ (637,621) $ (113,432)
$
$
(2.67) $
(2.67) $
(0.49)
(0.49)
238,611
238,611
231,184
231,184
* Adjusted IFRS balances to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 of the notes to our consolidated financial statements for further
details.
(1)
Amounts include share-based payment expense, as follows:
Cost of revenues
Research and development
Marketing and sales
General and administrative
49
$
17,450 $
149,049
39,303
51,960
11,955
98,609
23,605
28,704
(2)
Amounts include amortization of acquired intangible assets, as follows:
Cost of revenues
Research and development
Marketing and sales
$
27,997 $
60
28,744
21,188
—
36,090
The following table sets forth our results of operations data for each of the periods indicated as a percentage
of total revenues:
Revenues:
Subscription
Maintenance
Perpetual license
Other
Total revenues
Cost of revenues
Gross profit
Operating expenses:
Research and development
Marketing and sales
General and administrative
Total operating expenses
Operating loss
Other non-operating expense, net
Finance income
Finance costs
Loss before income tax expense
Income tax expense
Net loss
Amounts include share-based payment expense, as follows:
Cost of revenues
Research and development
Marketing and sales
General and administrative
Amounts include amortization of acquired intangible assets, as follows:
Cost of revenues
Research and development
Marketing and sales
Fiscal Year Ended June 30,
2019
2018
*As Adjusted
52%
33
8
7
100
17
83
48
22
18
88
(5)
(44)
3
(4)
(50)
(3)
(53)
1%
12
3
4
2%
—%
2
47%
37
9
7
100
20
80
47
21
17
85
(5)
(2)
1
(1)
(7)
(6)
(13)
1%
11
3
3
2%
—%
4
* Adjusted IFRS balances to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 of the notes to our consolidated financial statements for
further details.
50
Fiscal Year Ended 2019 and 2018
Revenues
Subscription
Maintenance
Perpetual license
Other
Total revenues
Fiscal Year Ended June 30,
2019
2018
$ Change
% Change
(U.S. $ in thousands)
*As Adjusted
$ 633,950 $ 410,694 $223,256
54%
394,526
326,511
93,593
88,058
83,171
60,602
68,015
10,422
27,456
$1,210,127 $ 880,978 $329,149
21
13
45
37
* Adjusted IFRS balances to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 of the notes to our consolidated financial statements for
further details.
Total revenues increased $329.1 million, or 37%, in the fiscal year ended June 30, 2019 compared to the fiscal
year ended June 30, 2018. 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, 2019, over 90% was
attributable to sales to customer accounts existing on or before June 30, 2018. Our number of total customers increased
to 152,727 at June 30, 2019 from 125,796 at June 30, 2018.
Subscription revenues increased $223.3 million, or 54%, in the fiscal year ended June 30, 2019 compared to
the fiscal year ended June 30, 2018. 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 Data Center 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 $68.0 million, or 21%, in the fiscal year ended June 30, 2019 compared to
the fiscal year ended June 30, 2018. The increase in maintenance revenues was primarily attributable to growing
renewal of software maintenance contracts from our customers related to our perpetual license software offerings.
Perpetual license revenues increased $10.4 million, or 13%, in the fiscal year ended June 30, 2019 compared
to the fiscal year ended June 30, 2018. A substantial majority of the increase in perpetual license revenues was
attributable to additional licenses to existing customers.
Other revenues increased $27.5 million, or 45%, in the fiscal year ended June 30, 2019 compared to the fiscal
year ended June 30, 2018. The increase in other revenues was primarily attributable to an increase in revenue from
sales of third-party apps through our Atlassian Marketplace.
Total revenues by geography were as follows:
Americas
EMEA
Asia Pacific
Fiscal Year Ended June 30,
2019
2018
$ Change
% Change
(U.S. $ in thousands)
*As Adjusted
$
603,959 $
439,363 $ 164,596
37%
474,712
131,456
347,509
127,203
94,106
37,350
$ 1,210,127 $
880,978 $ 329,149
37
40
37
* Adjusted IFRS balances to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 of the notes to our consolidated financial statements for
further details.
51
Cost of Revenues
Cost of revenues
Gross margin
Fiscal Year Ended June 30,
2019
2018
$ Change
% Change
(U.S. $ in thousands)
*As Adjusted
$ 210,285
$ 172,690
$
37,595
22%
83%
80%
* Adjusted IFRS balances to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 of the notes to our consolidated financial statements for
further details.
Cost of revenues increased $37.6 million, or 22%, in the fiscal year ended June 30, 2019 compared to the fiscal
year ended June 30, 2018.
The overall increase was primarily due to an increase in compensation expense for employees and contractors
of $23.8 million (which includes an increase of $5.5 million in share-based payment expenses), an increase of $6.8
million in amortization of intangible assets mainly due to the acquisition of OpsGenie and AgileCraft and an increase
of $5.8 million in merchant fees.
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,
2019
2018
$ Change
% Change
(U.S. $ in thousands)
Research and development
$
579,134 $
415,776 $ 163,358
39%
Research and development expenses increased $163.4 million, or 39%, in the fiscal year ended June 30, 2019
compared to the fiscal year ended June 30, 2018.
The overall increase was primarily a result of an increase in compensation expense for employees and
contractors of $130.3 million (which includes an increase of $50.4 million in share-based payment expenses) and an
increase of $15.5 million in facilities and related overhead to support our 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 year 2019 and 2018.
Marketing and sales
Fiscal Year Ended June 30,
2019
2018
$ Change
% Change
(U.S. $ in thousands)
*As Adjusted
Marketing and sales
$ 268,356 $ 187,315 $
81,041
43%
* Adjusted IFRS balances to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 of the notes to our consolidated financial statements for
further details.
52
Marketing and sales expenses increased $81.0 million, or 43%, for the fiscal year ended June 30, 2019,
compared to the fiscal year ended June 30, 2018. Marketing and sales expense increased primarily due to an increase
in compensation expense for employees and contractors of $41.8 million (which includes an increase of $15.7 million
in share-based payment expenses) and an increase of $22.6 million in advertising costs.
Our marketing and sales headcount increased during the period as a result of hiring additional personnel to
expand our relationship 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,
2019
2018
$ Change
% Change
(U.S. $ in thousands)
General and administrative
$
215,714 $
151,242 $
64,472
43%
General and administrative expenses increased $64.5 million, or 43%, in the fiscal year ended June 30, 2019
compared to the fiscal year ended June 30, 2018. The increase was primarily due to an increase of $49.2 million in
compensation expense for employees and contractors (which includes an increase of $23.3 million in share-based
payment expenses) and an increase of $6.2 million in professional service fees primarily due to recent acquisition
activities.
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 expense, net
Fiscal Year Ended June 30,
2019
2018
$ Change
% Change
(U.S. $ in thousands)
Other non-operating expense, net
$ (535,453) $
(15,157) $ (520,296)
*
_______________________
Not meaningful
*
Other non-operating expense, net increased $520.3 million in the fiscal year ended June 30, 2019, compared
to the fiscal year ended June 30, 2018. The increase was primarily due to the net impact from the mark to fair value
of the embedded exchange feature of the Notes and the related capped call transactions of $521.5 million. Please
refer to Note 15 of the notes to our consolidated financial statements for more details of our Notes and capped call.
Income tax expense
Income tax expense
Effective tax rate
Fiscal Year Ended June 30,
2019
2018
$ Change
% Change
(U.S. $ in thousands)
*As Adjusted
$
(32,065) $
(55,301) $
23,236
(42)%
**
**
* Adjusted IFRS balances to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 of the notes to our consolidated financial statements for
further details.
**
Not meaningful
53
We reported a tax expense of $32.1 million on pretax loss of $605.6 million for the fiscal year ended June 30,
2019, as compared to a tax expense of $55.3 million on pretax loss of $58.1 million for the fiscal year ended June 30,
2018. Our effective tax rate substantially differed from the U.K. income tax rate of 19.0% primarily due to different tax
rates in foreign jurisdictions such as U.S. and Australia, the recognition of significant permanent differences during the
fiscal years ended 2019 and 2018 and non-cash charges to reduce the carrying value of our U.S. deferred tax assets
due to the reduced statutory rate in the U.S. Tax Cuts and Jobs Act as well as changes in our assessment of the
realizability of our U.S. and Australian deferred tax assets. In June 2019 and December 2017, as a result of our
assessment of the realizability of its Australian and U.S. deferred tax assets, we recorded non-cash charges to tax
expense of $54.7 million and $30.4 million, respectively to reduce the carrying value of these assets. Our assessment
of the realizability of our 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 non-deductible charges related to the Notes, nondeductible share-
based payment expense and research and development incentives.
See Note 8, “Income Tax,” to the notes to our consolidated financial statements for our reconciliation of loss
before income tax benefit (expense) to income tax benefit (expense). A change in our global operations could result
in changes to our effective tax rates, future cash flows and overall profitability of our operations.
B. Liquidity and Capital Resources
As of June 30, 2019, we had cash and cash equivalents totaling $1.3 billion, short-term investments totaling
$445.0 million and trade receivables totaling $82.5 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
2019, 2018 and 2017 were as follows:
Net cash provided by operating activities
Net cash used in by investing activities
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Fiscal Year Ended June 30,
2019
2018
2017
(U.S. $ in thousands)
$
466,342
$
311,456
199,381
(604,198)
(51,696)
(224,573)
(3,187)
906,789
(855)
(630)
9,438
465
Net (decrease) increase in cash and cash equivalents
$
(141,898) $ 1,165,919
$
(15,289)
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 timing
and extent of exchange of the Notes for payments of cash, the introduction of new software and services offerings,
enhancements to our existing software and services offerings and the continued market acceptance of our products.
Cash provided by operating activities has historically been affected by the amount of net income (loss) adjusted
for non-cash expense items such as non-coupon impact related to the Notes and capped calls, depreciation and
amortization 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, and changes in other
working capital accounts.
Accounts impacting working capital consist of trade receivables, prepaid expenses and other current assets,
current derivative assets, trade and other payables, provisions, current derivative liabilities, current portion of our Notes
and other current liabilities. 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 $466.3 million for the fiscal year ended June 30, 2019, as a result
of $605.6 million in loss before income tax expense adjusted by non-cash charges including the loss of marking to fair
54
value of the embedded exchange feature of the Notes and related capped call transactions of $533.9 million,
depreciation and amortization of $70.2 million, share-based payment expense of $257.8 million and debt discount and
issuance cost amortization of $33.9 million. The net increase of $169.0 million from our operating assets and liabilities
was primarily attributable to a $122.5 million increase in our deferred revenue as a result of increased sales of
subscriptions and renewals of maintenance contracts and a $75.6 million increase in trade and other payables,
provisions and other non-current liabilities, offset by a $30.2 million increase in trade receivables. Net cash provided
by operating activities was also impacted by tax refunds received, net of income tax paid of $7.0 million.
Net cash provided by operating activities was $311.5 million for the fiscal year ended June 30, 2018, as a result
of $58.1 million in loss before income tax expense adjusted by non-cash charges including the loss of marking to fair
value of the embedded exchange feature of the Notes and related capped call transactions of $12.4 million, depreciation
and amortization of $79.4 million, share-based payment expense of $162.9 million and debt discount and issuance
cost amortization of $7.5 million. The net increase of $113.1 million from our operating assets and liabilities was primarily
attributable to a $97.7 million increase in our deferred revenue as a result of increased sales of subscriptions and
renewals of maintenance contracts, a $43.5 million increase in trade and other payables, provisions and other non-
current liabilities, offset by a $19.6 million increase in trade receivables and a $8.4 million increase in prepaid expenses
and other current and non-current assets. Net cash provided by operating activities was also impacted by income
taxes paid, net of refunds, of $4.2 million.
Net cash used in investing activities during the fiscal year ended June 30, 2019 was $604.2 million. This was
primarily related to cash paid for business combinations, net of cash acquired, totaling $418.6 million, purchases of
investments totaling $648.0 million and purchases of property and equipment totaling $44.2 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 $485.0 million and proceeds from sales of investments of $20.5 million.
Net cash used in investing activities during the fiscal year ended June 30, 2018 was $51.7 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 million and proceeds from sales of investments
of $123.9 million.
Net cash used in financing activities for the fiscal year ended June 30, 2019 was $3.2 million and was primarily
related to coupon interest payments on the Notes of $6.3 million, offset by proceeds from exercises of employee share
options of $3.5 million.
Net cash provided by financing activities for the fiscal year ended June 30, 2018 was $906.8 million and was
primarily related to proceeds from the issuance of our Notes of $990.5 million offset by the purchase of the capped
calls for $87.7 million.
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 of the notes to our 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 recognition
Under IFRS 15, 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 services, which are generally capable
of being distinct and accounted for as separate performance obligations. Revenue is recognized net of allowances for
returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.
55
Revenues are recognized upon the application of the following steps:
1.
2.
3.
4.
5.
Identification of the contract or contracts with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when, or as, the performance obligation is satisfied.
The timing of revenue recognition may differ from the timing of invoicing our customers. We record a contract
asset when revenue is recognized prior to invoicing. Contract assets are netted against any related contract liabilities
in the statements of financial position. Our revenue arrangements include standard warranty provisions that our
arrangements will perform and operate in all material respects, 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 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.
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 recognized from contracts with customers is disaggregated into categories that depict how the
nature, 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 14, “Revenue”, of the notes to our consolidated financial statements.
Subscription revenues
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. 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 the license period. Subscription
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, with a majority being
one month. For cloud-based services, subscription revenue is recognized ratably as services are performed,
commencing with the date the service is made available to customers. For on-premises term-based licenses, we
recognize revenue upfront for the portion that relates to the delivery of the term license and the support and related
revenue is recognized ratably as the services are delivered over the term of the arrangement.
Maintenance revenues
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.
56
Perpetual license revenues
Perpetual license revenues represent fees earned from the license of software to customers for use on the
customer’s premises, other than Data Center products. Software is licensed on a perpetual basis. Perpetual license
revenues consist of the revenues recognized from sales of licenses to new customers and additional licenses to existing
customers. We recognize revenue on the license portion of perpetual license arrangements on the date of license
delivery in substantially all situations.
Other revenues
Other revenues include fees received for sales of third-party apps in the Atlassian Marketplace, technical account
management, and training services. Revenue from the sale of third-party apps via Atlassian Marketplace is recognized
at the date of product delivery given that all of our obligations have been met at that time and net of the vendor liability
portion, as we 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 training is recognized as delivered or
as the rights to receive training expire.
Business combinations
We include the results of operations of the businesses that we acquire beginning from the acquisition date. We
allocate the purchase price of our acquisitions to 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. The significant
assumptions used to estimate the fair value of the intangible 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.
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 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 cash generating unit (“CGU”). We operate as a single 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
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 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
Customer relationships
Acquired developed technology
2 - 12 years
2 - 10 years
2 - 10 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.
57
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 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
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 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 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.
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 our forecast of future
operating results. 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 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 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.
New accounting standards not yet adopted
In January 2016, the IASB issued IFRS 16, Leases (“IFRS 16”), 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 leases on its statement of financial position represented by right-of-use assets and lease liabilities.
The standard also contains enhanced disclosure requirements for lessees and is effective for us beginning on July 1,
2019. We will adopt the IFRS 16 standard using the modified retrospective approach and will not restate comparative
periods. We will elect the package of practical expedients permitted under the transition guidance, which allows us to
exclude initial direct costs from the measurement of the right-of-use asset for any leases that exist prior to adoption
of the new standard and adjust the right-of-use asset for any recognized onerous lease provisions. We will also elect
to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease
payments in the consolidated statements of operations on a straight-line basis over the lease term. Based on our
portfolio of leases as of June 30, 2019, approximately $286 million of right-of-use assets and lease liabilities will be
recognized on our balance sheet upon adoption, primarily relating to real estate.
58
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
two fiscal years, we invested $747.3 million in research and development activities, excluding share-based
compensation, translating to 35.7% of the revenue generated over the same period. During this period, we successfully
launched several new innovations including the introduction of three purpose-built versions of Jira, Jira Service Desk
and Data Center products for Jira, Jira Service Desk, Confluence, and Bitbucket.
As of June 30, 2019, over 50% of our employees were involved in research and development activities. Our
research and development organization is primarily distributed across six locations: Sydney, Australia, the San
Francisco Bay Area, California, New York, New York, Austin, Texas, Bengaluru, India, and Ankara, Turkey. In addition,
we conduct research and development activities at our partner location in Gdansk, Poland.
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, Server and 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—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, Russia, China,
Japan, Switzerland, Norway, Singapore, Israel, Korea, and Canada. We have also registered or filed for trademark
registration of product-related trade names and logos in the United States, Australia, the European Union, 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, 2019, we had 82 issued patents and have over 100 applications pending in the United States.
We also have a number of patent applications pending before the 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
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 or financial conditions.
59
E. Off-Balance Sheet Arrangements
We did not have any relationships with unconsolidated organizations or financial partnerships, such as structured
finance or special purpose entities that would have been established for 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.
60
F. Contractual Obligations and Commitments
Our principal contractual obligations primarily consist of obligations under our Notes, minimum lease payments
relating to operating leases for office space, and contractual commitments for hosting services. As of June 30, 2019,
the closing price exchange condition of the Notes has been met and the Notes and exchange derivative liability are
classified as current on our 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, 2019. Refer to Note 15, “Exchangeable
Senior Notes”, of the notes to our consolidated financial statements for more details on the Notes.
At June 30, 2019 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
$ 1,604,923 $ 1,604,923 $
(U.S. $ in thousands)
— $
330,848
323,350
38,790
106,684
81,035
75,000
— $
—
66,986
85,000
144,037
56,666
4,970
—
$ 2,264,091 $ 1,752,691 $ 158,711 $ 151,986 $ 200,703
2,294
2,676
—
Long-term debt
Operating lease obligations
Purchase obligations
Other obligations
Total
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, including their ages as of
June 30, 2019. Unless otherwise stated, the address for our non-employee directors and executive officers, other than
Messrs. Cannon-Brookes and Farquhar, is 350 Bush Street, Floor 13, San Francisco, California 94104. The address
for Messrs. Cannon-Brookes and Farquhar is Level 6, 341 George Street, Sydney, NSW, 2000, Australia.
Name
Executive Officers and Employee Directors
Michael Cannon-Brookes
Scott Farquhar
Jay Simons
James Beer
Tom Kennedy (1)
Helen Russell
Sri Viswanath
Age Position
39 Co-Founder, Co-Chief Executive Officer and Director
39 Co-Founder, Co-Chief Executive Officer and Director
46 President
58 Chief Financial Officer
45 Chief Legal Officer
51 Chief People Officer
44 Chief Technology Officer
Non-Employee Directors:
Shona L. Brown (2)
Heather Mirjahangir Fernandez (3)(4)
Sasan Goodarzi (2)
Jay Parikh (2)
Enrique Salem (3)(4)
Steven Sordello (3)
Richard P. Wong (4)
__________________________________
53 Director and Chair
43 Director
51 Director
46 Director
53 Director
50 Director
50 Director
61
(1) Mr. Kennedy will continue to serve as the Company’s Chief Legal Officer until his resignation, effective
November 1, 2019. Erika Fisher, our previous Head of Privacy, was appointed General Counsel of the Company
effective July 1, 2019.
(2) Member of the compensation and leadership development committee.
(3) Member of the audit committee.
(4) Member of the nominating and corporate governance committee.
Each executive officer serves at the discretion of our board of directors and holds office until their successor is
duly elected and qualified or until their 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 ForeScout
Technologies, Inc., an Internet of things (IoT) security company. Mr. Beer is also a member of the Federal Reserve
Bank of San Francisco's Economic Advisory Council.
Tom Kennedy has served as our Chief Legal Officer since October 2011. From July 2010 to July 2011,
Mr. Kennedy served as a Transition Executive at IBM Corporation, a global technology company. From July 2007 to
July 2010, Mr. Kennedy served as Senior Vice President and General Counsel of BigFix, Inc., a security software
company, which was acquired by IBM Corporation in 2010. From November 1999 to May 2007, Mr. Kennedy was an
attorney at Cooley LLP. Mr. Kennedy holds a Juris Doctor degree from the University of California, Los Angeles and
a Bachelor of Arts in political science from the University of California, Berkeley.
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
62
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.
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 2000
to 2003, Dr. Brown served as a partner at McKinsey & Company. Dr. Brown is currently a director of PepsiCo, Inc., a
food and beverage 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 of Business Administration from Stanford University
Graduate School of Business.
Sasan Goodarzi has served on our board of directors since April 2018. Mr. Goodarzi has served as Chief
Executive Officer and board member of Intuit, Inc., a financial software company, since January 2019. From May 2016
to January 2019, Mr. Goodarzi was Executive Vice President and General Manager of Intuit, Inc. Small Business Group.
From 2004 to 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 President of the Products 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 of Science degree in electrical engineering at the University of Central Florida
and a Master 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 Vice President of
Infrastructure Engineering at Facebook, Inc., a social media and social networking service company, since November
2009. 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.
63
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 network security
company, ForeScout Technologies, Inc., an Internet of things (IoT) security company, 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 Chief Financial Officer 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 is currently a member of the board of trustees of Santa Clara University.
Mr. Sordello holds a Master of 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 of 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, 2019, we paid an aggregate of $3,944,003 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; however,
Messrs. Cannon-Brookes and Farquhar each opted not to participate in our bonus for fiscal year 2019.
Directors’ Compensation
Employee Directors
For the fiscal year ended June 30, 2019, 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:
Fiscal Year Ended June 30, 2019 Employee Directors’ Compensation (U.S. $) (1)
Name
Michael Cannon-Brookes
Salary/Fees(2)
$
273,960 $
Scott Farquhar
$
273,960 $
Benefits
Annual
Bonus(3)
Long-Term
Incentive
Retirement
Benefits(4)
— $
— $
— $
— $
— $
— $
26,026 $
26,026 $
Total
299,986
299,986
(1) For the fiscal year ended June 30, 2019, 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 2019 of AUD 1.40 to USD 1.00.
(2) Messrs. Cannon-Brookes and Farquhar each opted for their salaries to be reduced to AUD $74,653.28, the
annualized statutory minimum wage in Australia, effective July 1, 2019.
64
(3) Messrs. Cannon-Brookes and Farquhar each opted not to participate in our bonus plan during the fiscal year ended
June 30, 2019.
(4) These amounts represent our contributions to each employee director's retirement fund, as required by applicable
jurisdictional law.
Non-Employee Directors
In connection with our IPO in December 2015, we implemented a formal policy (the “Director Compensation
Policy”) pursuant to which our non-employee directors are eligible to receive the following cash retainers and equity
awards (U.S. $):
Annual Retainer for Board of Directors Membership
Annual service on the board of directors
Additional retainer for annual service as chair of the board of directors
Additional Annual Retainer for Committee Chairs
Annual service as chair of the audit committee
Annual service as chair of the compensation and leadership development committee
Annual service as chair of the nominating and corporate governance committee
$ 50,000
$ 35,000
$ 20,000
$ 15,000
$ 10,000
Our Director Compensation Policy provides that, upon initial election to our board of directors, each non-
employee director will be granted RSUs having a fair market value of $250,000 (the "Initial Grant"), rounded up to the
nearest whole share, based on the closing trading price of a Class A ordinary share on the date of grant. In addition,
on the date of each annual meeting of shareholders, each non-employee director who will continue as a non-employee
director following such meeting will be granted an annual award of RSUs having a fair market value of $225,000 (the
"Annual Grant"), rounded up to the nearest whole share. If a new non-employee director joins our board of directors
on a date other than the date of our annual meeting of shareholders, such non-employee director will be granted a
pro-rata portion of the Annual Grant, based on the time between their appointment and our next annual meeting of
shareholders. The Initial Grant will vest according to the following schedule: 25% will vest on the one-year anniversary
of the grant date and the remaining 75% will vest in equal quarterly installments over the next three years, subject to
continued service as a director through the applicable vesting dates. The Annual Grant will vest in full on the earlier 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.
All awards granted to our non-employee directors are subject to 100% accelerated vesting upon the sale of the
company.
We reimburse all reasonable out-of-pocket expenses incurred by directors in attending meetings of the board
of directors or any committee thereof, or otherwise in connection with the exercise of their powers and responsibilities
as directors.
Each of our non-employee directors is required, within four years following their 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, 2019, 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, 2019:
65
Fiscal Year Ended June 30, 2019 Non-Employee Directors’ Compensation (U.S. $)
Name
$
Shona Brown (1)
Heather Mirjahangir Fernandez $
$
Sasan Goodarzi
Jay Parikh
Enrique Salem
Steven Sordello (2)
Richard P. Wong(3)
$
$
$
$
Salary/Fees
100,194
Benefits
—
50,000
50,278
50,000
50,000
70,000
60,000
—
—
—
—
—
—
Annual
Bonus
Long-Term
Incentives(4)
Retirement
Benefits
— $
— $
— $
— $
— $
— $
— $
225,015 (5)
225,015 (5)
225,015 (5)
225,015 (5)
225,015 (5)
225,015 (5)
225,015 (5)
— $
— $
— $
— $
— $
— $
— $
Total
325,209
275,015
275,293
275,015
275,015
295,015
285,015
(1) Dr. Brown was the chair of the compensation and leadership development committee and chair of the board of
directors.
(2) Mr. Sordello was the chair of the audit committee.
(3) Mr. Wong was the chair of the nominating and corporate governance committee.
(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) Each continuing non-employee member of our board of directors received an Annual Grant.
The board of directors has approved an updated Director Compensation Policy (the “Revised Director
Compensation Policy”) to be voted upon by our shareholders at the Company’s 2019 Annual General Meeting (“AGM”).
If adopted by our shareholders, the Revised Director Compensation Policy would increase the retainer for annual
service on our board of directors to $55,000, increase the additional retainer for annual service as non-executive chair
of our board of directors to $50,000, and increase the fair market value of the Annual Grant to $250,000. In addition,
pursuant to the Revised Director Compensation Policy, new directors joining our board of directors after the AGM would
not receive an Initial 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 U.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. All early-exercised shares for each of Messrs. Parikh and Salem have 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.
66
Executive Severance Plan
In December 2014, we adopted an executive severance plan (the "Executive Severance Plan"), under which
certain of our executive officers, excluding Messrs. Cannon-Brookes and Farquhar, may participate. The Executive
Severance Plan provides for a severance payment equal to six months of base salary upon a termination by us without
"cause" (as defined in the Executive Severance Plan) or a resignation by the executive officer for "good reason" (as
defined in the 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 compensation and 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, 2019 pursuant to
our annual executive bonus plan (the "FY19 Bonus Plan"). Messrs. Cannon-Brookes and Farquhar each opted not to
participate in the FY19 Bonus Plan.
The FY19 Bonus Plan provided our executive officers with an opportunity to earn an annual bonus payment
with a target equal to 60% of their base salary and a maximum payout equal to 112.5%, as applicable, of their base
salary, based on company performance (measured by revenue) and individual performance. In fiscal year 2019, payout
to our executive officers pursuant to the FY19 Bonus Plan was equal to 61% of each executive officer’s base salary.
Retirement Benefits
For the fiscal year ended June 30, 2019, we contributed approximately $52,052 into retirement funds on behalf
of our executive officers in Australia (as required by applicable jurisdictional law), and approximately $56,700 into a
tax qualified retirement plan (“the 401(k) Plan”) on behalf of our executive officers in the United States. 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 2019 of AUD $1.40 to U.S. $1.00.
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 401(k) Plan subject to applicable annual Code limits. The 401(k) Plan allows for matching contributions
to be made by us. Currently, we make a safe harbor match based on the participant's pre-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, 2019, we granted 290,056 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.
67
As of June 30, 2019, our executive officers held options to purchase 536,855 Class A ordinary shares, and
620,027 RSUs. As of June 30, 2019, our directors held 26,617 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 compensation and leadership
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 subplan 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 compensation and
leadership 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, 2019, 9,112,327 RSUs, 317,531 restricted Class
A ordinary shares, and 261,313 options to purchase Class A ordinary shares at a weighted-average exercise price of
approximately $0.76 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 compensation and leadership development committee. Our compensation
and leadership 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 compensation and leadership development committee in its discretion. Our compensation and
leadership development committee may also delegate to our Chief Executive Officers, the chair of our compensation
and 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 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 compensation and leadership 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 compensation and leadership development committee and may not exceed ten years
68
from the date of grant (five years in the case of an incentive share option held by a 10% owner). Our compensation
and leadership 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 nonqualified share
option.
Our compensation and leadership 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 compensation and leadership 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 compensation and leadership 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 compensation and leadership 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 compensation and leadership development committee shall determine. Our
compensation and leadership 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 compensation and leadership development committee may grant cash bonuses under the 2015 Plan to
participants, subject to the achievement of certain performance goals.
Our compensation and leadership 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 compensation and leadership 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.
69
Our board of directors may amend or discontinue the 2015 Plan and our compensation and leadership
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, 2019, options to purchase
269,921 Class A ordinary shares remained outstanding under the Share Option Plan at a weighted-average exercise
price of approximately $2.71 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, 2019, options to purchase 689,592 Class
A ordinary shares remained outstanding under the 2013 Plan at a weighted-average exercise price of approximately
$3.03 per share.
The 2013 Plan allowed for the grant of options to our employees, directors and consultants.
The 2013 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,
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
70
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 compensation and leadership 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, 2019, 99,284 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 compensation and leadership development committee. The administrator
has the authority to make all determinations for administration of the ESPP.
71
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 their eligible compensation during an offering period. Unless the participating employee
has previously withdrawn from the offering, their 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 compensation and leadership 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 their background, employment and affiliations, our board of directors has
determined that Dr. Brown, Messrs. Goodarzi, Parikh, Salem, Sordello and Wong, 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 NASDAQ 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, a compensation and leadership development
committee and a nominating and 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.
72
Audit Committee
Messrs. Salem and Sordello and Ms. Mirjahangir Fernandez, each of whom is a non-employee director,
comprise our audit committee. Mr. Sordello is the chair of our audit committee. Our board of directors has determined
that each of the members of our audit committee satisfies the requirements for independence and financial literacy
under the listing standards of NASDAQ 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 NASDAQ listing standards. Our audit 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 committee operates under a written charter that satisfies the applicable rules and regulations of the
SEC and the NASDAQ listing standards.
Compensation and Leadership Development Committee
Dr. Brown and Messrs. Goodarzi and Parikh, each of whom is a non-employee director, comprise our
compensation and leadership development committee. Dr. Brown is the chair of our compensation and leadership
development committee. Although the rules of NASDAQ do not require the compensation and leadership 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 compensation and leadership development committee
satisfies the requirements for independence under the NASDAQ listing standards and the applicable rules and
regulations of the SEC. Each member of our compensation and leadership development committee is also a non-
employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act. Our compensation and
leadership 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, and other material benefit programs; and
overseeing our overall compensation philosophy, compensation plans, and benefits programs.
73
Our compensation and leadership development committee operates under a written charter that satisfies the
applicable rules and regulations of the SEC and the NASDAQ listing standards.
Nominating and Corporate Governance Committee
Ms. Mirjahangir Fernandez and Messrs. Salem and Wong, each of whom is a non-employee director, comprise
our nominating and corporate governance committee. Mr. Wong is the chair of our nominating and corporate governance
committee. Our board of directors has determined that each member of our nominating and corporate governance
committee satisfies the requirements for independence under the NASDAQ listing standards. Our nominating and
corporate 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 nominating and corporate governance committee operates under a written charter that satisfies the
NASDAQ 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, 2019, 2018 and 2017, we had 3,616, 2,638, and 2,193 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.”
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,
2019 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 118,184,933 Class A ordinary shares and 124,722,559 Class B
ordinary shares outstanding as of June 30, 2019. 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
74
person that are currently exercisable or exercisable within 60 days of June 30, 2019 or issuable upon the vesting of
RSUs held by the person within 60 days of June 30, 2019.
However, except as described above, we did not deem such shares outstanding for the purpose of computing
the percentage ownership of any other person.
Name of Beneficial Owner
5% Shareholders:
Shares Beneficially Owned
Class A
Class B
Shares
%
Shares
%
% of Total
Voting
Power (1)
Entities affiliated with Artisan Partners Limited Partnership (2)
Entities affiliated with Baillie Gifford & Co. (3)
8,664,465
7,610,193
Entities affiliated with Capital Research Global Investors (4)
10,790,810
Entities affiliated with FMR LLC (5)
Entities affiliated with Sands Capital Management (6)
Entities affiliated with T. Rowe Price Associates, Inc. (7)
7,813,171
6,493,358
10,349,989
7.33%
6.44%
9.13%
6.61%
5.49%
8.76%
-
-
-
-
-
-
-
-
-
-
-
-
Directors and Executive Officers:
Michael Cannon-Brookes (8)
Scott Farquhar (9)
Jay Simons (10)
James Beer (11)
Tom Kennedy (12)
Sri Viswanath (13)
Helen Russell (14)
Shona Brown (15)
Heather Mirjahangir Fernandez (16)
Jay Parikh (17)
Enrique Salem (18)
Steven Sordello (19)
Sasan Goodarzi (20)
Richard P. Wong (21)
-
-
1,003,000
23,342
58,855
247,279
14,796
25,350
14,025
15,000
125,807
39,364
3,564
141,210
-
-
*
*
*
*
*
*
*
*
*
*
*
*
61,742,279
61,742,279
333,000
49.5%
49.5%
*
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
*
*
*
*
*
*
45.22%
45.22%
*
*
*
*
*
*
*
*
*
*
*
*
All directors and executive officers as a group (14)
persons) (22)
_________
*Represents beneficial ownership of less than 1%
1,711,592
1.44% 123,817,558
99.27%
90.77%
(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
February 7, 2019. 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 8,664,465 shares, and shared voting power with respect to 8,060,252 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 24, 2019. Of the shares of Class A ordinary shares beneficially owned, Baillie Gifford reported that it has sole
dispositive power with respect to 7,610,193 shares, and sole voting power with respect to 3,501,377 shares. Baillie
Gifford listed their address as Calton Square, 1 Greenside Row, Edinburgh EH1 3AN, Scotland, UK.
75
(4) Based on information reported by Capital Research Global Investors ("Capital Research"), a division of Capital
Research and Management Company, on Schedule 13G filed with the SEC on February 14, 2019. Of the shares of
Class A ordinary shares beneficially owned, Capital Research reported that it has sole dispositive power with respect
to 10,790,810 shares, and sole voting power with respect to 10,790,810 shares. Capital Research listed their address
as 333 South Hope Street, Los Angeles, CA 90071.
(5) Based on information reported by FMR LLC. ("FMR") and Abigail P. Johnson on Schedule 13G filed with the SEC
on February 13, 2019. Of the shares of Class A ordinary shares beneficially owned, FMR reported that it has sole
dispositive power with respect to 7,813,171 shares, and sole voting power with respect to 1,242,530 shares. Of the
shares of Class A ordinary shares beneficially owned, Abigail P. Johnson reported that it has sole dispositive power
with respect to 7,813,171 shares. Entities affiliated with FMR listed their address as 245 Summer Street, Boston,
Massachusetts 02210.
(6) Based on information reported by Sands Capital Management, LLC (“Sands”) on Schedule 13G filed with the SEC
on January 10, 2019. Of the shares of Class A ordinary shares beneficially owned, Sands reported that it has sole
dispositive power with respect to 6,493,358 shares, and sole voting power with respect to 4,624,708 shares. Sands
listed their address as 1000 Wilson Blvd., Suite 3000, Arlington, VA 22209.
(7) Based on information reported by T. Rowe Price Associates, Inc. (“T. Rowe Price”) on Schedule 13G filed with the
SEC on February 14, 2019. Of the shares of Class A ordinary shares beneficially owned, T. Rowe Price reported that
it has sole dispositive power with respect to 10,349,989 shares, and sole voting power with respect to 3,198,485
shares. Entities affiliated with T. Rowe Price listed their address as 100 E. Pratt Street, Baltimore, Maryland 21202.
(8) Consists of (i) 7,293,789 Class B ordinary shares held of record by Mr. Cannon-Brookes and (ii) 54,448,490 Class
B ordinary shares held of record by Grokco Pty Ltd as trustee for the Grok Trust.
(9) Consists of (i) 7,293,789 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.
(10) Consists of (i) 245,720 Class B ordinary shares held of record by Mr. Simons, (ii) 87,280 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) 500,000 Class A ordinary shares held of record by Mr. Simons, and (iv) 503,000 Class A ordinary shares
subject to outstanding options that are exercisable within 60 days of June 30, 2019.
(11) Consists of (i) 5,428 Class A ordinary shares held of record by Mr. Beer as trustee of the James A & Lael L Beer
Trust and (ii) 17,914 RSUs that vest within 60 days of June 30, 2019.
(12) Consists of (i) 25,000 Class A ordinary shares held of record by Mr. Kennedy and (ii) 33,855 Class A ordinary
shares subject to outstanding options that are exercisable within 60 days of June 30, 2019.
(13) Consists of 247,279 Class A ordinary shares held of record by Mr. Viswanath.
(14) Consists of (i) 2,746 Class A ordinary shares held of record by Ms. Russell and (ii) 12,050 RSUs that vest within
60 days of June 30, 2019.
(15) Consists of (i) 24,480 Class A ordinary shares held of record by Dr. Brown and (ii) 870 RSUs that vest within 60
days of June 30, 2019.
(16) Consists of (i) 13,155 Class A ordinary shares held of record by Ms. Mirjahangir Fernandez and (ii) 870 RSUs
that vest within 60 days of June 30, 2019.
(17) Consists of 15,000 Class A ordinary shares held of record by Mr. Parikh
(18) Consists of 125,807 Class A ordinary shares held of record by Mr. Salem.
(19) Consists of (i) 38,494 Class A ordinary shares held of record by Mr. Sordello and (ii) 870 RSUs that vest within
60 days of June 30, 2019.
76
(20) Consists of (i) 3,312 Class A ordinary shares held of record by Mr. Goodarzi and (ii) 252 RSUs that vest within
60 days of June 30, 2019.
(21) Consists of 141,210 Class A ordinary shares held of record by Mr. Wong.
(22) Consists of (i) 1,141,911 Class A ordinary shares, (ii) 123,817,558 Class B ordinary shares, (iii) options to purchase
536,855 Class A ordinary shares that are exercisable within 60 days of June 30, 2019 and (iv) 32,826 RSUs that vest
within 60 days of June 30, 2019.
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, 2019, approximately 0.1% of our outstanding shares were Class B shares held in the United
States by one record holder. As of June 30, 2019, approximately 48.28% of our outstanding shares were Class A
shares held in the United States by one record holder (Cede and Company).
As of June 30, 2019, entities affiliated with Janus Henderson Group PLC and entities affiliated with Wellington
Management Group LLC each no longer hold greater than 5% of our outstanding ordinary shares.
B. Related Party Transactions
Other than as described below, during the fiscal year ended June 30, 2019, 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, 2019, 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.
77
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 Messrs. Cannon-Brookes and Farquhar. As of June 30,
2019, certain holders of our Class A ordinary shares and our Class B ordinary shares, including our founders, 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 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, Room to Read, 40K Foundation, Raspberry Pi
Foundation, and Ruangguru.
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 $3.6 million to the Atlassian Foundation in fiscal year
2019. 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 year 2019, we purchased approximately $2.7 million of services from LinkedIn Corporation (“LinkedIn”),
for recruiting purposes, in the ordinary course of business. Mr. Sordello, one of our board members, is Chief Financial
Officer of LinkedIn. The transactions between Atlassian and LinkedIn were not negotiated by Mr. Sordello. Mr. Sordello
does not have a material interest in the relationship described above.
Splunk
In fiscal year 2019, we purchased $2.3 million of services from Splunk Inc. (“Splunk”) for systems monitoring
purposes, in the ordinary course of business. Sri Viswanath, our Chief Technology Officer joined Splunk as a director
of the board in March 2019. 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.
Intuit
In fiscal year 2019, Intuit purchased approximately $0.4 million of products from us, in the ordinary course of
business. Mr. Goodarzi, one of our board members, is Chief Executive Officer and a director of Intuit. The transactions
between Atlassian and Intuit were not negotiated by Mr. Goodarzi and were 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 do not represent a material interest to such directors, executive
officers or significant shareholders.
Policies and Procedures for Related Party Transactions
The audit 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 committee charter provides that
the audit committee shall review and approve or disapprove any related party transactions.
78
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. From time to time we may be subject to legal proceedings
and claims arising in the ordinary course of business.
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 and will depend on then existing conditions, including our financial condition, operating results,
contractual restrictions, capital requirements, 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
The principal market in which our Class A ordinary shares are traded is on NASDAQ under the symbol “TEAM.”
B. Plan of Distribution
Not applicable.
C. Markets
Our Class A ordinary shares are quoted on NASDAQ under the symbol “TEAM.”
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
79
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 Exhibit 4.4 (Description of Share Capital) filed as an exhibit to this annual report 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
as 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 United Kingdom. on
a general basis.
E. Taxation
Material U.K. Tax Considerations
The comments set out below are based on current U.K. tax law as applied in England and 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-U.K. 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 benefitting 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. tax law. In
particular:
Taxation of Dividends
We will not be required to withhold amounts on account of U.K. tax at source when paying a dividend.
Individuals
U.K. resident and domiciled holders do not have to pay tax on the first £2,000 of dividend income received in
the 2019/2020 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.
80
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. 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 U.K. 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-U.K. 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 their 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 their individual circumstances, be chargeable to U.K. capital gains tax on chargeable gains arising from
a disposal of their 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
U.K. 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 U.K. 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.
81
(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
U.K. 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 amount
or 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, 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.
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. 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 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;
82
•
•
•
•
•
•
•
•
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” 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;
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 Code, existing, proposed and temporary U.S. Treasury Regulations promulgated
thereunder and administrative and judicial interpretations thereof. 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 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. 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 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 U.S. person.
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 applicable 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
83
ordinary shares will 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 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 NASDAQ 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.
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
84
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.”
We do not believe that we are a PFIC, and we do not expect to become a PFIC. 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.
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
85
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 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: 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, British pound, Euro, Japanese
yen, Philippine peso, Indian rupee and 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 exchange
policy is reviewed annually by the our audit committee and requires us to monitor our foreign exchange exposure on
a regular basis.
The 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 contract
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.
86
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, 2019 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 $22.5 million. A hypothetical 10% weakening of the U.S. dollar against other currencies
would increase the fair value of our foreign currency contracts by $22.5 million.
A sensitivity analysis performed on our hedging portfolio as of June 30, 2018 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 $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.
Interest Rate Risk
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, 2019,
we had cash and cash equivalents totaling $1.3 billion and short-term investments totaling $445.0 million.
A sensitivity analysis performed on our portfolio indicated that a hypothetical 100 basis point increase in interest
rates at June 30, 2019 and 2018 would result in a $2.3 million and $1.7 million decrease in the market value of our
investments, 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 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.
A sensitivity analysis performed on the Notes embedded exchange derivative and capped call transactions
indicates that a hypothetical 10% increase in our share price would increase the fair value of the Notes embedded
exchange derivative by $138.6 million and increase the fair value of the capped call transactions by $16.2 million. A
hypothetical 10% decrease in our share price would decrease the fair value of the Notes embedded exchange derivative
by $134.6 million and decrease the fair value of the capped call transactions by $18.2 million.
The Group is also exposed to equity price risk in connection with our equity investments. Our marketable and
non-marketable equity investments are susceptible to market price risk from uncertainties about future values of the
investment securities. As of June 30, 2019, our marketable equity investments are fair valued at $58.9 million. A
hypothetical 10% increase in the respective share prices of our equity investments would increase the fair value of
our marketable equity investments by $5.9 million.
See Note 5, “Financial Assets and Liabilities,” of 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.
87
Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
PART II
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, 2019, 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, 2019. 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, 2019
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. 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 NASDAQ listing standards.
88
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, 2019 and 2018 were as follows:
Audit fees (1)
Audit-related fees (2)
Tax fees (3)
Other fees (4)
Total
2019
2018
(U.S. $ in thousands)
$
2,980 $
648
220
8
3,469
447
238
3
$
3,856 $
4,157
(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 and comfort
letter services in relation to our exchangeable senior notes.
(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 and due diligence on acquisitions.
(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.
Our audit 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 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
Not applicable.
Item 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
89
Item 16G. CORPORATE GOVERNANCE
We are a “foreign private issuer” under the securities laws of the United States and the rules of 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's listing standards. Under NASDAQ's rules, a foreign private issuer is subject to less stringent
corporate governance requirements. Subject to certain exceptions, the rules of NASDAQ permit a foreign private issuer
to follow its home country practice in lieu of the listing requirements of NASDAQ. We intend to follow home country
practices in lieu of the listing requirements of NASDAQ with regard to voting by a show of hands and quorum
requirements. Otherwise, we intend to follow the requirements of NASDAQ 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 Section 16 of the Exchange Act. They will, however,
be subject to the obligations to report changes in share ownership under Section 13 of the Exchange Act and related
SEC rules to the extent appropriate.
Item 16H. MINE SAFETY DISCLOSURE
Not applicable.
Item 17. FINANCIAL STATEMENTS
See “Item 18. Financial Statements.”
Item 18. FINANCIAL STATEMENTS
PART III
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, 2019, 2018 and 2017
• Consolidated Statements of Comprehensive Loss for the fiscal years ended June 30, 2019, 2018 and 2017
• Consolidated Statements of Financial Position as of June 30, 2019 and 2018
• Consolidated Statements of Changes in Equity for the fiscal years ended June 30, 2019, 2018 and 2017
• Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2019, 2018 and 2017
• Notes to the Consolidated Financial Statements
90
Item 19. EXHIBITS
Exhibit
Number
Description
3.1 (1)
Amended and Restated Articles of Association of the company.
4.1 (2)
Form of certificate evidencing Class A ordinary shares.
4.2 (3)
Registration Agreement, dated July 2, 2010, by and among the company and certain of its
shareholders.
4.3 (4)
Indenture dated April 27, 2018 between the company and U.S. Bank National Association.
4.4
Description of share capital
10.1 (4)
Capped call confirmation.
10.1 (5)
Lease, dated October 25, 2017, by and between Atlassian Inc. and MV Campus Owner, LLC.
10.1 (6)
Lease, dated November 22, 2017, by and between Atlassian Inc. and 350 Bush Street Owner,
LLC.
10.1 (3) #
Form of Deed of Indemnity entered into between the company and its directors.
10.2 (3) #
Form of Indemnification Agreement entered into between the company and its officers.
10.3 (3) #
Atlassian UK Employee Share Option Plan and forms of agreements thereunder.
10.4 (3) #
2013 U.S. Share Option Plan and forms of agreements thereunder.
10.5 (3) #
2014 Restricted Share Unit Plan and forms of agreements thereunder.
10.6 (3) #
2015 Share Incentive Plan and forms of agreements thereunder.
10.7 (3) #
2015 Employee Share Purchase Plan.
10.8 (3) # Ordinary Shares Option Agreement.
10.9 (3) # Deed of Amendment to Class B Ordinary Shares Option Agreement.
10.10 (3) # Class B Ordinary Shares Exercise Agreement.
10.11 (3) #
Executive Cash Incentive Bonus Plan.
10.12 (3) #
Executive Severance Plan and form of Executive Severance Agreement entered into between
the Registrant and its executive officers.
10.13 (3) # Non-Employee Director Compensation Policy.
10.14 (3) #
Form of Director Agreement.
10.15 (3)
Lease, dated March 25, 2015, by and between Atlassian Pty Ltd and Council of the City of
Sydney.
10.16 (3)
Lease, dated December 22, 2011, by and between Atlassian Pty Ltd and 341 George St Pty Ltd.
10.17 (3)
Lease, dated July 9, 2015, by and between Atlassian Pty Ltd and 341 George St Pty Ltd.
10.18 (3)
Lease, dated June 26, 2011, by and between Atlassian, Inc. and Redbird Investment
Group, LLC.
12.1
12.2
12.3
13.1
Certificate of Co-Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)
and 15d-14(a) as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
Certificate of Co-Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)
and 15d-14(a) as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
Certificate of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and
15d-14(a) as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
Certificate of Co-Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to
§906 of the Sarbanes-Oxley Act of 2002.
91
Exhibit
Number
13.2
13.3
21.1
23.1
Description
Certificate of Co-Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to
§906 of the Sarbanes-Oxley Act of 2002.
Certificate of Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906
of the Sarbanes-Oxley Act of 2002.
Subsidiaries of the Registrant.
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
____________________________
(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 April 30, 2018.
(5)
Incorporated by reference to the company’s report on Form 6-K filed on October 30, 2017.
(6)
Incorporated by reference to the company’s report on Form 6-K filed on November 27, 2017.
#
Indicates management contract or compensatory plan, contract or agreement.
92
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 report on its behalf.
SIGNATURES
ATLASSIAN CORPORATION PLC
/s/ MICHAEL CANNON-BROOKES
Name:
Title:
Michael Cannon-Brookes
Co-Chief Executive Officer
/s/ SCOTT FARQUHAR
Name:
Title:
Scott Farquhar
Co-Chief Executive Officer
Date: August 23, 2019
By:
By:
93
ATLASSIAN CORPORATION PLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Financial Position
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
F-2
F-7
F-8
F-9
F-10
F-11
F-12
F-1
REPORT 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) as of June 30, 2019 and 2018, the related consolidated statements of operations, comprehensive loss,
changes in equity and cash flows for each of the three years in the period ended June 30, 2019, and the related notes
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company at June 30, 2019 and 2018, and the results
of its operations and its cash flows for each of the three years in the period ended June 30, 2019, 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, 2019, 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 23, 2019 expressed an unqualified opinion
thereon.
Adoption of New Accounting Standard
As discussed in Note 2 to the consolidated financial statements, the Company changed its method for recognizing
revenue due to the adoption of IFRS 15, Revenue from Contracts with Customers, and the amendments effective
July 1, 2016 under the full retrospective method. See below for discussion of our related critical audit matter.
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 Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of critical audit matters 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 matters
below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
F-2
Description of the Matter
How We Addressed the
Matter in Our Audit
Revenue recognition
As described in Note 2 to the consolidated financial statements, the Company
adopted IFRS 15, Revenue from Contracts with Customers, during 2019. The
Company primarily derives revenues from subscription-based arrangements for cloud-
based services, as well as software license agreements 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, or promises to transfer
multiple products and services to a customer, including both software products and
services. To account for promised goods and services in accordance with IFRS 15,
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. 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 effect of IFRS 15 on the Company’s various product
offerings as part of the Company’s implementation using the full retrospective method
of adoption, as well as ongoing accounting. This involved assessing the terms and
conditions of new or amended contracts with customers or new product or service
offerings, and the determination of the relative standalone selling prices for each
distinct performance obligation and the timing of recognition of revenue.
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, including assessing the
appropriateness of the methodology applied, testing mathematical accuracy of the
underlying data and calculations, and testing selections to corroborate the data
underlying the Company’s calculations. We also evaluated whether the Company
appropriately applied its revenue recognition policy to the arrangement to determine
whether revenue was recognized in the correct amounts and periods. Finally, we
assessed the appropriateness of the related disclosures in the consolidated financial
statements.
F-3
Description of the Matter
Accounting for acquisitions
As described in Note 3 and Note 12 to the consolidated financial statements, the Company
completed four acquisitions during 2019 for consideration of $423.9 million. The most
significant of these were (1) the acquisition of all outstanding equity of OpsGenie Inc. for
consideration of $259.5 million and (2) the acquisition of all outstanding equity of
AgileCraft, LLC for consideration of $155.7 million.
Auditing the Company's accounting for its acquisitions of OpsGenie and AgileCraft
was complex due to the significant estimation required by management in determining
the fair value of the technology-related intangible assets and customer relationship
intangible assets of $70.2 million and $65.5 million, respectively (collectively, “the
intangible assets”). The significant estimation was 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. The Company used the discounted cash flow
method of the income approach to measure the fair value of these intangible assets.
The significant assumptions used to estimate the fair value of the intangible assets
included revenue growth rates, technology migration curves, customer attrition rates
and discount rates. These significant assumptions are forward-looking and could be
affected by future economic and market conditions.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating
effectiveness of the controls over the Company’s accounting for acquisitions. For
example, we tested controls over the valuation of intangible assets, including the
valuation models and underlying assumptions used to develop such estimates.
For each of the Company's acquisitions, we read the purchase agreements, evaluated
the significant assumptions and methods used in developing the fair value estimates,
and tested the recognition of (1) the tangible assets acquired and liabilities assumed
at fair value; (2) the identifiable intangible assets acquired at fair value; and (3)
goodwill measured as a residual.
To test the estimated fair value of the intangible assets, we performed audit
procedures that included, among others, evaluating the Company's use of the income
approach (the multi-period excess earnings method and relief from royalty method)
and testing the significant assumptions used in the model, as described above,
including the completeness and accuracy of the underlying data. For example, we
compared the significant assumptions to current industry, market and economic
trends, to the assumptions used to value similar assets in other acquisitions, to the
historical results of the acquired business and to other guideline companies within the
same industry. We involved our valuation specialists to assist with our evaluation of
the methodology used by the Company and significant assumptions included in the
fair value estimates.
F-4
Description of the Matter
Realizability of the deferred tax assets
As described in Note 3 and Note 8 to the consolidated financial statements, at June 30,
2019, the Company has recognized gross deferred tax assets on deductible temporary
differences of $17.1 million. 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 all or part
of the deferred tax asset will be utilized, based on positive and negative evidence,
including that sufficient future taxable income will be available.
Management’s analysis of the realizability of its deferred tax assets (including the
recognition, measurement, and disclosure of deferred tax assets) was significant to
our audit because the amounts are material to the financial statements. Auditing
management’s assessment is complex and involves significant judgment as the
Company’s ability to generate taxable income sufficient to utilize the asset may be
impacted by various economic and industry conditions.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating
effectiveness of controls over management’s projections of future taxable income and
the future reversal of existing taxable temporary differences.
Among other audit procedures performed, we evaluated the positive and negative
evidence in assessing whether the deferred tax assets are more likely than not to be
utilized, including evaluating the trends of both the historical financial results and the
projected sources of taxable income on both a world-wide basis and on a
geographical jurisdiction basis, as well as other qualitative factors. We tested the
completeness and accuracy of the underlying data. We further evaluated the
application of local jurisdiction tax law in the Company’s projections of future taxable
income. We also tested the Company’s scheduling of the reversal of existing taxable
temporary differences.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2012.
San Francisco, California
August 23, 2019
F-5
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Atlassian Corporation Plc
Opinion on Internal Control over Financial Reporting
We have audited Atlassian Corporation Plc’s internal control over financial reporting as of June 30, 2019, 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, 2019, 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 2019 consolidated financial statements, and our report dated August 23, 2019 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’s Report on internal controls 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 23, 2019
F-6
ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. $ and shares in thousands, except per share data)
Revenues:
Subscription
Maintenance
Perpetual license
Other
Total revenues
Cost of revenues (1) (2)
Gross profit
Operating expenses:
Research and development (1) (2)
Marketing and sales (1) (2)
General and administrative (1)
Total operating expenses
Operating loss
Other non-operating expense, net
Finance income
Finance costs
Loss before income tax (expense) benefit
Income tax (expense) benefit
Net loss
Net loss attributable to:
Owners of Atlassian Corporation Plc
Net loss per share attributable to ordinary shareholders:
Basic
Diluted
Weighted-average shares outstanding used to compute net
loss per share attributable to ordinary shareholders:
Basic
Diluted
Fiscal Year Ended June 30,
Notes
2019
2018
2017
*As Adjusted
*As Adjusted
$
633,950 $
394,526
93,593
88,058
1,210,127
210,285
999,842
410,694 $
326,511
83,171
60,602
880,978
172,690
708,288
579,134
268,356
215,714
1,063,204
(63,362)
(535,453)
33,500
(40,241)
(605,556)
(32,065)
415,776
187,315
151,242
754,333
(46,045)
(15,157)
9,877
(6,806)
(58,131)
(55,301)
$ (637,621) $ (113,432) $
249,823
264,453
74,058
38,350
626,684
119,161
507,523
310,169
134,404
118,784
563,357
(55,834)
(1,342)
4,851
(75)
(52,400)
14,951
(37,449)
$ (637,621) $ (113,432) $
(37,449)
$
$
(2.67) $
(2.67) $
(0.49) $
(0.49) $
(0.17)
(0.17)
238,611
238,611
231,184
231,184
222,224
222,224
14
6
8
17
17
17
17
* As adjusted to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 for further details.
(1)
Amounts include share-based payment expense, as follows:
Cost of revenues
Research and development
Marketing and sales
General and administrative
$
17,450 $
149,049
39,303
51,960
11,955 $
98,609
23,605
28,704
6,856
79,384
17,395
33,813
(2)
Amounts include amortization of acquired intangible assets, as follows:
Cost of revenues
Research and development
Marketing and sales
$
27,997 $
60
28,744
21,188 $
—
36,090
14,587
—
15,269
The above consolidated statements of operations should be read in conjunction with the accompanying notes.
F-7
ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(U.S. $ in thousands)
Net loss
Fiscal Year Ended June 30,
Notes
2019
2018
2017
*As Adjusted
*As Adjusted
$ (637,621) $ (113,432) $
(37,449)
Items that will not be reclassified to profit or loss in subsequent
periods:
Net change in unrealized gain on investments classified at
fair value through other comprehensive income
Income tax effect
Other comprehensive income for items that will not be
reclassified to profit or loss, net of tax
Items that will be reclassified to profit or loss in subsequent
periods:
Foreign currency translation adjustment
Net change in unrealized gain (loss) on investments classified
at fair value through other comprehensive income (loss)
Net gain (loss) on derivatives designated as hedging
instruments
Income tax effect
Other comprehensive income (loss) after tax that will be
reclassified to profit or loss in subsequent periods
5
5
5
Other comprehensive income (loss)
Total comprehensive loss, net of tax
Total comprehensive loss attributable to:
Owners of Atlassian Corporation Plc
38,662
(8,813)
29,849
(35)
1,340
1,539
(553)
2,291
32,140
—
—
—
118
(586)
(8,341)
2,502
(6,307)
(6,307)
—
—
—
140
(945)
3,164
(812)
1,547
1,547
$ (605,481) $ (119,739) $
(35,902)
$ (605,481) $ (119,739) $
(35,902)
* As adjusted to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 for further details.
The above consolidated statements of comprehensive loss should be read in conjunction with the accompanying notes.
F-8
ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(U.S. $ in thousands)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Trade receivables
Tax receivables
Derivative assets
Prepaid expenses and other current assets
Total current assets
Non-current assets:
Property and equipment, net
Deferred tax assets
Goodwill
Intangible assets, net
Derivative assets
Other non-current assets
Total non-current assets
Total assets
Liabilities
Current liabilities:
Trade and other payables
Current tax liabilities
Provisions
Deferred revenue
Derivative liabilities
Current portion of exchangeable senior notes, net
Total current liabilities
Non-current liabilities:
Deferred tax liabilities
Provisions
Deferred revenue
Exchangeable senior notes, net
Derivative liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Equity
Share capital
Share premium
Other capital reserves
Other components of equity
Accumulated deficit
Total equity
Total liabilities and equity
Notes
2019
2018
June 30,
*As Adjusted
13
5
9
5,15
13
10
8
11
11
5,15
13
13
13
14
5,15
15
8
13
14
15
5,15
13
16
16
16
16
$
1,268,441
$
445,046
82,525
707
215,156
30,236
1,410,339
323,134
46,141
12,622
60
29,735
2,042,111
1,822,031
81,459
17,084
608,907
150,975
77
76,645
935,147
2,977,258
$
159,487
$
11,703
8,983
440,954
855,005
853,576
2,329,708
13,872
6,082
27,866
—
74
34,189
82,083
2,411,791
$
24,199
$
458,166
816,660
32,079
(765,637)
565,467
2,977,258
$
$
51,656
59,220
311,943
63,577
99,935
13,466
599,797
2,421,828
107,892
172
7,215
324,394
5,213
—
444,886
12,160
4,363
18,477
819,637
202,757
12,228
1,069,622
1,514,508
23,531
454,766
557,100
(61)
(128,016)
907,320
2,421,828
$
$
$
$
$
$
* As adjusted to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 for further details.
The above consolidated statements of financial position should be read in conjunction with the accompanying notes.
F-9
ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(U.S. $ in thousands)
Notes
Share
capital
Share
premium
Other capital
reserves
Other components of equity
Cash flow
hedge
reserve
Foreign
currency
translation
reserve
Investments at
fair value
through other
comprehensive
income reserve
Retained
earnings
(accumulated
deficit)
Total equity
*As Adjusted
Balance as of June 30, 2016
Net loss
Other comprehensive income (loss), net of tax
Total comprehensive income (loss), net of tax
Issuance of ordinary shares upon exercise of share options
Vesting of early exercised shares
Issuance of ordinary shares for settlement of restricted share
units (RSUs)
Share-based payment
Replacement equity awards related to business combination
Tax benefit from share plans
Balance as of June 30, 2017
Net loss
Other comprehensive income (loss), net of tax
Total comprehensive income (loss), net of tax
Issuance of ordinary shares upon exercise of share options
Vesting of early exercised shares
Issuance of ordinary shares for settlement of restricted share
units (RSUs)
Share-based payment
Tax benefit from share plans
Reduction in deferred tax assets
Balance as of June 30, 2018
Net loss
Other comprehensive income (loss), net of tax
Total comprehensive income (loss), net of tax
Issuance of ordinary shares upon exercise of share options
Vesting of early exercised shares
Issuance of ordinary shares for settlement of restricted share
units (RSUs)
Share-based payment
Replacement equity awards related to business combination
Tax benefit from share plans
Balance as of June 30, 2019
16
16
16
7
12
8
16
16
16
7
8
16
16
16
7
12
$
$ 21,620
—
—
—
640
15
$ 441,734
—
—
—
8,858
367
—
—
—
—
9,225
450,959
—
—
—
3,761
46
—
—
—
—
3,807
454,766
—
—
—
3,392
8
451
—
—
—
1,106
22,726
—
—
—
243
37
525
—
—
—
805
23,531
—
—
—
150
51
467
244,335
—
—
—
—
—
(451)
137,458
20,193
35,811
193,011
437,346
—
—
—
—
—
(525)
162,873
140
(42,734)
119,754
557,100
—
—
—
—
—
$
— $
—
2,215
2,215
—
—
—
—
—
—
—
2,215
—
(5,839)
(5,839)
—
—
—
—
—
—
—
(3,624)
—
1,077
1,077
—
—
—
(467)
—
—
—
—
668
$ 24,199
—
—
—
3,400
$ 458,166
$
257,777
1,768
482
259,560
816,660
$
—
—
—
—
(2,547) $
4,149
—
140
140
—
—
—
—
—
—
—
4,289
—
118
118
—
—
—
—
—
—
—
4,407
—
(35)
(35)
—
—
—
—
—
—
—
4,372
$
$
$
550
—
(808)
(808)
—
—
—
—
—
—
—
(258)
—
(586)
(586)
—
—
—
—
—
—
—
(844)
—
31,098
31,098
—
—
—
—
—
—
—
30,254
$
$
22,865
(37,449)
—
(37,449)
—
—
—
—
—
—
—
(14,584)
(113,432)
—
(113,432)
—
—
—
—
—
—
—
(128,016)
(637,621)
—
(637,621)
—
—
—
—
—
—
—
(765,637)
735,253
(37,449)
1,547
(35,902)
9,498
382
—
137,458
20,193
35,811
203,342
902,693
(113,432)
(6,307)
(119,739)
4,004
83
—
162,873
140
(42,734)
124,366
907,320
(637,621)
32,140
(605,481)
3,542
59
—
257,777
1,768
482
263,628
565,467
*As adjusted to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 for further details.
The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
F-10
ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. $ in thousands)
Operating activities
Loss before income tax (expense) benefit
Adjustments to reconcile loss before income tax expense to net cash provided by
operating activities:
Depreciation and amortization
Gain on sale of investments and other assets
Net unrealized foreign currency (gain) loss
Share-based payment expense
Net unrealized loss on exchange derivative and capped call transactions
Amortization of debt discount and issuance cost
Interest income
Interest expense
Changes in assets and liabilities:
Trade receivables
Prepaid expenses and other assets
Trade and other payables, provisions and other non-current liabilities
Deferred revenue
Interest received
Income tax refunds received (income tax paid), net
Net cash provided by operating activities
Investing activities
Business combinations, net of cash acquired
Purchases of intangible assets
Purchases of property and equipment
Proceeds from sales of property, equipment and intangible assets
Purchases of investments
Proceeds from maturities of investments
Proceeds from sales of investments
Increase in restricted cash
Payment of deferred consideration
Net cash used in investing activities
Financing activities
Proceeds from exercise of share options
(Payment of issuance cost) proceeds from issuance of exchangeable senior notes, net of
discount and issuance costs
Purchase of capped calls
Interest paid
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Fiscal Year Ended June 30,
Notes
2019
2018
2017
*As
Adjusted
*As
Adjusted
$ (605,556) $
(58,131) $
(52,400)
10, 11
7
6
9
70,248
(2,357)
(770)
257,762
533,908
33,939
(33,500)
6,302
79,435
(1,163)
(188)
61,546
(397)
93
162,873
137,448
12,414
7,478
(9,877)
1,113
—
—
(4,851)
—
(30,211)
(19,635)
(10,208)
1,085
75,624
14
122,502
30,328
7,038
(8,449)
(6,438)
43,477
97,676
8,679
10,947
66,143
6,540
(4,246)
(9,042)
466,342
311,456
199,381
12
(418,595)
(2,110)
—
—
(381,090)
(925)
(44,192)
(30,209)
(15,129)
3,721
2,775
342
(648,036)
(347,822)
(423,540)
485,021
20,545
(552)
—
206,119
123,862
(3,131)
(3,290)
111,403
488,672
(3,371)
(935)
(604,198)
(51,696)
(224,573)
15
15
3,542
3,995
9,438
(410)
990,494
—
(87,700)
(6,319)
(3,187)
(855)
—
906,789
(630)
—
—
—
9,438
465
(141,898)
1,165,919
(15,289)
1,410,339
244,420
259,709
$ 1,268,441
$ 1,410,339
$
244,420
* As adjusted to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 for further details.
The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.
F-11
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 planning and project
management, Confluence for team content creation and sharing, Trello for capturing and adding structure to fluid, fast-
forming work for teams, Bitbucket for team code sharing and management, Jira Service Desk for team service and
support applications, Opsgenie for incident management and Jira Align for enterprise agile planning.
The accompanying consolidated financial statements of the Company and its subsidiaries for the year ended
June 30, 2019 were authorized for issue in accordance with a resolution of the board of directors on August 20, 2019.
2. Summary of Significant Accounting Policies
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 derivative
financial instruments that have been measured at fair 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.
Effective July 1, 2018, we adopted the requirements of IFRS 15, Revenue from Contracts with Customers,
(“IFRS 15”) as discussed below. All amounts and disclosures set forth in this annual report on Form 20-F have been
updated to comply with the new standard, including certain prior period amounts as indicated by “as adjusted” in the
consolidated financial statements and related notes.
Principles of consolidation
The consolidated financial statements incorporate the financial 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 cash-generating unit (“CGU”) and 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 operating results 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 operating results
to make decisions about allocating resources and assessing performance based on consolidated financial information.
Accordingly, the Group has determined it operates in one operating segment.
Foreign currency
The Group's consolidated financial statements are presented using the U.S. dollar, which is the Company's
functional currency. Some of the Group’s foreign subsidiaries’ functional currency is the local currency. We translate
the financial statements of these subsidiaries to U.S. dollars using month-end exchange rates for assets and liabilities,
and average exchange rates for revenue, costs, and expenses. Adjustments resulting from translating foreign functional
F-12
currency financial statements into U.S. dollars are recorded as a separate component on the consolidated statements
of comprehensive income.
Foreign currency transaction gains and losses from re-measurement of monetary assets and liabilities that are
denominated in currencies other than the respective functional currencies are included in other non-operating (expense)
income, net in the consolidated statements of operations for the period.
Revenue recognition
Adoption of IFRS 15
IFRS 15, 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. The Group adopted
IFRS 15 as of July 1, 2018, using the full retrospective method. Accordingly, the results for the prior comparable periods
were adjusted to conform to the current period measurement and recognition of results.
The most significant impact of the new standard relates to our accounting for the on-premises term-based
licenses. Under IFRS 15, if performance obligations are not sold on a stand-alone basis, then standalone selling price
(“SSP”) must be estimated. Our term-based licenses include the delivery of software and support services as well as
unspecified future updates. Under the previous standard, revenue for these contracts was recognized ratably over the
period of the contract. However, under the new standard, we estimate SSP for the software license separately from
the support and update services. License revenue is then recognized upon delivery of the initial software at the outset
of the arrangement, and support and updates is recognized ratably over the contract period.
We have an online distribution model that allows us to efficiently reach customers globally without the need to
invest in a traditional commissioned sales force. As such, the asset resulting from the costs to obtain and fulfill a
contract is not material to our consolidated financial statements.
We applied the new standard using the following implementation practical expedients:
• For completed contracts that have variable consideration, we have elected to use the transaction price at the
date the contract was completed rather than estimating variable consideration amounts in comparative
reporting periods;
• For all reporting periods presented before the date of initial application, we have elected to not disclose the
amount of the transaction price allocated to remaining performance obligations and an explanation of when
we expect to recognize that amount as revenue;
• We have elected to reflect the aggregate effect of all modifications that occurred before fiscal 2017 with respect
to identifying the satisfied and unsatisfied performance obligations, determining the transaction price and
allocating the transaction price to the satisfied and unsatisfied performance obligations; and
• We have elected to recognize the incremental costs of obtaining a contract as an expense when incurred if
the amortization period of the asset otherwise would have been recognized is one year or less.
F-13
Select consolidated statements of operations line items which reflect the adoption of IFRS 15 are as follows:
Revenues:
Subscription
Maintenance
Perpetual license
Other
Total revenues
Total operating expenses
Income tax expense
Net loss
Basic loss per share
Diluted loss per share
Revenues:
Subscription
Maintenance
Perpetual license
Other
Total revenues
Total operating expenses
Income tax benefit
Net loss
Basic loss per share
Diluted loss per share
Year ended June 30, 2018
As Reported
IFRS 15 Adjustment
As Adjusted
(U.S. $ in thousands, except per share data)
403,214 $
7,480 $
325,898
85,481
59,357
873,950
755,008
(53,507)
(119,341) $
(0.52) $
(0.52) $
613
(2,310)
1,245
7,028
(675)
(1,794)
5,909 $
0.03 $
0.03 $
410,694
326,511
83,171
60,602
880,978
754,333
(55,301)
(113,432)
(0.49)
(0.49)
Year ended June 30, 2017
As Reported
IFRS 15 Adjustment
As Adjusted
(U.S. $ in thousands, except per share data)
242,128 $
7,695 $
265,521
74,565
37,722
619,936
563,861
17,148
(42,504) $
(0.19) $
(0.19) $
(1,068)
(507)
628
6,748
(504)
(2,197)
5,055 $
0.02 $
0.02 $
249,823
264,453
74,058
38,350
626,684
563,357
14,951
(37,449)
(0.17)
(0.17)
$
$
$
$
$
$
$
$
F-14
Select condensed consolidated statements of financial position line items reflecting 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 $
28,159 $
1,576 $
29,735
Non-current assets:
Deferred tax assets
Other non-current assets
Current liabilities:
Deferred revenue
Non-current liabilities:
Deferred tax liabilities
Deferred revenue
Equity
Accumulated deficit
64,662
12,286
(5,442)
1,180
59,220
13,466
340,834
(16,440)
324,394
12,051
19,386
109
(909)
12,160
18,477
(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
Other non-current assets
Current liabilities:
Deferred revenue
Non-current liabilities:
Deferred tax liabilities
Deferred revenue
Equity
Accumulated deficit
188,239
9,269
(3,341)
778
184,898
10,047
245,306
(10,541)
234,765
43,950
10,691
416
(261)
44,366
10,430
$
(23,229) $
8,645 $
(14,584)
Adoption of IFRS 15 revenue standard had no impact to cash provided by or used in operating, financing,
or investing activities on our consolidated statements of cash flows.
Policies, Estimates and Judgments
Under IFRS 15, 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 services, which are generally capable
of being distinct and accounted for as separate performance obligations. Revenue is recognized net of allowances for
returns and 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.
2.
Identification of the contract or contracts with a customer;
Identification of the performance obligations in the contract;
F-15
3.
4.
5.
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when, or as, the performance obligation is satisfied.
The timing of revenue recognition may differ from the timing of invoicing our customers. We record a contract
asset when revenue is recognized prior to invoicing. Contract assets are netted against any related contract liabilities
in the consolidated statements of financial position. Our revenue arrangements include standard warranty provisions
that our arrangements will perform and operate in all material respects, 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 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 recognized from contracts with customers is disaggregated into categories that depict how the nature,
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 14.
Subscription revenues
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. 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 the license period. Subscription
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, with a majority being
one month. For cloud-based services, subscription revenue is recognized ratably as services are performed,
commencing with the date the service is made available to customers. For on-premises term-based licenses, we
recognize revenue upfront for the portion that relates to the delivery of the term license and the support and related
revenue is recognized ratably as the services are delivered over the term of the arrangement.
Maintenance revenues
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.
F-16
Perpetual license revenues
Perpetual license revenues represent fees earned from the license of software to customers for use on the
customer’s premises other than Data Center products. Software is licensed on a perpetual basis. Perpetual license
revenues consist of the revenues recognized from sales of licenses to new customers and additional licenses to existing
customers. We recognize revenue on the license portion of perpetual license arrangements on the date of license
delivery in substantially all situations.
Other revenues
Other revenues include fees received for sales of third-party apps in the Atlassian Marketplace, technical account
management, and training services. Revenue from the sale of third-party apps via Atlassian Marketplace is recognized
at the date of product delivery given that all of our obligations have been met at that time and net of the vendor liability
portion, as we 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 training is recognized as delivered or
as the rights to receive training expire.
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 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, exchangeable senior 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 exchangeable senior notes are measured at amortized cost
using the effective interest rate (“EIR”) method.
Debt investments
The Group’s marketable debt investments were classified as instruments at fair value through other
comprehensive income. Fair value changes of marketable debt investments that have been recognized in other
comprehensive income are recycled to profit or loss upon sale of the financial asset.
F-17
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”)
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. 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 will be adversely affected by changes in exchange rates. Hedging derivative instruments are recognized as
either assets or liabilities and are measured at fair value.
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. For options designated as cash flow hedges, changes
in the time value are excluded from the assessment of hedge effectiveness and are recognized in earnings. Gains
(losses) on derivatives representing either hedge components excluded from the assessment of effectiveness or 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 15 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 income (expense), net. The Group used Black-Scholes option pricing models to fair value the
Exchange and Capped Call Derivatives. Certain inputs used in the model such as stock price volatility requires judgment.
Impairment of financial assets
The Group measures loss allowances on financial assets 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 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
F-18
changes on debt investment and derivatives designated as hedging instruments, which have been recognized in other
comprehensive income, are recycled to profit or loss upon sale of the financial asset.
Financial 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.
Fair 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.
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
Computer hardware and computer-related software
Furniture and fittings
Leasehold improvements
Business combinations
3 - 5 years
3 - 5 years
5 - 10 years
Shorter of the remaining lease term or 7 years
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.
F-19
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 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
We acquired 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
Customer relationships
Acquired developed technology
2 - 12 years
2 - 10 years
2 - 10 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.
Long-lived assets
The carrying value 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.
Share-based payments
Share-based payments cover equity-settled awards including stock options and restricted stock units (“RSUs”)
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 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.
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. The Group categorizes leases at their inception as either operating or finance 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.
F-20
Research 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 technological feasibility has been
established, which for our products, is typically reached shortly before the release of such products and as a result,
the Group has not capitalized any research and 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. 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.
New accounting standards not yet adopted
In January 2016, the IASB issued IFRS 16, Leases (“IFRS 16”), 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 leases on its statement of financial position represented by right-of-use assets and lease liabilities.
The standard also contains enhanced disclosure requirements for lessees and is effective for the Group beginning on
July 1, 2019. We will adopt the IFRS 16 standard using the modified retrospective approach and will not restate
comparative periods. We will elect the package of practical expedients permitted under the transition guidance, which
allows us to exclude initial direct costs from the measurement of the right-of-use asset for any leases that exist prior
to adoption of the new standard and adjust the right-of-use asset for any recognized onerous lease provisions. We
F-21
will also elect to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated
lease payments in the consolidated statements of operations on a straight-line basis over the lease term. Based on
our portfolio of leases as of June 30, 2019, approximately $286 million of right-of-use assets and lease liabilities will
be recognized on our balance sheet upon adoption, primarily relating to real estate.
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
Business combinations
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. The significant
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, 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. For details of business
combinations, please refer to Note 12.
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, dividends, and other capital management transactions.
Management judgment is also required in relation to the application of income tax legislation, which involves
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.
For details of taxation, please refer to Note 8.
F-22
Impairment of non-financial assets
The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the
Group 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 amount 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 2019, 2018 and 2017. For details of non-financial assets, please refer to Note 10 and 11.
Impairment of financial instruments
The 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. For details of financial instruments,
please refer to Note 5.
4. Group Information
As of June 30, 2019, the Group’s subsidiaries, all of which are wholly owned, were as follows:
Country of Incorporation
United Kingdom, United States of America
United Kingdom, United States of America
United Kingdom, United States of America
United Kingdom
United Kingdom
United States of America
United States of America
United States of America
United States of America
United States of America
Australia
United States of America
Turkey
United States of America
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Japan
Germany
Netherlands
Philippines
France
Netherlands
Canada
India
Name
Atlassian (UK) Limited
Atlassian (UK) Holdings Limited
Atlassian (Australia) Limited
Atlassian (Global) Limited (1)
Atlassian (UK) Operations Limited
Atlassian, Inc.
Atlassian Network Services, Inc.
Dogwood Labs, Inc.
Trello, Inc.
AgileCraft LLC
AgileCraft Australia Pty Ltd
OpsGenie, Inc.
iFountain, LLC
Atlassian Australia 1 Pty Ltd
Atlassian Australia 2 Pty Ltd
Atlassian Corporation Pty. Ltd.
Atlassian Pty Ltd
Good Software Co. Pty. Ltd.
Atlassian Capital Pty. Ltd.
MITT Australia Pty Ltd
MITT Trust
Atlassian K.K.
Atlassian Germany GmbH
Atlassian Holdings B.V.
Atlassian Philippines, Inc.
Atlassian France SAS
Atlassian B.V.
Atlassian Canada Inc.
Atlassian India LLP
(1) Atlassian (Global) Limited is currently in liquidation.
F-23
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 board of directors 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, British pound, Euro, Japanese
yen, Philippine peso, Indian rupee and 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. The Group’s foreign
exchange policy is reviewed annually by the Group’s audit committee and requires the Group to monitor its foreign
exchange exposure on a regular basis.
The 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 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.
Our master netting agreements are with selected financial institutions to reduce our credit risk and contract 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 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 hedge 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 as the hedged items are recognized in profit or loss. Amounts reclassified
from cash flow hedge reserve to profit or loss are recorded 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. 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.
It is our policy to enter into cash flow hedges to hedge cost of revenues and operating expenses up to 24
months.
F-24
Balance sheet hedging
We also enter into foreign exchange forward contracts to hedge a portion of certain foreign currency denominated
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. 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 exchange rate exposure
The Group 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, 2019 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 $22.5 million. A hypothetical 10% weakening of the U.S. dollar against other currencies
would increase the fair value of our foreign currency contracts by $22.5 million.
A sensitivity analysis performed on our hedging portfolio as of June 30, 2018 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 $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.
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.
A sensitivity analysis performed on the Notes embedded exchange derivative and capped call transactions
indicates that a hypothetical 10% increase in our share price would increase the fair value of the Notes embedded
exchange derivative by $138.6 million and increase the fair value of the capped call transactions by $16.2 million. A
hypothetical 10% decrease in our share price would decrease the fair value of the Notes embedded exchange derivative
by $134.6 million and decrease the fair value of the capped call transactions by $18.2 million.
The Group is also exposed to equity price risk in connection with our equity investments. The Group’s marketable
and non-marketable equity investments are susceptible to market price risk from uncertainties about future values of
the investment securities. As of June 30, 2019, the Group’s marketable equity investments are fair valued at $58.9
million. A hypothetical 10% increase in the respective share prices of our equity investments would increase the fair
value of our marketable equity investments by $5.9 million.
Interest rate risk
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, 2019,
the Group had cash and cash equivalents totaling $1.3 billion and short-term investments totaling $445.0 million.
A sensitivity analysis performed on our portfolio indicated that a hypothetical 100 basis point increase in interest
rates at June 30, 2019 and 2018 would result in a $2.3 million and $1.7 million decrease in the market value of our
investments, respectively. This estimate is based on a sensitivity model that measures market value changes when
changes in interest rates occur.
F-25
Credit risk
The Group is exposed to credit risk arising from cash and cash equivalents, deposits with banks and financial
institutions, investments, foreign exchange 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 ratings 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
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. Our credit policy typically requires
payment within 30-45 days, and we establish credit limits for each customer based on our internal guidelines. The
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 for the details of 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 present 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, and short-term investments and expected cash
flows from operations, 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.
F-26
Contractual maturities of financial liabilities are as follows:
As of June 30, 2019
Financial liabilities:
Trade and other payables
Derivative liabilities
Exchangeable senior notes (1)
As of June 30, 2018
Financial liabilities:
Trade and other payables
Derivative liabilities
Exchangeable senior notes
Up to 12 Months
Greater than 12
Months
Total
(U.S. $ in thousands)
$
159,487 $
3,879
1,604,923
— $
159,487
74
—
3,953
1,604,923
$
1,768,289 $
74 $
1,768,363
$
$
107,892 $
5,213
— $
107,892
204
5,417
—
1,000,000
1,000,000
113,105 $
1,000,204 $
1,113,309
(1) The amount related to Notes represent the if-exchanged value using stock price as of June 30, 2019. Refer to Note 15 for further
detail on the Notes.
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. No material changes were made to the process of managing capital during the fiscal years ended June 30,
2019. During the fiscal year ended June 30, 2018, the Group issued $1.0 billion of exchangeable debt for working
capital and other corporate purposes, including acquiring complementary businesses, products, services or
technologies.
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 Measurements
The following table presents the Group’s financial assets and liabilities as of June 30, 2019, by level within the
fair value hierarchy:
F-27
Assets measured at fair value
Cash and cash equivalents:
Money market funds
U.S. treasury securities
Agency securities
Certificates of deposit and time deposits
Commercial paper
Corporate debt securities
Short-term Investments:
U.S. treasury securities
Agency securities
Certificates of deposit and time deposits
Commercial paper
Corporate debt securities
Current derivative assets:
Derivative assets - hedging
Derivative assets - capped call transactions
Non-current derivative assets:
Derivative assets - hedging
Other non-current assets:
Level 1
Level 2
Level 3
Total
(U.S. $ in thousands)
$
593,696 $
— $
— $
593,696
—
—
—
—
—
—
—
—
—
—
—
—
—
6,996
8,084
9,844
67,327
7,560
101,759
26,966
20,466
94,035
201,820
559
—
77
3,660
—
—
—
—
—
—
—
—
—
—
—
—
—
6,996
8,084
9,844
67,327
7,560
101,759
26,966
20,466
94,035
201,820
559
214,597
214,597
—
—
—
3,000
77
3,660
58,932
3,000
Certificates of deposit and time deposits
Marketable equity securities
Non-marketable equity securities
—
58,932
—
Total assets measured at fair value
$
652,628 $
549,153 $
217,597 $ 1,419,378
Liabilities measured at fair value
Current derivative liabilities:
Derivative liabilities - hedging
Derivative liabilities - exchangeable feature of
Notes
Non-current derivative liabilities:
Derivative liabilities - hedging
Total liabilities measured at fair value
Liabilities for which fair value is disclosed
Exchangeable senior notes
$
$
$
— $
3,879 $
— $
3,879
—
—
—
74
851,126
851,126
—
74
— $
3,953 $
851,126 $
855,079
— $ 1,697,200 $
— $ 1,697,200
F-28
The following table presents the Group’s financial assets and liabilities as of June 30, 2018, by the level
within the fair value hierarchy:
Assets measured at fair value
Cash and cash equivalents:
Money market funds
Commercial paper
Agency securities
Corporate debt securities
U.S. treasury securities
Short-term Investments
U.S. treasury securities
Agency securities
Certificates of deposit and time deposits
Commercial paper
Corporate debt securities
Current derivative assets:
Derivative assets- hedging
Non-current derivative assets:
Derivative assets- hedging
Derivative assets- capped call transactions
Other non-current assets:
Certificates of deposit and time deposits
Level 1
Level 2
Level 3
Total
(U.S. $ in thousands)
$
693,596 $
— $
— $
693,596
—
—
—
—
—
—
—
—
—
—
—
—
—
29,118
7,989
1,000
18,968
52,700
22,015
55,164
35,372
157,883
60
3
—
—
—
—
—
—
—
—
—
—
—
—
29,118
7,989
1,000
18,968
52,700
22,015
55,164
35,372
157,883
60
3
99,932
99,932
3,660
—
3,660
Total assets measured at fair value
$
693,596 $
383,932 $
99,932 $
1,177,460
Liabilities measured at fair value
Current derivative liabilities:
Derivative liabilities- hedging
Non-current derivative liabilities:
Derivative liabilities- hedging
Derivative liabilities- embedded exchange
feature of the exchangeable senior notes
Total liabilities measured at fair value
Liabilities for which fair value is disclosed
Exchangeable senior notes
$
$
$
— $
5,213 $
— $
5,213
—
—
204
—
— $
5,417 $
202,553 $
202,553
202,553
207,970
—
204
— $
1,033,030 $
— $
1,033,030
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.
Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)
Embedded exchange feature of the exchangeable senior notes and capped call transactions
In April 2018, the Group issued $1 billion in Notes and entered into related capped call transactions. Please
refer to Note 12 for details. The Exchange and Capped Call Derivatives are measured at fair value using Black-Scholes
option pricing models that utilize both observable and unobservable market inputs.
F-29
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. In general, an increase in our stock price volatility would increase the fair value of the derivatives and would
result in a net loss. Other significant inputs to the valuation includes our stock price and time to expiration of the options,
which are observable. An increase in our stock price would increase the fair value of the derivatives and would result
in a net loss. As time to expiration of the options decreases with passage of time, the fair value of the derivatives would
decrease. The future impact on other non-operating income (expense), net depends on how significant inputs such
as stock price, stock price volatility and time to expiration of the options change in relation to other inputs.
The stock price volatility as of June 30, 2019, ranged from 43.8% to 47.3%. As of June 30, 2019, a 10% higher
volatility, holding other inputs constant would result in approximately $46.9 million of additional loss for the fiscal year
ended June 30, 2019. The stock price volatility as of June 30, 2018, ranged from 32.7% to 36.3%. As of June 30, 2018,
a 10% higher volatility, holding other inputs constant would result in approximately $23.5 million of additional loss for
the fiscal year ended June 30, 2018.
Non-marketable investments
Non-marketable equity securities are measured at fair value using market data, such as publicly available
financing round valuations. 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.
The following table presents the reconciliations of Level 3 financial instrument fair values:
Capped Call
Embedded
exchange feature
of Notes
(U.S. $ in thousands)
Non-marketable
investments
Balance as of June 30, 2017
$
— $
— $
Purchases
Gains (losses)
Recognized in other non-operating (expense) income,
net
Balance as of June 30, 2018
Change in unrealized gains (losses) relating to assets and
liabilities held as of June 30, 2018
Recognized in other non-operating income (expense),
net
87,700
(177,907)
12,232
99,932
(24,646)
(202,553)
12,232
(24,646)
Balance as of June 30, 2018
$
99,932 $
(202,553) $
—
—
—
—
—
—
Purchases
Transfer out
Gains (losses)
Recognized in finance income
Recognized in other non-operating (expense) income,
net
Recognized in other comprehensive income
—
—
—
—
—
—
114,665
—
(648,573)
—
23,000
(20,942)
270
—
672
Balance as of June 30, 2019
$
214,597 $
(851,126) $
3,000
Change in unrealized gains (losses) relating to assets and
liabilities held as of June 30, 2019
Recognized in other non-operating income (expense),
net
114,665
(648,573)
—
There were transfers out from Level 3 due to initial public offerings of the respective investees during fiscal
year 2019. There were no transfers between levels during fiscal year 2018.
F-30
Investments
As of June 30, 2019, the Group’s investments consisted of the following:
Debt Investments
Marketable debt securities
U.S. treasury securities
Agency securities
Certificates of deposit and time deposits
Commercial paper
Corporate debt securities
Total debt investments
Equity Investments
Marketable equity securities
Non-marketable equity securities
Total equity investments
Total investments
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
(U.S. $ in thousands)
$ 101,563 $
203 $
26,936
24,126
94,035
201,552
448,212
20,270
3,000
23,270
33
—
—
292
528
38,662
—
38,662
(7)
(3)
—
—
(24)
(34)
—
—
—
101,759
26,966
24,126
94,035
201,820
448,706
58,932
3,000
61,932
$ 471,482 $
39,190 $
(34) $ 510,638
As of June 30, 2019, the Group had $445.0 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 $58.9 million, non-marketable equity securities totaling $3.0 million, and certificates of deposit and
time deposits totaling $3.7 million which were classified as long-term and were included in other non-current assets
on the Group’s consolidated statements of financial position.
As of June 30, 2018, the Group’s investments consisted of the following:
Debt Investments
U.S. treasury securities
Agency securities
Certificates of deposit and time deposits
Commercial paper
Corporate debt securities
Total investments
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
(U.S. $ in thousands)
$
52,809 $
— $
(109) $
52,700
22,097
58,824
35,372
158,538
—
—
—
14
(82)
—
—
22,015
58,824
35,372
(669)
157,883
$ 327,640 $
14 $
(860) $ 326,794
As of June 30, 2018, the Group had $323.1 million of investments which were classified as short-term
investments on the Group’s consolidated statements of financial position. Additionally, the Group had certificates of
deposit and time deposits totaling $3.6 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 effects of the Group’s investments on the consolidated financial statements were as follows (amounts
presented are prior to any income tax effects):
Unrealized gain (loss) recognized in other comprehensive income
Gain (loss) recognized into profit or loss
F-31
Fiscal Year Ended June 30,
2019
2018
2017
(U.S. $ in thousands)
(601) $
$ 40,017 $
(849)
$
15 $
(15) $
96
The table below summarizes the Group’s debt investments by remaining contractual maturity based on the
effective maturity date:
Recorded as follows:
Due in one year or less
Due after one year
Total investments
Derivative financial instruments
As of June 30,
2019
2018
(U.S. $ in thousands)
$ 442,964 $ 277,087
5,742
49,707
$ 448,706 $ 326,794
The group have 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 15: Exchangeable Senior Notes.
The fair value of the hedging derivative instruments were as follows:
Statement of Financial Position
Location
Fair Value
As of June 30,
2019
Fair Value
As of June 30,
2018
(U.S. $ in thousands)
Derivative assets - hedging
Derivatives designated as hedging instruments:
Foreign exchange forward contracts
Foreign exchange forward contracts
Current derivative assets
$
247 $
Non-current derivative
assets
77
312
636 $
39
3
21
63
3,854 $
5,006
74
25
204
207
5,417
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts
Current derivative assets
Total derivative assets
Derivative liabilities - hedging
Derivatives designated as hedging instruments:
Foreign exchange forward contracts
Foreign exchange forward contracts
Derivatives not designated as hedging instruments:
Current derivative liabilities
Non-current derivative
liabilities
Foreign exchange forward contracts
Current derivative liabilities
$
$
Total derivative liabilities
$
3,953 $
F-32
The following table sets forth the notional amounts of our derivative instruments as of June 30, 2019 (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
$259,674
$14,477
$274,151
$230,264
$43,887
$274,151
The following table sets forth the notional amounts of our derivative instruments as of 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
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):
Gain recognized into general and administrative expense - ineffective portion
$
Fiscal Year Ended June 30,
2019
2018
2017
(U.S. $ in thousands)
12 $
24 $
(3)
Gross unrealized loss recognized in other comprehensive income
$ (8,369) $ (4,387) $ 4,520
Net (loss) gain reclassified from cash flow hedge reserve into profit or loss -
effective portion
Recognized in cost of revenues
Recognized in research and development
Recognized in marketing and sales
Recognized in general and administrative
$ (9,908) $ 3,954 $ 1,356
$
(713) $
134 $
49
$ (6,935) $ 2,532 $ 1,010
$
(194) $
112 $
$ (2,066) $ 1,176 $
21
276
6. Other Non-operating Expense, Net
Other non-operating expense, net consisted of the following:
Exchange derivative allocated issuance costs
Fiscal Year Ended June 30,
2019
$
— $
2018
(1,785) $
2017
Net unrealized loss on exchange derivative and capped calls
(533,908)
(12,414)
Foreign currency exchange loss, net
Contributions to Atlassian Foundation
Other income
Other non-operating expense, net
(702)
(3,629)
2,786
(413)
(1,856)
1,311
—
—
(93)
(1,620)
371
$ (535,453) $ (15,157) $
(1,342)
F-33
7. Expenses
Loss before income tax benefit (expense) included the following expenses:
Fiscal Year Ended June 30,
2019
2018
2017
Depreciation:
Equipment
Computer hardware and software
Furniture and fittings
Leasehold improvements
Total depreciation
Amortization:
Patents and trademarks
Customer relationships
Acquired developed technology
Total amortization
Total depreciation and amortization
Employee benefits expense:
Salaries and wages
Variable compensation
Payroll taxes
Share-based payment expense
Defined contribution plan expense
Contractor expense
Other
$
1,336 $
1,214 $
1,476
2,031
8,604
13,447
7,796
21,015
27,990
56,801
11,543
1,485
7,915
22,157
6,990
29,100
21,188
57,278
70,248 $
79,435 $
1,022
23,729
1,016
5,923
31,690
2,907
12,361
14,588
29,856
61,546
$
$
351,401 $
273,326 $
201,953
62,106
42,020
33,067
30,478
19,260
20,792
257,762
162,873
137,448
22,566
27,263
53,654
16,839
23,666
44,877
13,041
16,333
34,605
Total employee benefits expense
$
816,772 $
585,126 $
443,432
8. Income Tax
The major components of income tax (expense) benefit for the fiscal years ended 2019, 2018 and 2017 are
as follows:
Current income tax:
Current income tax charge
Fiscal Year Ended June 30,
2019
2018
2017
(U.S. $ in thousands)
*As Adjusted
*As Adjusted
$
(15,788) $
(1,956) $
(11,518)
Adjustments in respect of current income tax of previous years
(361)
(48)
(25)
Deferred tax:
Benefit (expense) relating to origination and reversal of
temporary differences
Adjustments in respect of temporary differences of previous
years
Income tax (expense) benefit
30,417
(19,934)
25,864
(46,333)
(33,363)
630
$
(32,065) $
(55,301) $
14,951
* As adjusted to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 for further details.
F-34
A reconciliation between income tax (expense) benefit and the product of accounting loss multiplied by the
U.K.'s domestic tax rate for the fiscal years ended 2019, 2018 and 2017, is as follows:
Fiscal Year Ended June 30,
2019
2018
2017
(U.S. $ in thousands)
*As Adjusted
*As Adjusted
Loss before income tax (expense) benefit
$
(605,556) $
(58,131) $
(52,400)
At the U.K.’s statutory income tax rate of 19% in fiscal 2019 and
2018, and 19.75% in fiscal 2017
Tax effect of amounts that are not taxable (deductible) in
calculating taxable income:
Research and development incentive
Non-deductible charges relating to exchangeable senior notes
Share-based payment
Amortization of intangible assets that do not give rise to
deferred taxes
Foreign tax rate adjustment
Adjustment to deferred tax balance
Other items, net
Adjustments in respect to current income tax of previous years
Adjustments in respect to deferred income tax of previous years
115,031
12,508
11,781
660
(104,445)
(3,729)
(4)
1,685
6,337
(906)
14,629
(361)
(46,333)
2,620
(3,195)
(11,199)
(31)
(4,968)
(14,602)
(3,023)
(21,890)
(48)
(33,363)
18,404
—
(9,946)
(673)
(1,990)
(332)
(2,898)
14,346
(25)
630
Income tax (expense) benefit
$
(32,065) $
(55,301) $
14,951
* As adjusted to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 for further details.
F-35
Details of deferred taxes, recognized and unrecognized:
Depreciation for tax purposes
Provisions, accruals and prepayments
Deferred revenue
Unrealized foreign currency exchange (gains) losses
Unrealized investment (gains) losses
Carried forward tax losses (gains)
Carried forward tax credits—credited to profit and loss
Intangible assets
Tax benefit (expense) from share plans—income
Tax benefit (expense) from share plans—equity
Deferred foreign taxes
Other, net
Deferred tax benefit
Deferred tax assets, net
Reflected in the consolidated statements of financial position
as follows:
Deferred tax assets
Deferred tax liabilities
Deferred tax assets, net
Items for which no deferred tax asset has been recognized:
Depreciation and amortization for tax purposes
Provisions, accruals and prepayments
Deferred revenue
Unrealized foreign currency exchange gains
Unused tax losses
Intangible assets
Tax benefit from share plans- income
Tax benefit from share plans- equity
Capital loss
Carried forward tax credits- credited to profit and loss
Unrealized loss on investments
Other, net
Consolidated Statements of
Financial Position
Consolidated Statements of
Operations
As of June 30,
Fiscal Year Ended June 30,
2019
2018
2019
2018
(U.S. $ in thousands)
*As Adjusted
$
35 $
2,537 $
(2,564) $
*As Adjusted
1,415
(454)
(3,073)
(428)
(8,213)
2,034
2,452
9,943
551
889
—
(524)
—
7,241
22,650
(410)
1,644
850
5,456
16,620
216
127
(9,460)
(411)
(7,164)
(23,932)
(101)
(405)
(409)
(3,005)
13,095
331
300
10,605
(2,668)
95
10,714
(226)
—
(34,221)
(41,546)
50,680
(30,379)
(123)
(10,605)
899
— $ (15,917) $ (53,297)
$
$
$
3,212 $
47,060
17,084 $
59,220
(13,872)
(12,160)
3,212 $
47,060
4,804
13,421
37,342
—
2,221
314
15,723
215
401,108
161,513
1,963,534
2,054,530
45,849
109,061
1,391
47,537
1,076
10,610
30,114
62,719
1,391
30,418
160
5,800
$ 2,635,733 $2,365,118
* As adjusted to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 for further details.
F-36
Reconciliation of deferred tax assets, net
Balance at the beginning of
Deferred tax expense for the year
Debited to equity
Adjustment in respect of income tax payable
Impact from business combinations
Currency revaluation impact
2019
2018
(U.S. $ in thousands)
*As Adjusted
$
47,060 $
(15,916)
(8,884)
—
(19,092)
44
140,532
(53,297)
(40,092)
(83)
—
—
$
Balance at the ending of
* As adjusted to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 for further details.
3,212 $
47,060
The U.S. Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017 introduces a number 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 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 during fiscal year 2018.
In June 2019 and December 2017, as a result of the Group’s assessment of the realizability of its Australian
and U.S. deferred tax assets, the Group recorded non-cash charges to tax expense of $54.7 million and $30.4 million,
respectively, and $25.8 million to equity in December 2017 to reduce the carrying value of these assets. The assessment
of the realizability of the 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. 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 Group made changes to its corporate structure to include certain foreign subsidiaries
in its U.S. consolidated tax group that resulted in the creation of certain deferred tax assets and liabilities, including a
non-recognized deferred tax asset of $2.1 billion related to the fair market value of its intellectual property. The assets
are included in the Group’s quarterly assessment and are only recognized to the extent they are determined to be
realizable.
The impact on the net deferred tax asset from business combinations of $19.1 million in fiscal year 2019
represents the net deferred tax assets and liabilities recognized as a result of the acquisition of OpsGenie. The Group
acquired net operating loss carryforward deferred tax assets of approximately $1.8 million from OpsGenie. The Group
also recognized deferred tax liabilities of approximately $19.6 million primarily related to acquired intangibles from
OpsGenie, the amortization of which will not be deductible from future taxable profits.
The Group recognizes certain amounts directly in equity including current tax benefits related to tax deductions
in excess of cumulative book expense for share based payment awards, deferred tax benefits related to revaluing its
deferred tax assets for share based payment awards to fair market value at each reporting date, and deferred tax
F-37
expense or benefit related to unrealized gains and losses that are recorded in Other Comprehensive Income.
Amounts recognized directly in equity:
Net deferred tax—debited directly to equity
2019
2018
(U.S. $ in thousands)
$
(8,884)
(8,884) $
(40,092)
(40,092)
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, 2019
U.S. net operating loss (Pre - 2017 Tax
Reform)
June 30, 2032-December 30, 2037 $
128,705 $
U.S. net operating loss (Post - 2017 Tax
Reform)
None
State net operating loss- various states
June 30, 2024-June 30, 2039
U.K. net operating loss
None
U.S. research and development credits
June 30, 2031-June 30, 2030
State research and development credits-
California
None
State research and development credits-
Texas
June 30, 2036-June 30, 2039
Australia capital loss
None
State enterprise zone credits
June 30, 2020-June 30, 2024
9. Trade Receivables
The Group’s trade receivables consisted of the following:
Trade receivables
ECL allowances
$
$
$
$
$
$
$
$
$
$
1,631,941 $
670,960 $
1 $
33,490 $
13,599 $
2,277 $
4,637 $
685 $
137
1,740
156
—
170
65
2,218
—
3
As of June 30,
2019
2018
(U.S. $ in thousands)
83,044 $
46,770
(519)
(629)
82,525 $
46,141
As of June 30, 2019, two customers, both solution partners, represented 13% and 13% of the total trade
receivables balance. As of June 30, 2018, two customers, both solution partners, represented 15% and 10% of the
total trade receivables balance.
Expected Credit Loss (“ECL”) Allowance
As of June 30, 2019 and 2018, the Group had ECL allowance of $519,000 and $629,000, respectively. The
movements in the ECL allowance were as follows:
As of June 30, 2017
Change in estimate
As of June 30, 2018
Change in estimate
As of June 30, 2019
F-38
(U.S. $ in
thousands)
$
$
116
513
629
(110)
519
Trade Receivables Aging
As of June 30, 2019
ECL rate
Trade receivables carrying amount
ECL
As of June 30, 2018
ECL rate
Trade receivables carrying amount
ECL
(U.S. $ in thousands)
Past due days
< 90 days
—
9,961
—
Current
—
71,883
—
> 90 days
43.3%
1,200
519
Current
< 90 days
> 90 days
—
41,134
—
—
4,933
—
89.5%
703
629
10. Property and Equipment
Property and equipment, net consisted of the following:
Equipment
Computer
Hardware
and Software
Furniture
and Fittings
Leasehold
Improvements
and Other
Total
(U.S. $ in thousands)
As of June 30, 2018
Opening cost balance
Additions
Disposals
Effect of change in exchange rates
Closing cost balance
Opening accumulated depreciation
Depreciation expense
Effect of change in exchange rates
Disposals
Closing accumulated depreciation
Net book amount
As of June 30, 2019
Opening cost balance
Additions
Disposals
Effect of change in exchange rates
Closing cost balance
Opening accumulated depreciation
Depreciation expense
Disposals
Effect of change in exchange rates
Closing accumulated depreciation
Net book amount
$
3,895
$
53,448
$
7,083
$
33,840
$
1,651
(320)
(2)
5,224
(2,121)
(1,214)
(1)
272
(3,064)
2,160
$
247
(44,545)
(3)
9,147
(38,336)
(11,543)
1
43,048
(6,830)
2,317
4,023
(83)
8
11,031
(2,449)
(1,485)
(4)
43
28,279
(668)
5
61,456
(14,187)
(7,915)
21
668
(3,895)
7,136
$
(21,413)
40,043
$
$
98,266
34,200
(45,616)
8
86,858
(57,093)
(22,157)
17
44,031
(35,202)
51,656
5,224
$
9,147
$
11,031
$
61,456
$
86,858
3,460
(829)
2
7,857
(3,064)
(1,336)
741
1
(3,658)
4,199
1,911
(514)
4
10,548
(6,830)
(1,476)
498
—
4,268
(689)
(4)
14,606
(3,895)
(2,031)
493
5
(7,808)
2,740
$
(5,428)
9,178
$
$
33,838
(5,339)
83
90,038
(21,413)
(8,604)
5,339
(18)
(24,696)
65,342
$
43,477
(7,371)
85
123,049
(35,202)
(13,447)
7,071
(12)
(41,590)
81,459
$
$
$
The Company had disposals of property, plant and equipment in 2019 and 2018, with a net carrying amount
of $0.3 million and $1.6 million, respectively.
F-39
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.
Goodwill consisted of the following:
Balance as of June 30, 2017
Effect of change in exchange rates
Balance as of June 30, 2018
Additions
Effect of change in exchange rates
Balance as of June 30, 2019
Impairment test for goodwill
Note
12
Goodwill
(U.S. $ in thousands)
311,900
$
43
311,943
297,010
(46)
608,907
$
The Group operates as a single CGU and all goodwill is allocated to this unit. 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 indicators of impairment. There was no impairment of goodwill during the
fiscal years ended 2019, 2018, and 2017.
F-40
Intangible assets
Intangible assets consisted of the following:
As of June 30, 2018
Opening cost balance
Effect of change in exchange rates
Closing cost balance
Opening accumulated amortization
Amortization charge
Effect of change in exchange rates
Closing accumulated amortization
Net book amount
As of June 30, 2019
Opening cost balance
Additions
Disposals
Effect of change in exchange rates
Closing cost amount
Opening accumulated amortization
Amortization charge
Disposals
Effect of change in exchange rates
Closing accumulated amortization
Patents,
Trademarks
and Other
Rights
Acquired
Developed
Technology
Customer
Relationships
Total
(U.S. $ in thousands)
$
21,745
$
136,960
$
58,684
$
217,389
$
$
—
21,745
(3,042)
(6,990)
—
90
137,050
(80,759)
(21,188)
(24)
—
58,684
(12,799)
(29,100)
—
90
217,479
(96,600)
(57,278)
(24)
(10,032)
(101,971)
(41,899)
(153,902)
11,713
$
35,079
$
16,785
$
63,577
21,745
$
137,050
$
58,684
$
5,550
—
—
27,295
(10,032)
(7,796)
—
—
72,589
(12,443)
(103)
197,093
(101,971)
(27,990)
11,365
73
67,168
—
—
125,852
(41,899)
(21,015)
—
—
217,479
145,307
(12,443)
(103)
350,240
(153,902)
(56,801)
11,365
73
(17,828)
(118,523)
(62,914)
(199,265)
Net book amount
$
9,467
$
78,570
$
62,938
$
150,975
As of June 30, 2019, no development costs have qualified for capitalization, and all development costs have
been expensed as incurred. As of June 30, 2019, the remaining amortization period for acquired developed technology
ranged from approximately one year to five years. The remaining amortization period for customer relationships ranged
from three years to nine years.
12. Business combinations
Fiscal 2019
AgileCraft
On April 3, 2019, we acquired 100% of the outstanding equity of AgileCraft LLC, a leading provider of enterprise
agile planning software. Total purchase price consideration for AgileCraft was approximately $155.7 million, which
consisted of approximately $154.0 million in cash and $1.7 million in fair value of replacement 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.
F-41
The Group acquired AgileCraft to complement its current product offerings and to help enterprise organizations
build and manage a ‘master plan’ of their most strategic projects and workstreams. The Group has included the financial
results of AgileCraft 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:
Cash and cash equivalents
Trade receivables
Prepaid expenses and other current assets
Intangible assets
Goodwill
Trade and other payables
Deferred revenue
Net assets acquired
Fair Value
(U.S. $ in thousands)
1,193
$
3,614
270
52,900
101,184
(1,196)
(2,230)
155,735
$
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 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 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 the date of acquisition.
Developed technology
Customer relationships
Backlog
Total intangible assets subject to amortization
Fair Value
Useful Life
(U.S. $ in
thousands)
$
$
34,600
16,900
1,400
52,900
(years)
5
7
3
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.
OpsGenie
On October 1, 2018, we acquired 100% of the outstanding equity of OpsGenie, Inc., a leader in incident alerting
and on-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. 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.
F-42
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:
Cash and cash equivalents
Trade receivables
Prepaid expenses and other current assets
Intangible assets
Goodwill
Trade and other payables
Deferred revenue
Deferred tax liabilities, net
Net assets acquired
Fair Value
(U.S. $ in thousands)
1,232
$
1,933
513
87,900
189,727
(1,533)
(1,217)
(19,010)
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.
The following table sets forth the components of identifiable intangible assets acquired and their estimated
useful lives as of the date of acquisition.
Developed technology
Customer relationships
Trade name
Total intangible assets subject to amortization
Fair Value
Useful Life
(U.S. $ in
thousands)
$
$
35,600
48,600
3,700
87,900
(years)
5
10
5
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.
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. 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.
F-43
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. 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 Group’s 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 identification of contingencies and goodwill.
Fiscal 2018
The Group did not have any business combinations during the fiscal year ended June 30, 2018.
Fiscal 2017
Trello
On February 3, 2017, the Group acquired all of the outstanding stock of Trello, a leading provider of project
management and organization software, for consideration consisting 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 has
included the financial results of Trello in its consolidated financial statements from the date of acquisition, which have
not been material to date.
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 estimated fair values of assets acquired and liabilities assumed as of the
date of acquisition:
Cash and cash equivalents
Trade receivables
Prepaid expenses and other current assets
Deferred tax assets
Intangible assets
Goodwill
Trade and other payables
Deferred revenue
Deferred tax liabilities
Net assets acquired
Fair Value
(U.S. $ in thousands)
1,019
$
1,035
765
17,074
127,400
289,171
(3,532)
(2,165)
(46,760)
384,007
$
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’s technology with the Group’s other offerings. The goodwill
balance was 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
F-44
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 from
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.
The following table sets forth the components of identifiable intangible assets acquired and their estimated
useful lives as of the date of acquisition.
Developed technology
Customer relationships
Trade names
Total intangible assets subject to amortization
Fair Value
Useful Life
(U.S. $ in
thousands)
$
50,600
56,900
19,900
$
127,400
(years)
3
2
3
The amount recorded for developed technology represents the estimated fair value of Trello’s project
management and organization technology. The amount recorded for customer relationships represents the fair values
of the underlying relationship with Trello customers.
Other fiscal 2017 business combinations
On July 12, 2016, the Group acquired StatusPage for $18.3 million in cash, net of cash acquired, and $3.3
million of deferred consideration. The Group has included the financial results of StatusPage in its consolidated financial
statements from the date of acquisition, which have not been material to date. In allocating the purchase consideration
based on estimated fair values, the Group recorded $8.7 million of acquired intangible assets with useful lives of two
to five years and $15.5 million of goodwill. The goodwill balance was not deductible for income tax purposes.
13. Other Balance Sheet Accounts
Cash and cash equivalents
Cash and cash equivalents consisted of the following:
Cash and bank deposits
Amounts due from third-party credit card processors
U.S. treasury securities
Corporate debt securities
Agency securities
Commercial paper
Money market funds
Certificates of deposit and time deposits
Total cash and cash equivalents
As of June 30,
2019
2018
(U.S. $ in thousands)
565,030 $
652,619
$
9,904
6,996
7,560
8,084
67,327
593,696
9,844
7,049
18,968
1,000
7,989
29,118
693,596
—
$
1,268,441 $
1,410,339
F-45
Prepaid expenses and other current assets
Prepaid expenses and other current assets consisted of the following:
Prepaid expenses
Accrued interest income on short-term investments
Other receivables
Other current assets
Total prepaid expenses and other current assets
As of June 30,
2019
2018
(U.S. $ in thousands)
$
$
*As Adjusted
23,588 $
21,278
3,072
1,977
1,599
2,582
3,059
2,816
30,236 $
29,735
Other receivables generally arise from transactions outside the normal operating activities of the Group.
Collateral is not normally required.
Other non-current assets
Other non-current assets consisted of the following:
Marketable equity securities
Non-marketable equity securities
Security deposits
Other
As of June 30,
2019
2018
(U.S. $ in thousands)
*As Adjusted
58,932 $
3,000
5,010
9,703
76,645 $
—
—
5,248
8,218
13,466
$
$
* As adjusted to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 for further details.
As of June 30, 2019 and 2018, the Group had certificates of deposit and time deposits totaling $3.7 million and
$3.7 million which were classified as long-term and were included in security deposits. Included in the Group’s other
non-current assets balance as of June 30, 2019 and 2018 were $7.1 million and $6.6 million respectively, of restricted
cash used for commitments of standby letters of credit related to facility leases and were not available for the Group’s
use in its operations.
Trade and other payables
Trade and other payables consisted of the following:
Trade payables
Accrued expenses
Accrued compensation and employee benefits
Sales and indirect taxes
Operating lease payable
Customer deposit
Other payables
F-46
As of June 30,
2019
2018
(U.S. $ in thousands)
24,993 $
53,802
54,507
9,158
1,613
7,943
17,119
42,905
28,302
8,076
1,420
6,319
7,471
159,487 $
3,751
107,892
$
$
Current provisions
Current provisions consisted of the following:
As of June 30,
2019
2018
(U.S. $ in thousands)
Employee benefits
$
8,983 $
7,215
Current provisions for employee benefits include accrued annual leave and long service leave. 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:
Employee benefits
Dilapidation provision
As of June 30,
2019
2018
(U.S. $ in thousands)
$
$
3,323 $
2,759
6,082 $
2,094
2,269
4,363
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-lived assets
at the expiration of these leases.
Other non-current liabilities
Other non-current liabilities consisted of the following:
Deferred rent
Other non-current liabilities
14. Revenue
Deferred revenues
As of June 30,
2019
2018
(U.S. $ in thousands)
33,845 $
344
34,189 $
11,777
451
12,228
$
$
We record deferred revenues when cash payments are received or due in advance of our performance,
including amounts which are refundable. The increase in the deferred revenue balance for twelve months ended
June 30, 2019 is primarily driven by cash payments received or due in advance of satisfying our performance
obligations, offset by $324.4 million of revenues recognized that were included in the deferred revenue balance as
of June 30, 2018. The acquisitions contributed $3.4 million to the increase in deferred revenue balance (for more
information, see Note 12).
F-47
Transaction price allocated to remaining performance obligations
IFRS 15 introduced the concept of “remaining transaction price allocated to remaining performance obligations”,
which is different from unbilled deferred revenue under previous accounting guidance. Transaction price allocated to
remaining performance obligations represents contracted revenue that has not yet been recognized, which includes
billed but unearned revenue and unbilled amounts that will be invoiced and recognized as revenues in future periods.
As of June 30, 2019, approximately $512.6 million of revenue is expected to be recognized from transaction
price allocated to remaining performance obligations. We expect to recognize revenue on approximately 91% of these
remaining performance obligations over the next 12 months with the balance recognized thereafter.
Disaggregated revenue
The Group’s revenues by geographic region based on end-users who purchased our products or services are
as follows:
Americas
EMEA
Asia Pacific
Fiscal Year Ended June 30,
2019
2018
2017
(U.S. $ in thousands)
*As Adjusted
*As Adjusted
$
603,959 $
439,363 $
317,432
474,712
131,456
347,509
94,106
193,790
115,462
$ 1,210,127 $
880,978 $
626,684
Revenues from the United States totaled approximately $529 million, $386 million, and $281 million for the
fiscal years ended 2019, 2018, and 2017, respectively. Revenues from our country of domicile, the United Kingdom,
totaled approximately $86 million, $63 million, and $46 million for the fiscal years ended 2019, 2018, and 2017,
respectively. No one customer has accounted for more than 10% of revenue for the fiscal years ended 2019, 2018,
and 2017.
15. Exchangeable Senior Notes
2023 Exchangeable Senior Notes
In April 2018, Atlassian, Inc. a wholly owned subsidiary of the Company, issued $850 million 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.
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 exchange 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), subject to customary anti-dilution adjustments. Holders of
the Notes may exchange, at their option, on or after February 1, 2023. Further, holders of the Notes may exchange,
at their option, prior to 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), if the last
reported sale price of the Class A ordinary shares for at least 20 trading days (whether or not consecutive) during a
period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding
calendar quarter is greater than or equal to 130% of the exchange price on each applicable trading day; (2) during the
five business day period after any five 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
F-48
such trading day; (3) if the Company calls any or all of the Notes for redemption, at any time prior to the close 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 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 may redeem the Notes at its option, prior to May 1, 2023, in whole but not in part, in connection
with certain tax-related events. The Company may also redeem 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 exchange
price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately
preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period
ending on, and including, the trading day immediately preceding the date on which the Company provides notice of
redemption, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued
and unpaid interest to, but excluding, the 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 $851.1 million and $202.6 million as of
June 30, 2019 and 2018, respectively.
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 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 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 $214.6
million and $99.9 million as of June 30, 2019 and 2018, respectively.
The current or non-current classification of the embedded exchange derivative liability and the capped calls
asset corresponds with the classification of the Notes on the consolidated statements of financial position. The
classification is evaluated at each balance sheet date, and may change from time to time depending on whether the
exchange conditions are met. As of June 30, 2019, 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 for details on
the valuation of exchange feature derivative liability and capped call assets.
The principal amount, unamortized debt discount, unamortized issuance costs and net carrying amount of the
liability component of the Notes as of June 30, 2019 and 2018 were as follow:
Principal amount
Unamortized debt discount
Unamortized issuance costs
Net liability
F-49
As of June 30,
2019
2018
(U.S. $ in thousands)
$
$
1,000,000 $
1,000,000
(140,011)
(6,413)
(172,464)
(7,899)
853,576 $
819,637
The effective interest rate, contractual interest expense and amortization of debt discount for the Notes for
the fiscal year ended June 30, 2019 and 2018 were as follow:
Effective interest rate
Contractual interest expense
Amortization of debt discount
Reconciliation of assets and liabilities arising from financing activities:
Fiscal Year Ended June 30,
2019
2018
(U.S. $ in thousands)
4.83%
6,267
32,453
$
$
$
$
4.83%
1,075
5,433
Capped call
assets
Exchangeable
Notes, net
Embedded exchange feature
of Notes
Accrued
interest
(U.S. $ in thousands)
Balance as of June 30, 2017
$
— $
— $
— $
Cash flows
Amortization of debt discount and
issuance cost
Fair value changes
Accrual of interest
Other
Balance as of June 30, 2018
Cash flows
Amortization of debt discount and
issuance cost
Fair value changes
Accrual of interest
(87,700)
812,587
—
5,693
(12,232)
—
—
(99,932)
—
—
(114,665)
—
—
—
1,357
819,637
—
33,939
—
—
Balance as of June 30, 2019
$
(214,597) $
853,576 $
177,907
—
24,646
—
—
202,553
—
—
648,573
—
851,126 $
—
—
—
—
1,094
—
1,094
(6,319)
—
—
6,267
1,042
F-50
16. Shareholders’ Equity
Share capital
Details
Class A ordinary shares
Class B ordinary shares
Movements in Class A ordinary share capital
Details
Balance as of June 30, 2017
Conversion of Class B ordinary shares
Exercise of share options
Issuance for settlement of RSUs
Vesting of share options that were early exercised
Balance as of June 30, 2018
Conversion of Class B ordinary shares
Exercise of share options
Issuance for settlement of RSUs
Vesting of share options that were early exercised
Balance as of June 30, 2019
As of June 30,
As of June 30,
2019
2018
2019
2018
(number of shares)
(in thousands)
117,273,566
124,722,559
241,996,125
105,371,800 $
129,942,506
235,314,306 $
11,727 $
12,472
24,199 $
10,537
12,994
23,531
Number of
Shares
Amount
(U.S. $ in
thousands)
91,979,704 $
9,198
5,861,707
1,902,084
5,253,809
374,496
587
190
525
37
105,371,800
10,537
5,219,947
1,496,875
4,674,873
510,071
522
150
467
51
117,273,566 $
11,727
Class A shares as of June 30, 2019 and June 30, 2018 does not include 911,367 and 827,871 shares of
restricted stock outstanding, respectively, that are subject to forfeiture or repurchase.
Movements in Class B ordinary share capital
Number of
Shares
Amount
(U.S. $ in
thousands)
135,283,942 $
520,271
(5,861,707)
129,942,506
(5,219,947)
124,722,559 $
13,528
53
(587)
12,994
(522)
12,472
Details
Balance as of June 30, 2017
Exercise of share options
Conversion to Class A ordinary shares
Balance as of June 30, 2018
Conversion to Class A ordinary shares
Balance as of June 30, 2019
Ordinary shares
Nominal value
Ordinary shares have a nominal value of $0.10.
F-51
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 one 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
one 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-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 one vote. Each Class B ordinary share is entitled to 10 votes.
Share premium
Share premium consists of additional consideration for shares above the nominal value of shares in issue.
Other capital reserves
Capital redemption and merger reserves
The Company has capital redemption and merger reserves of $35.0 million at June 30, 2019, 2018 and 2017.
They are comprised of a $98.0 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.
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
F-52
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.
17. 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.
A reconciliation of the calculation of basic and diluted loss per share is as follows:
Numerator:
Net loss attributable to ordinary shareholders
Denominator:
Weighted-average ordinary shares outstanding—basic
Weighted-average ordinary shares outstanding—diluted
Fiscal Year Ended June 30,
2019
2018
2017
(U.S. $ in thousands, except per share data)
*As Adjusted
*As Adjusted
$ (637,621) $ (113,432) $
(37,449)
238,611
238,611
231,184
231,184
222,224
222,224
Net loss per share attributable to ordinary shareholders:
Basic net loss per share
Diluted net loss per share
$
$
(2.67) $
(2.67) $
(0.49) $
(0.49) $
(0.17)
(0.17)
* As adjusted to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 for further details.
For fiscal years ended June 30, 2019, 2018 and 2017 , 9.6 million, 12.8 million and 13.8 million, respectively
of potentially anti-dilutive shares were excluded from the computation of net loss per share.
18. Commitments
The Group leases various offices in locations such as Amsterdam, the Netherlands; the San Francisco Bay
Area, California, New York, New York, Austin, Texas, and Boston, Massachusetts, United States; Sydney, Australia;
Manila, the Philippines; Bengaluru, India; Yokohama, Japan; and Ankara, Turkey under non-cancellable operating
leases expiring within one to nine 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 $38.6
million, $23.6 million, and $12.2 million during the fiscal years ended 2019, 2018 and 2017, respectively.
Additionally, the Group has a contractual commitment for services with third-parties related to its cloud services
platform and data centers. These commitments are non-cancellable and expire within two to four years.
Commitments for minimum lease payments in relation to non-cancellable operating leases and purchase
obligations as of June 30, 2019 were as follows:
Fiscal Period:
Year ending 2020
Years ending 2021 - 2024
Thereafter
Total commitments
Operating
Leases
Other
Contractual
Commitments
Total
(U.S. $ in thousands)
$
$
38,790 $
108,978 $
148,021
144,037
219,342
—
330,848 $
328,320
147,768
367,363
144,037
659,168
F-53
19. 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 Group’s key management personnel is as follows:
Executive management
Short-term compensation and benefits
Post-employment benefits
Share-based payments
Board of directors
Cash remuneration
Share-based payments
20. Geographic Information
Fiscal Year Ended June 30,
2019
2018
2017
(U.S. $ in thousands)
$ 3,835 $ 2,991 $ 2,860
109
99
100
17,144
9,335
26,030
$ 21,088 $ 12,425 $ 28,990
$
430 $
362 $
388
1,772
1,577
1,825
$ 2,202 $ 1,939 $ 2,213
The Group’s non-current operating assets by geographic regions are as follows:
Non-current operating assets
United States
Australia
India
Fiscal Year Ended June 30,
2019
2018
(U.S. $ in thousands)
$
$
819,227 $
412,112
18,842
9,286
16,730
—
847,355 $
428,842
Non-current operating assets for this purpose consist of property and equipment, goodwill, intangible assets
and other non-current assets.
21. Share-based Payments
The Group maintains four 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 board of directors approved the 2015 Plan, and in November 2015,
our shareholders adopted the 2015 Plan, effective on our IPO, which serves as the successor to the 2014 Plan and
the Option Plans and provides for the issuance of incentive and nonstatutory share options, share appreciation rights,
restricted share awards, RSUs, unrestricted share 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.
F-54
RSU grants generally vest 25% on the one year anniversary and 1/12th of the remaining RSUs vest over the
remaining three years, on a quarterly basis thereafter. 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
the effectiveness of the registration statement related to 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 no 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 seven to ten years and typically follow a standard
vesting schedule over a 4 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:
Balance as of June 30, 2017
Increase in shares authorized:
2015 Plan
RSUs granted
RSUs canceled
RSUs settled
Share options exercised
Share options canceled
Balance as of June 30, 2018
Increase in shares authorized:
2015 Plan
RSUs granted
RSUs canceled
RSUs settled
Share options exercised
Share options canceled
Shares
Available
for Grant
21,597,913
11,423,916
(4,390,298)
1,951,289
—
—
17,395
30,600,215
11,807,109
(5,397,681)
1,113,870
—
—
5,481
Share Options
Outstanding
Weighted
Average
Exercise
Price
4,642,661 $
2.21
—
—
—
—
(1,902,084)
(17,395)
2,723,182
—
—
—
—
(1,496,875)
(5,481)
—
—
—
—
1.93
1.45
2.41
—
—
—
—
2.37
0.65
RSUs
Outstanding
12,417,473
—
4,390,298
(1,951,289)
(5,253,809)
—
—
9,602,673
—
5,397,681
(1,113,870)
(4,674,873)
—
—
Balance as of June 30, 2019
38,128,994
1,220,826 $
2.47
9,211,611
Share options vested and exercisable as of
June 30, 2019
Share options vested and exercisable as
of June 30, 2018
1,027,372 $
1,983,464 $
2.55
2.50
During fiscal years ended 2019 and 2018 , the Company added 11,807,109 and 11,423,916 Class A ordinary
shares to the pool of shares available for issuance, respectively, pursuant to an evergreen provision contained in the
2015 Plan.
F-55
The weighted-average remaining contractual life for options outstanding as of June 30, 2019 and 2018 was
3.6 years and 4.1 years, respectively. Options exercisable as of June 30, 2019 and 2018, had a weighted-average
remaining contractual life of approximately 3.2 years and 3.3 years, respectively.
The following table summarizes information about share options outstanding as of June 30, 2019:
Range of
Exercise Prices
$0.59 - 0.66
$1.14
$1.92 - 2.16
$2.40 - 2.92
$3.18
Options Outstanding
Options Exercisable
Number
Outstanding
196,206 $
65,107
17,828
299,613
642,072
1,220,826 $
Weighted
Average
Exercise
Price
0.63
1.14
2.09
2.47
3.18
2.47
Number
Exercisable
143,346 $
20,868
17,828
299,613
545,717
1,027,372 $
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Years
0.62
1.14
2.09
2.47
3.18
2.55
5.83
7.07
0.45
0.86
3.81
3.24
The following table summarizes information about share options outstanding as of June 30, 2018
Range of
Exercise Prices
$0.59 - 0.66
$1.14 - 1.59
$1.92 - 2.16
$2.40 - 2.92
$3.18
Options Outstanding
Options Exercisable
Number
Outstanding
385,963 $
212,391
166,967
740,363
1,217,498
2,723,182 $
Weighted-
Average
Exercise
Price
0.63
1.35
2.06
2.46
3.18
2.41
Number
Exercisable
162,945 $
123,296
166,967
740,363
789,893
1,983,464 $
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Years
0.61
1.50
2.06
2.46
3.18
2.50
6.01
2.07
1.39
1.86
4.75
3.32
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).
The weighted-average grant date fair value of the RSUs issued during the fiscal years ended June 30, 2019
and 2018 was $83.90 and $41.70 per share, respectively. There were no share options granted during the fiscal year
ended June 30, 2019 and 2018.
As of June 30, 2019, the Group had an aggregate of $285.3 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
remaining period of 1.4 years.
Restricted stock
During fiscal year 2019, the Company granted 593,567 shares of restricted stock that were subject to forfeiture.
The weighted average grant fair value date of these restricted shares was $98.72. There was no grant of restricted
stock during fiscal year 2018. As of June 30, 2019 and 2018 , there were 911,367 and 827,871 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 applicable.
F-56