To our shareholders, customers,
partners, and all Atlassians—
As we write this letter, the world is in the grip of a
pandemic, and 5,000 Atlassians are working from
home. In these extraordinary times, resilience is
foremost on our minds – the resilience of our team,
of the teams and customers we serve, and of the
economy and society.
We started Atlassian with the aim of building a
resilient, enduring business that unleashes the
potential of teams everywhere. To achieve that, we
want to deliver value not just for shareholders, but
for our customers, our people, our communities, and
our planet.
This way of thinking has never been more important.
To be totally honest, it’s the key to our success and
long-term profitability. Even better, it will position us
to remain resilient in this uncertain time. Given the
unfolding threat posed by COVID-19, it feels strange
to share a business-as-usual report.
On one hand, we’re incredibly proud of our strong
fiscal 2020 results. We adapted quickly to operate as
a fully-remote company in the face of the COVID-19
pandemic, and empowered many customers to do the
same through our mission-critical work management
products. We delivered value to teams at over 174,000
customers, more than 150,000 of which are in the
cloud. We made significant progress building a strong
foundation in our transformation to a cloud-first
company. We surpassed $1.6 billion in revenue and
generated $500 million in free cash flow.
On the other hand, the world around us is in upheaval.
COVID-19 is affecting the well-being of millions and
causing the global economy to retrench. The pandemic
is also exposing just how fragile our economy,
healthcare, and social systems are. The Black Lives
Matter movement has put a spotlight on systemic
racial injustice, and events like the Australian bushfires
highlight the devastation possible when we ignore
existential threats like climate change. Teams will
create solutions to these problems, and amidst the
current macro climate, our job is to make those teams
resilient and successful.
As we look ahead, we’ll lean into our competitive
advantages and be bold as we push through the
turbulence. This will lead us to unleash the potential
of teams, create massive impact for customers,
and continue our transformation into a $5 billion+
global software leader. We operate with a long-term
mindset to drive durable growth measured over
decades. We will use the momentum and financial
strength from fiscal 2020 to fuel our direction in
the years ahead. We will continue to advance our
customers’ path to the cloud and invest against the
tremendous opportunities in front of us.
We also continue to invest in sustainable practices
because it’s the right thing to do and because we
know it’s what our people expect of business in
general. Atlassian’s Return on Action report, released
in March, reveals that employees across generations
and industries are looking for leadership and action
on the issues that most affect society as a whole.
We’re just starting our sustainability journey, and
we have much more progress to make, particularly
when it comes to balanced representation in our
employees. In the end, we’re one team on one
planet, and it’s up to all of us to be the change we
seek, together.
We want to thank Atlassians for their resilience
and determination during these incredibly challenging
times. They make possible all that we achieve as
a company.
And thank you for all your support and joining us on
our journey to unleash the potential of every team.
Scott Farquhar and Mike Cannon-Brookes
Co-Founders and Co-Chief Executive Officers
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
OR
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2020
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
IR@atlassian.com
(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
Name of each exchange on which registered
TEAM
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
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, 2020, 128,201,296 Class A Ordinary Shares and 119,761,681 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 ☑ No ☐
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 ☐ No ☑
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 ☑ No ☐
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 ☐
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:
Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Emerging growth company ☐
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 whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☑
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP ☐ International
Financial Reporting Standards as issued by the International Accounting Standards Board ☑ Other ☐
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 ☐ Item 18 ☐
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 ☐ 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
36
45
45
62
74
78
79
79
87
88
88
88
88
88
89
89
89
89
90
90
90
90
90
90
91
91
92
94
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, including the impact of customers transitioning from perpetual
licenses to subscription licenses;
• 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;
and
The impact of natural disasters, diseases and pandemics, such as the novel coronavirus (“COVID-19”)
pandemic, and any associated economic downturn, and political and social unrest on our results of
operations and financial performance.
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.
4
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. 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, 2020, 2019 and 2018 and the consolidated summary of financial position data as of
June 30, 2020 and 2019 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, 2017 and 2016 and the
consolidated statements of financial position data as of June 30, 2018, 2017 and 2016 are derived from our audited
consolidated financial statements that are not included in this annual report. The selected summary data for the
year ended June 30, 2020 reflects the adoption of IFRS 16, Leases (“IFRS 16”). The selected summary data for the
year ended June 30, 2019, 2018, 2017 and 2016 does not reflect the adoption of IFRS 16.The selected summary
data for the years ended June 30, 2020, 2019, 2018 and 2017 reflects the adoption of IFRS 15, Revenue from
Contracts with Customers (“IFRS 15”). The selected summary data for the year ended June 30, 2016 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:
Fiscal Year Ended June 30,
2020
2019
2018
2017
2016
(U.S. $ and shares in thousands, except per share data)
$ 931,455 $ 633,950 $ 410,694 $ 249,823 $ 146,659
469,350
95,162
118,206
394,526
326,511
264,453
218,848
93,593
88,058
83,171
60,602
74,058
38,350
65,487
26,064
1,614,173
1,210,127
880,978
626,684
457,058
268,807
210,285
172,690
119,161
75,783
1,345,366
999,842
708,288
507,523
381,275
Research and development (1) (2)
Marketing and sales (1) (2)
General and administrative (1)
Total operating expenses
Operating income (loss)
763,188
299,683
268,409
1,331,280
14,086
579,134
415,776
310,169
208,306
268,356
187,315
134,404
215,714
151,242
118,784
93,391
85,458
1,063,204
754,333
563,357
(63,362)
(46,045)
(55,834)
387,155
(5,880)
Other non-operating expense, net
(338,486)
(535,453)
(15,157)
(1,342)
(1,072)
Finance income
Finance costs
Loss before income tax expense
Income tax benefit (expense)
Net income (loss)
Net income (loss) per share attributable to
ordinary shareholders:
27,801
33,500
9,877
4,851
(49,610)
(40,241)
(6,806)
(75)
2,116
(71)
(346,209)
(605,556)
(58,131)
(52,400)
(4,907)
(4,445)
(32,065)
(55,301)
14,951
$
(350,654) $
(637,621) $ (113,432) $
(37,449) $
9,280
4,373
Basic
Diluted
$
$
(1.43) $
(1.43) $
(2.67) $
(0.49) $
(0.17) $
(2.67) $
(0.49) $
(0.17) $
0.02
0.02
Weighted-average shares outstanding used to
compute net income (loss) per share attributable
to ordinary shareholders:
Basic
Diluted
244,844
244,844
238,611
231,184
222,224
182,773
238,611
231,184
222,224
193,481
(1)
Amounts include share-based payment expense, as follows:
Cost of revenues
Research and development
Marketing and sales
General and administrative
$
19,787 $
17,450 $ 11,955 $
6,856 $
5,371
204,150
149,049
41,960
47,498
39,303
51,960
98,609
23,605
28,704
79,384
17,395
33,813
35,735
11,945
22,429
(2)
Amounts include amortization of acquired intangible assets, as follows:
Cost of revenues
Research and development
Marketing and sales
$
29,509 $
27,997 $ 21,188 $ 14,587 $
7,405
166
12,860
60
—
—
28,744
36,090
15,269
—
86
6
Consolidated Statements of Financial Position Data:
Cash and cash equivalents
Short-term investments
Derivative assets
Right-of-use assets, net
Working capital (deficit)
Total assets
Deferred revenue
Derivative liabilities
Exchangeable senior notes, net
Lease obligations
Total liabilities
Share capital
Total equity
Non-IFRS Financial Results
As of June 30,
2020
2019
2018
2017
2016
(U.S. $ in thousands)
$ 1,479,969 $ 1,268,441 $ 1,410,339 $ 244,420 $ 259,709
676,072
327,487
217,683
445,046
215,233
—
323,134
305,499
483,405
99,995
—
3,252
—
—
—
(374,993)
(287,597) 1,377,145
296,984
542,038
3,894,072
2,977,258
2,421,828
1,282,117
990,973
601,005
1,284,598
889,183
264,568
468,820
855,079
853,576
—
342,871
245,195
181,068
207,970
819,637
—
—
—
—
—
—
—
3,318,766
2,411,791
1,514,508
379,424
259,310
24,744
24,199
23,531
22,726
21,620
575,306
565,467
907,320
902,693
731,663
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 results of operations. 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, and beginning in fiscal year 2020,
with the adoption of IFRS 16, payments of lease obligations are also deducted.
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;
The related income tax effects on these items and changes in our assessment regarding the realizability of
our deferred tax assets; and
Purchase of property and equipment and payments of lease obligations.
7
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 results of operations
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 table provides 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, 2020,
2019, 2018, 2017 and 2016. The data for the year ended June 30, 2020 reflects the adoption of IFRS 16 on July 1,
2019. The data for the year ended June 30, 2019, 2018, 2017 and 2016 does not reflect the adoption of IFRS 16.
The data for the years ended June 30, 2020, 2019, 2018 and 2017 reflect the adoption of IFRS 15 on July 1, 2018.
The data for the year ended June 30, 2016 does not reflect the adoption of IFRS 15.
8
2020
Fiscal Year Ended June 30,
2019
2018
2017
2016
Gross profit
IFRS gross profit
(U.S. $ and shares in thousands, except per share data)
$ 1,345,366 $ 999,842 $ 708,288 $ 507,523 $ 381,275
Plus: Share-based payment expense
Plus: Amortization of acquired intangible assets
19,787
29,509
17,450
27,997
11,955
21,188
6,856
14,587
5,371
7,405
Non-IFRS gross profit
$ 1,394,662 $ 1,045,289 $ 741,431 $ 528,966 $ 394,051
Operating income
IFRS operating income (loss)
$
14,086 $
(63,362) $ (46,045) $ (55,834) $
(5,880)
Plus: Share-based payment expense
313,395
257,762
162,873
137,448
Plus: Amortization of acquired intangible assets
42,535
56,801
57,278
29,856
75,480
7,491
Non-IFRS operating income
$ 370,016 $ 251,201 $ 174,106 $ 111,470 $ 77,091
Net income
IFRS net income (loss)
Plus: Share-based payment expense
Plus: Amortization of acquired intangible assets
Plus: Non-coupon impact related to exchangeable
senior notes and capped calls
$ (350,654) $ (637,621) $ (113,432) $ (37,449) $
4,373
313,395
42,535
257,762
56,801
162,873
57,278
137,448
29,856
75,480
7,491
371,561
567,847
19,892
—
—
Less: Income tax effects and adjustments
(88,030)
(30,243)
(2,150)
(39,864)
(16,018)
Non-IFRS net income
$ 288,807 $ 214,546 $ 124,461 $ 89,991 $ 71,326
Net income per share
IFRS net income (loss) per share - diluted
$
(1.43) $
(2.67) $
(0.49) $
(0.17) $
Plus: Share-based payment expense
Plus: Amortization of acquired intangible assets
Plus: Non-coupon impact related to exchangeable
senior notes and capped calls
1.27
0.17
1.49
1.05
0.23
2.37
0.68
0.25
0.08
0.59
0.13
—
0.02
0.37
0.04
—
Less: Income tax effects and adjustments
(0.35)
(0.12)
(0.01)
(0.17)
(0.08)
Non-IFRS net income per share - diluted
$
1.15 $
0.86 $
0.51 $
0.38 $
0.35
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
Free cash flow
244,844
238,611
231,184
222,224
193,481
6,811
9,609
12,801
13,833
—
—
—
—
—
8,205
251,655
248,220
243,985
236,057
201,686
IFRS net cash provided by operating activities
$ 574,210 $ 466,342 $ 311,456 $ 199,381 $ 129,542
Less: Purchase of property and equipment
(35,709)
(44,192)
(30,209)
(15,129)
(34,213)
Less: Payments of lease obligations
(38,125)
—
—
—
—
Free cash flow (3)
$ 500,376 $ 422,150 $ 281,247 $ 184,252 $ 95,329
(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, 2020,
2019, 2018 and 2017 because the effect would have been anti-dilutive.
(2) Gives effect to share options and restricted share units (“RSUs”) in periods prior to our IPO for comparability.
(3) As a result of our adoption of IFRS 16 on July 1, 2019, we have updated our definition of free cash flow to subtract payments of lease obligations
under IFRS 16. These payments were previously, but no longer, reported in cash provided by operating activities. As a result, free cash flow is not affected
by this change. Please see Note 2, “Summary of Significant Accounting Policies,” to the notes to our consolidated financial statements for additional
information regarding IFRS 16 adoption.
9
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 results of
operations 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 results of
operations could be harmed substantially.
The COVID-19 pandemic, and any associated economic and social impacts, could harm our business and
results of operations.
In January 2020 the World Health Organization declared COVID-19 a Public Health Emergency of
International Concern, and a pandemic in March 2020. This outbreak has continued to rapidly spread across the
world and has significantly impacted global economic activity, worldwide financial markets and social practices. The
related adverse public health developments, including orders to shelter-in-place, travel restrictions, and mandated
business closures, have adversely affected workforces, organizations, customers, economies, and financial markets
globally, leading to an economic downturn and increased market volatility. It has also disrupted the normal
operations of many businesses, including ours. The COVID-19 pandemic may prevent us from conducting business
operations at full capacity for an indefinite period of time. For example, we have taken precautionary measures
intended to help minimize the risk of the virus to our employees which may disrupt our operations, including
temporarily closing our offices worldwide, requiring all employees to work remotely, and suspending all travel
worldwide for our employees. An extended period of remote-work arrangements could strain our business continuity
plans, introduce operational risk, including, but not limited to, cybersecurity risks, and impair our ability to effectively
manage our business, which may negatively impact our business, results of operations, and financial condition. We
are actively monitoring the impacts of the situation and may adjust our current policies and practices as more
information and public health guidance become available.
This outbreak and the resulting economic and social impact, as well as intensified measures undertaken to
contain the spread of COVID-19, could decrease technology spending, affect our ability to accurately forecast our
future results, adversely affect demand for our products, cause some of our paid customers or suppliers to file for
bankruptcy protection or go out of business, affect the ability of our customer support team to conduct in-person
trainings or our solutions partners to conduct in-person sales, impact expected spending from new customers or
renewals or expansions from existing customers, negatively impact collections of accounts receivable, result in
elongated sales cycles, and harm our business, results of operations, and financial condition. In particular, we have
revenue exposure to customers who are small- and medium-sized businesses and to industries that may be
disproportionately impacted by COVID-19. If these customers’ business operations and finances are negatively
affected, they may not purchase or renew our products, may reduce or delay spending, or request extended
payment terms or price concessions, which would negatively impact our business, results of operations, and
financial condition.
The extent to which COVID-19 ultimately impacts our business, results of operations, and financial position
will depend on future developments, which are uncertain and cannot be fully predicted at this time, including, but not
limited to, the duration and spread of the outbreak, its severity, the actions taken by governments and authorities to
contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions
can resume.
10
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, a slower than anticipated adoption of our cloud
offerings, 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 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 (including GitHub), IBM, Google,
ServiceNow, salesforce.com, PagerDuty, Gitlab, Zendesk, Asana, Monday.com and Smartsheet. 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
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.
11
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 with sizeable venture capital
investment, 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 our 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 could harm our
business. Further, as more customers elect our cloud offering in place of our on-premises offering, revenues from
such customers are 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, if we are unable to continue to scale our systems to meet
the requirements of a successful large, cloud offering, or if we lose customers currently using our on-premises
products due to our increased focus on our cloud offering or our inability to successfully migrate them to our cloud
products, our business could 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 offering that competes 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, and any decline in our customer retention or
expansion could 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
duration 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,
our increased focus on our cloud offerings, or the effects of global economic conditions, including the impacts on us
or our customers, partners and suppliers from the COVID-19 pandemic. 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 could harm our
future results of operations and prospects.
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
could be harmed.
12
Our ability to attract new customers, and retain 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 could 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 could 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 IT and business
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 could 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 2020
and 2019, our research and development expenses were 47% and 48% of our revenue, respectively. If we do not
spend our research and development budget efficiently or effectively on compelling innovation and technologies, our
business could 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 could 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, Sweden,
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 could 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.
13
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 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 products 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. Additionally, due to the COVID-19 pandemic, our employees are temporarily working remotely,
which may pose additional data security risks.
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, limited free versions or affordable starter licenses for
certain products, and we may not be able to realize the benefits of this strategy.
We offer free trials, limited free versions or affordable starter licenses 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 could be harmed.
14
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 or free 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 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. We have historically increased, and
will continue to increase, prices from time to time. 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. 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, including
the current environment caused by the COVID-19 pandemic. 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 a majority of our revenue from Jira Software and Confluence.
We derive a majority 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 the 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 we do not continue to add new vendors and developers, or our existing 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 could 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 could be harmed. Moreover, we provide service level commitments under certain of our paid
customer cloud contracts, pursuant to which we guarantee specified minimum availability. From time to time, we
have granted, and in the future will continue to grant, credits to paid customers pursuant to the terms of these
agreements. If we fail to meet these contractual commitments, we could be obligated to provide credits for future
service, or face contract termination with refunds of prepaid amounts related to unused subscriptions, which could
harm our business, results of operations, and financial condition.
15
Additionally, 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.
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 these apps contain bugs, vulnerabilities, or defects, such apps
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 could 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 product 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 could 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 could 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, enterprise 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, training, and
retaining 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
16
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 could be harmed.
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
•
•
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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;
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• Our increased focus on our cloud offerings;
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;
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• 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 decisions, reduce the value of new license, subscription, or maintenance plans, or affect
customer retention;
The impact of social unrest, natural disasters, diseases and pandemics, such as the COVID-19
pandemic, and any associated economic downturn, and political and social unrest, on our results of
operations and financial performance;
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.
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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, our business,
results of operations, and financial condition could be harmed.
We have established relationships with certain solution partners 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 that can drive substantial revenue and provide additional value-
added services to our customers. Currently we derive approximately one-third of our revenue from channel partners’
sales efforts.
Successfully managing our indirect channel distribution efforts is a complex process across the broad range
of geographies where we do business or plan to do business. Our solution partners are independent businesses we
do not control. Notwithstanding this independence, we still face legal risk and reputational harm from the activities of
our solution partners including, but not limited to, export control violations, workplace conditions, corruption and anti-
competitive behavior.
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Our agreements with our existing solution partners are non-exclusive, meaning they 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 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 in a timely and cost-effective manner, or at all, or are
unable to assist our current and future solution partners in independently distributing and deploying our products,
our business, results of operations, and financial condition could be harmed. If our solution partners 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 could also be harmed.
Many of our solution partners rely on in-person interactions to manage and build relationships with our
customers. Currently, as a result of the work and travel restrictions due to COVID-19, our solution partners’ activities
are being conducted remotely. We do not yet know the extent of the negative impact this will have on our solution
partners’ ability to distribute our products.
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 or strategic investments may not
achieve our goals, and any future acquisitions or strategic investments 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:
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Issue additional equity securities that would dilute our existing shareholders;
Use cash that we may need in the future to operate our business;
Incur large charges, expenses, or substantial liabilities;
Incur debt on terms unfavorable to us or that we are unable to repay;
Encounter difficulties retaining key employees of the acquired company or integrating diverse software
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 could be harmed.
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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’,
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 analyses 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 analyses. If these analyses 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. 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 could harm our business, results of operations, and
financial condition.
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. Data protection regulation is an area of increased focus
and changing requirements. On April 27, 2016, the European Union (“EU”) adopted the General Data Protection
Regulation 2016/679, or GDPR, that took effect on May 25, 2018, replacing the prior data protection laws of each
EU member state. GDPR applies to any company established in the EU as well as to those outside the EU if they
collect and use personal data in connection with the offering of goods or services to individuals in the EU 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, took effect January 1, 2020 and the California Attorney General began enforcement on July 1,
2020. Aspects of the CCPA and its interpretation and enforcement remain unclear. We cannot fully predict the
impact of the CCPA on our business or operations, but it may require us to modify our data processing practices
and policies and to incur substantial costs and expenses in an effort to comply. 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 third annual review by EU regulatory authorities in October 2019, which re-affirmed the EU-
U.S. Privacy Shield as a valid framework for transferring data from the EU 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 an EU data protection authority until such point in time
that we ensure an adequate mechanism for European data transfers, which could damage our reputation, inhibit
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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 could 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 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:
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Increased management, travel, infrastructure, and legal compliance costs associated with having
operations in many countries;
Difficulties in enforcing contracts, including “clickwrap” contracts that are entered into online, of 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;
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• 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, including as a result of
COVID-19;
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;
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Reduced protection for intellectual property rights in some countries and practical difficulties associated
with enforcing our legal rights abroad;
Imposition of travel restrictions, prohibitions of non-essential travel, modifications of employee work
locations, or cancellation or reorganization of certain sales and marketing events as a result of
COVID-19;
Compliance with the laws of numerous foreign taxing jurisdictions, including withholding obligations, and
overlapping of different tax regimes; and
• Geopolitical risks, such as political and economic instability, and changes in diplomatic and trade
relations.
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.
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, go-to-market, 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 and retain
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 could 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
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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 (“AUD”), 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.
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,
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 additional
jurisdictions.
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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. For example, the impact of COVID-19 may cause customers to request
concessions, including better pricing, or to slow their rate of expansion or reduce their number of licenses, which
may not be reflected immediately in our results of operations. 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 could 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 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 could be harmed if any provider of such software systems:
Discontinues or limits our access to its APIs;
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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.
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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 could 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 could be harmed.
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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. We
have received, and may receive in the future, communications from third parties, including practicing entities and
non-practicing entities, claiming 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.
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 could 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.
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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.
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 (“OECD”) continues to introduce various proposals changing the way tax is assessed, collected and
governed. Of note are the efforts around the base erosion and profit shifting which seek to establish certain
international standards for taxing the worldwide income of multinational companies. These measures have been
endorsed by the leaders of the world’s 20 largest economies.
The EU together with the United Kingdom have recently established a mandate that focuses on the
transparency of cross-border arrangements concerning at least one EU member state through mandatory
disclosure and exchange of cross-border arrangements rules. These regulations (known as MDR in the United
Kingdom and DAC 6 in the EU) require taxpayers to disclose certain transactions to the tax authorities resulting in
an additional layer of compliance and require careful consideration of the tax benefits obtained when entering into
transactions that need to be disclosed.
25
Also, in March 2018, the European Commission (“EC”) proposed a series of measures aimed at ensuring a
fair and efficient taxation of digital businesses operating within the EU. As collaborative efforts by the OECD and EC
continue, some countries have unilaterally moved to introduce their own digital service tax or equalization levy to
capture tax revenue on digital services more immediately. Notably France, Italy, Austria, the United Kingdom, Turkey
and India have enacted or will soon enact this tax, generally 2% on taxable activities.
As a result of the above measures 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
(the “Tax Act”) that significantly reforms the Internal Revenue Code of 1986, as amended (the “Code”). The Tax 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 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 could 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.
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Catastrophic events may disrupt our business.
Natural disasters, pandemics, including COVID-19, other public health emergencies, geopolitical conflicts,
social unrest, 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 suppliers of third-party infrastructure and applications, internal
technology systems, and our websites for our development, marketing, internal controls, operational support, hosted
services and sales activities. If these systems were to fail or be negatively impacted as a result of a natural disaster,
disease or pandemic, including COVID-19, or catastrophic event, our ability to conduct normal business operations
and deliver products to our customers could 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, disease or pandemic, including COVID-19, or catastrophic event, and successfully
execute on those plans, our business and reputation could 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 could 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, including as a
result of the COVID-19 pandemic, 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 could 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.
In addition, the recent COVID-19 pandemic has created significant additional uncertainty for the global
economy. If the outbreak worsens or continues for an indefinite period of time, especially in regions in which we
have material operations or sales, our business and results of operations could be adversely affected.
27
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, the
impacts of the COVID-19 pandemic, 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.
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, 2020, shareholders who hold our Class B ordinary shares collectively hold approximately
90.33% 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 89.45% 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,
pricing changes, strategic partnerships, joint ventures or capital commitments;
28
•
•
•
•
•
•
•
•
•
•
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;
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 geopolitical risks, natural disasters, diseases and
pandemics, including COVID-19, 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, 2020, we had
128,201,296 outstanding Class A ordinary shares and 119,761,681 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.
29
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 of 2002 (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.
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 could be negatively affected.
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 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 our outstanding Notes depends on our future performance, which is subject to economic, financial,
competitive and other factors beyond our control, including the impacts of the COVID-19 pandemic. 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.
30
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.
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
results of operations.
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, 2020, and the Notes are currently exchangeable at the option of the holders, in whole or in
part, between July 1, 2020 and September 30, 2020. 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 continue to classify the outstanding principal of the Notes as a
current rather than long-term liability as of June 30, 2020.
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 is accounted for as a derivative pursuant to accounting standards relating to derivative instruments and
hedging activities. In general, this results in an initial valuation of the exchange feature, which is bifurcated from the
debt component of the Notes, resulting in an original issue discount. The original issue discount is amortized and
recognized as a component of interest expense over the term of the Notes, which results 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 does not affect the amount of cash interest paid to holders of the Notes or our
cash flows, it reduces our earnings and could adversely affect the price at which our Class A ordinary shares trade.
31
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 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.
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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.
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 could 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.
33
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
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
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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 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.
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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 2019, we acquired Code Barrel Pty Ltd (“Code Barrel”), a workflow automation tool for Jira. Total
purchase price consideration for Code Barrel was approximately $39.1 million in cash. Code Barrel is the creator of
‘Automation for Jira,’ a tool for easily automating several aspects of Jira. The acquisition of Code Barrel enhances
Jira by helping customers automate more of the time-consuming and error-prone tasks in Jira.
In May 2020, we acquired Halp, Inc. (“Halp”), a message-based conversational help desk ticketing solution.
The total purchase price was approximately $17.6 million, which consisted of approximately $17.0 million in cash
and $0.6 million in fair value of replacement shares attributable to service provided prior to acquisition. The
acquisition of Halp complements our current product offerings and enables customers to integrate real-time
messaging tools into their existing workflow solutions like Jira Service Desk and Confluence.
In July 2020, we acquired Mindville AB, an asset and configuration management company based in Sweden.
Mindville brings critical configuration management database capability to Jira Service Desk to better meet the needs
of our IT customers. See Note 23, “Events after the reporting period,” to the notes to our consolidated financial
statements for additional information.
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, Jira Service Desk for team
service and support applications, Opsgenie for incident management, Jira Align for enterprise agile planning,
Bitbucket for code sharing and management and Atlasian Access for enterprise-grade security and centralized
administration. 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 174,000 customers across virtually every industry sector in approximately 190 countries as of June 30,
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2020. 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 solely rely on a traditional sales
infrastructure, especially with enterprise-scale customers. 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.
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 Microsoft, Zoom, 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
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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:
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•
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 can use a full-feature free version of our products for up to a certain number of users.
In addition, 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 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.
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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 174,000 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 5,892 customers
paying us in excess of $50,000, 267 customers paying us in excess of $500,000 and 104 customers paying
us in excess of $1,000,000 during fiscal year 2020, 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.
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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.
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 15 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
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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 15 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;
Jira Service Desk for team service and support applications;
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•
•
•
•
• Opsgenie for incident management;
•
•
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Jira Align for enterprise agile planning;
Bitbucket for team code sharing and management; and
Atlasian Access for enterprise-grade security and centralized administration.
These products can be deployed by users in the cloud and many of our products can be deployed behind the
firewall on the customers' own infrastructure.
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.
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.
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.
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Atlassian Access. Atlassian Access is an enterprise-wide product for enhanced security and centralized
administration that works across every Atlassian cloud products used, including Jira, Jira Service Desk, Confluence,
Trello, and Bitbucket.
Other Products
We also offer additional products, including Atlassian cloud apps, Bamboo, Crowd, Crucible, Fisheye, Halp,
Sourcetree, Statuspage and Trello Power-Ups.
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 Cloud 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 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 approximately 25%. In fiscal year 2020, the Atlassian Marketplace generated over $400 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.
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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.
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.
While these events are typically held in-person, as a result of the COVID-19 pandemic, we have adjusted the format
of various events to be hosted virtually in accordance with local public health guidelines.
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. While we have typically held this event in person in prior years, in fiscal year
2020, we hosted Atlassian Summit entirely virtually with over 16,000 unique viewers. 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 virtual networking opportunity for customers to meet each
other, our partner ecosystem, and our employees. We plan to host Atlassian Summit entirely virtually in fiscal year
2021.
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:
42
•
•
•
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.
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 (including GitHub)
and IBM, and smaller companies like Gitlab that offer project management, collaboration and developer
tools.
IT Teams - Our competitors range from cloud vendors, including ServiceNow, salesforce.com, PagerDuty,
Zendesk and Freshworks, to legacy vendors such as BMC Software (Remedy) that offer service desk
solutions.
Business Teams - Our competitors range from large technology vendors, including Microsoft and Google,
that offer a suite of products, to smaller companies like Asana, Monday.com and Smartsheet, which offer
point solutions for team 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, such as Microsoft, Gitlab and Asana.
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.
Employees
Our employees are our greatest asset and we strive to foster a collaborative, productive and fun work
environment. As of June 30, 2020, 2019 and 2018 we had 4,907, 3,616, and 2,638 employees, respectively.
43
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, 2020, our subsidiaries, all of which are wholly-owned, are as follows:
Name
Atlassian (UK) Limited
Atlassian (UK) Holdings Limited
Atlassian (Australia) Limited
Atlassian (UK) Operations Limited
Atlassian, Inc.
Atlassian Network Services, Inc.
Dogwood Labs, Inc.
Trello, Inc.
AgileCraft LLC
AgileCraft Australia Pty Ltd (1)
OpsGenie, Inc.
Opsgenie Yazılım Anonim Şirketi
iFountain, LLC
Halp, Inc
Atlassian Australia 1 Pty Ltd
Atlassian Australia 2 Pty Ltd
Atlassian Corporation Pty. Ltd.
Atlassian Pty Ltd
Good Software Co. Pty Ltd
Code Barrel Pty Ltd
Lead Green Pty Ltd
Lead Green Trust
Vertical First Pty Ltd
Vertical First Trust
Atlassian Capital Pty. Ltd.
MITT Australia Pty Ltd
MITT Trust
Atlassian Holdings B.V.
Atlassian K.K.
Atlassian Germany GmbH
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 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
United States of America
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Netherlands
Japan
Germany
Philippines
France
Netherlands
Canada
India
(1) AgileCraft Australia Pty Ltd is currently in liquidation.
D. Property, Plant and Equipment
As of June 30, 2020, our principal offices consist of approximately 245,000 and 277,000 square feet of
leased office facilities in Sydney, Australia and the San Francisco Bay Area, California, United States, respectively.
We also lease other office facilities around the world, including Austin, Texas; New York, New York; and Boston,
Massachusetts, in the United States; the Netherlands; Japan; the Philippines; India; and Turkey.
44
In February 2020, we entered into lease agreements for approximately 158,000 square feet of office space
in a building under construction in Austin, Texas, United States. We expect to begin occupying 82,000 square feet
and 76,000 square feet of this space in fiscal years 2022 and 2023, respectively.
We believe that suitable additional or alternative space will be available as needed to accommodate our
growth if we require additional space.
Item 4A. Unresolved Staff Comments
Not applicable.
Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Our mission is to unleash the potential of every team.
Our products help teams organize, discuss and complete their 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, Jira Service Desk for team service and support applications,
Opsgenie for incident management, Jira Align for enterprise agile planning, Bitbucket for code sharing and
management and Atlasian Access for enterprise-grade security and centralized administration. 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 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.
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 and other customized needs. Sales through indirect channels comprised
over one-third of total revenues for fiscal year 2020. 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. Subscription revenues consist primarily of fees earned from subscription-based arrangements for providing
customers the right to use our software in a cloud-based-infrastructure that we provide. Subscription revenues also
include the sale of on-premises term licenses, consisting of software licensed for a specified period and support and
maintenance service that is bundled with the license for the term of the license period. From time to time we make
changes to our prices and pricing plans for our products which may impact the growth rate of our revenue, our
deferred revenue balances, and customer retention.
Maintenance provides our customers with access
future updates, upgrades and
enhancements and technical product support for perpetual license products on an if and when available basis.
Maintenance revenue combined with a subscription revenue business, through our cloud and Data Center products,
to unspecified
45
results in a large recurring revenue base. In each of the past three fiscal years, more than 80% of our total revenues
have been of a recurring nature from either maintenance fees or subscriptions.
Customers typically pay us 100% of the initial perpetual license fee as maintenance revenue annually,
beginning in the first year. We typically recognize revenue on the license portion of perpetual license arrangements
and term license agreements once the customer obtains control of the license, which is generally upon delivery of
the license, and for maintenance and subscriptions, revenue is recognized ratably over the term of the contract. Any
invoice amounts or payments received in advance of revenue recognition from subscriptions or maintenance are
included in our deferred revenue balance. The deferred revenue balance is influenced by several factors, including
customer decisions around the timing of renewals, length of contracts and invoice timing within the period.
Key Business Metrics
We utilize 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, 2020, we had 174,097 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 5% of our total revenues during the
fiscal year ended June 30, 2020.
We define the number of customers at the end of any particular period as the number of organizations with
unique domains that have at least one active and paid license or subscription of our products for which they paid
approximately $10 or more per month. While a single customer may have distinct departments, operating segments,
or subsidiaries with multiple active licenses or subscriptions of our products, if the product deployments share a
unique domain name, we only include the customer once for purposes of calculating this metric. We define active
licenses as those licenses that are under an active maintenance or subscription contract as of period end.
Our customers, as defined in this metric, have generated substantially all of our revenue in each of the
periods presented. Including organizations who have only adopted our free or starter products, the active use of our
products extends well beyond our 174,097 customers.
The following table sets forth our number of customers:
Customers
As of June 30,
2020
2019
2018
174,097
152,727 **
125,796 *
* 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, and net cash used in financing activities for
payments of lease obligations.
46
Net cash provided by operating activities
Less: Purchase of property and equipment
Less: Payments of lease obligations
Free cash flow *
Fiscal Year Ended June 30,
2020
2019
2018
(U.S. $ in thousands)
$ 574,210 $ 466,342 $ 311,456
(35,709)
(44,192)
(30,209)
(38,125)
—
—
$ 500,376 $ 422,150 $ 281,247
* As a result of our adoption of IFRS 16 on July 1, 2019, we have updated our definition of free cash flow to subtract payments of lease
obligations under IFRS 16. These payments were previously, but no longer, reported in cash provided by operating activities. As a result, free
cash flow is not affected by this change. Please see Note 2, “Summary of Significant Accounting Policies,” to the notes to our consolidated
financial statements for additional information regarding IFRS 16 adoption.
Free cash flow increased by $78.2 million during the fiscal year ended June 30, 2020 as compared to the
fiscal year ended June 30, 2019 as a result of an increase of $107.9 million in net cash provided by operating
activities and a decrease of $8.5 million in capital expenditures, offset by payment of lease obligations of $38.1
million.
For more information about net cash provided by operating activities, please see “Liquidity and Capital
Resources.”
A. Results of Operations
Components of Results of Operations
Sources of Revenues
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.
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 typically recognize revenue on the license portion of perpetual license arrangements once
the customer obtains control of the license, which is generally upon delivery of the license.
Other revenues
Other revenues include primarily fees received for sales of third-party apps in the Atlassian Marketplace.
Technical account management, consulting and training services are also included in other revenues. Revenue from
the sale of third-party 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 on a net basis as we function as the agent in the relationship.
47
Revenue from technical account management is recognized over the time period that the customer has access to
the service. Revenue from consulting and training is recognized over time as the services are performed.
Cost of Revenues
Cost of revenues primarily consists of expenses related to hosting our cloud infrastructure, which includes
third-party hosting fees and depreciation associated with computer equipment and software; compensation
expenses for our employees and contractors, including share-based payment expense, associated with our
customer support and infrastructure service teams; payment processing fees; amortization of product technologies;
certain IT program fees; 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.
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 compensation 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.
Research and development
Research and development expenses consist primarily of compensation expense for our employees and
contractors, including share-based payment expense, contract software development costs, certain IT program
expenses, 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.
Marketing and sales
Marketing and sales expenses consist primarily of compensation expense for our employees and contractors,
including share-based payment expense, for our marketing and sales employees, marketing and sales programs,
certain IT program expenses, 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 solution partners and
resellers, tracking channel sales activity, supporting and servicing our customers by helping them optimize their
experience and expand the 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 primarily of compensation expense for our employees and
contractors, including share-based payment expense, for finance, legal, human resources and information
technology personnel, as well as external legal, accounting and other, professional fees, certain IT program
expenses, other corporate expenses and facilities and related overhead costs.
Share-based payment expense
We allocate share-based payment expense to personnel costs based on the functional category in which the
employee works. We recognize our share-based payments as an expense in the consolidated statements of
operations based on their grant date fair values and vesting periods.
48
We adhere to the accelerated method of expense recognition for share-based awards subject to graded
vesting (i.e., when portions of the award vest at different dates throughout the vesting period). For example, for a
grant vesting over four years, we treat the grant as multiple awards (sometimes referred to as “tranches”) and
recognize the cost on a straight-line basis separately for each tranche. This results in the majority of the grant’s
share-based payment expense being recognized in the first year of the grant rather than equally per year under a
straight-line expense methodology.
We began granting RSUs in 2014. Prior to our initial public offering (“IPO”), we granted RSUs with both a
time-based service condition and a liquidity condition. The time-based service condition for substantially all of these
awards is satisfied over four years. The liquidity condition was satisfied upon the effectiveness of the registration
statement related to our IPO. Pursuant to IFRS, we estimate the fair value of each award at the date of grant and
recognize expense over the service period rather than starting expense recognition upon a liquidity event, as is the
case under U.S. Generally Accepted Accounting Principles.
During the fiscal years ended 2020 and 2019 we recognized share-based payment expense of $313.4 million
and $257.8 million, respectively. As of June 30, 2020, 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
$328.6 million. We expect this share-based payment expense balance to be amortized as follows: $220.9 million
during fiscal year 2021; $79.0 million during fiscal year 2022; $25.0 million during fiscal year 2023 and $3.7 million
thereafter. The expected amortization reflects only outstanding share awards as of June 30, 2020.
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.
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 years 2020 and 2019, primarily due to the marking to fair
value of the Notes and capped call. Please refer to Note 16, “Exchangeable Senior Notes,” to the notes to our
consolidated financial statements for details of our Notes and capped call. Our significant investments in research
and development and technology infrastructure for our cloud-based offerings, expanding our operations globally,
and developing new products and features for, and enhancements of, our existing products were also a contributing
factor.
49
Results of Operations
The following table sets forth our results of operations for the periods indicated:
Fiscal Year Ended June 30,
2020
2019
(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 income (loss)
Other non-operating expense, net
Finance income
Finance costs
Loss before income tax expense
Income tax expense
Net loss
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
(1)
Amounts include share-based payment expense, as follows:
$
$
$
$
931,455 $
469,350
95,162
118,206
1,614,173
268,807
1,345,366
763,188
299,683
268,409
1,331,280
14,086
(338,486)
27,801
(49,610)
(346,209)
(4,445)
(350,654) $
633,950
394,526
93,593
88,058
1,210,127
210,285
999,842
579,134
268,356
215,714
1,063,204
(63,362)
(535,453)
33,500
(40,241)
(605,556)
(32,065)
(637,621)
(1.43) $
(1.43) $
(2.67)
(2.67)
244,844
244,844
238,611
238,611
Cost of revenues
Research and development
Marketing and sales
General and administrative
$
19,787 $
204,150
41,960
47,498
(2)
Amounts include amortization of acquired intangible assets, as follows:
Cost of revenues
Research and development
Marketing and sales
$
29,509 $
166
12,860
17,450
149,049
39,303
51,960
27,997
60
28,744
50
The following table sets forth our results of operations data for each of the periods indicated as a percentage
Fiscal Year Ended June 30,
2020
2019
58 %
29
6
7
100
17
83
47
18
17
82
1
(21)
2
(4)
(22)
—
(22)
1 %
13
3
3
2 %
—
1
52 %
33
8
7
100
17
83
48
22
18
88
(5)
(44)
3
(4)
(50)
(3)
(53)
1 %
12
3
4
2 %
—
2
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 income (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 2020 and 2019
Revenues
Subscription
Maintenance
Perpetual license
Other
Total revenues
Fiscal Year Ended June 30,
2020
2019
$ Change
% Change
(U.S. $ in thousands)
$
931,455 $
469,350
633,950 $
394,526
297,505
74,824
95,162
118,206
93,593
88,058
1,569
30,148
$ 1,614,173 $ 1,210,127 $
404,046
47 %
19
2
34
33
51
Total revenues increased $404.0 million, or 33%, in the fiscal year ended June 30, 2020 compared to the
fiscal year ended June 30, 2019. 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, 2020, over
90% was attributable to sales to customer accounts existing on or before June 30, 2019. Our number of total
customers increased to 174,097 at June 30, 2020 from 152,727 at June 30, 2019.
Subscription revenues increased $297.5 million, or 47%, in the fiscal year ended June 30, 2020 compared to
the fiscal year ended June 30, 2019. The increase in subscription revenues was primarily attributable to additional
subscriptions from our existing customer base. As customers increasingly adopt our cloud-based subscription
services and term-based licenses for our on-premises Data Center products for their business needs, we expect our
subscription revenues to continue to increase in future periods.
Maintenance revenues increased $74.8 million, or 19%, in the fiscal year ended June 30, 2020 compared to
the fiscal year ended June 30, 2019. 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 $1.6 million, or 2%, in the fiscal year ended June 30, 2020 compared
to the fiscal year ended June 30, 2019. The increase in perpetual license revenues was attributable to additional
licenses to existing customers.
Other revenues increased $30.1 million, or 34%, in the fiscal year ended June 30, 2020 compared to the
fiscal year ended June 30, 2019. 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
Total revenues
Cost of Revenues
Cost of revenues
Gross margin
Fiscal Year Ended June 30,
2020
2019
$ Change
% Change
(U.S. $ in thousands)
$
802,499 $
603,959 $
198,540
33 %
633,735
177,939
474,712
131,456
159,023
46,483
$ 1,614,173 $ 1,210,127 $
404,046
33
35
33
Fiscal Year Ended June 30,
2020
2019
$ Change
% Change
(U.S. $ in thousands)
$ 268,807 $ 210,285 $
58,522
28 %
83 %
83 %
Cost of revenues increased $59 million, or 28%, in the fiscal year ended June 30, 2020 compared to the
fiscal year ended June 30, 2019. The overall increase was primarily due to an increase of $25.4 million in hosting
fees paid to the third party providers and an increase of $21.1 million in compensation expense for employees and
contractors.
We increased our headcount during the period to meet the higher demand for our products and 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. We expect that cost of revenues will increase in absolute dollars and
may increase as a percentage of revenues in future periods.
52
Operating Expenses
Research and development
Fiscal Year Ended June 30,
2020
2019
$ Change
% Change
(U.S. $ in thousands)
Research and development
$
763,188 $
579,134 $
184,054
32 %
Research and development expenses increased $184.1 million, or 32%, in the fiscal year ended June 30,
2020 compared to the fiscal year ended June 30, 2019. The overall increase was primarily a result of an increase of
$154.9 million in compensation expense for employees and contractors (which includes an increase of $55.1 million
in share-based payment expenses) and an increase of $19.2 million in professional services.
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 2020 and 2019.
Marketing and sales
Fiscal Year Ended June 30,
2020
2019
$ Change
% Change
(U.S. $ in thousands)
Marketing and sales
$
299,683 $
268,356 $
31,327
12 %
Marketing and sales expenses increased $31.3 million, or 12%, for the fiscal year ended June 30, 2020,
compared to the fiscal year ended June 30, 2019. Marketing and sales expenses increased primarily due to an
increase of $29.5 million in compensation expense for employees and an increase of $11.0 million in professional
services, offset by a decrease of $15.9 million in amortization of acquired intangible assets. 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.
General and administrative
Fiscal Year Ended June 30,
2020
2019
$ Change
% Change
(U.S. $ in thousands)
General and administrative
$
268,409 $
215,714 $
52,695
24 %
General and administrative expenses increased $52.7 million, or 24%, in the fiscal year ended June 30, 2020
compared to the fiscal year ended June 30, 2019. The increase was primarily due to an increase of $25.8 million in
compensation expense for employees and contractors, an increase of $9.9 million in professional services and an
increase of $5.4 million in software subscription expense. Our general and administrative headcount increased
during the period as we added personnel to support our growth.
Other non-operating expense, net
Other non-operating expense, net
$
(338,486) $
(535,453) $
196,967
**
_______________________
Not meaningful
**
Fiscal Year Ended June 30,
2020
2019
$ Change
% Change
(U.S. $ in thousands)
53
Other non-operating expense, net decreased $197.0 million in the fiscal year ended June 30, 2020,
compared to the fiscal year ended June 30, 2019. The decrease 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 $198.0
million. Please refer to Note 16, “Exchangeable Senior Notes,” to the notes to our consolidated financial statements
for more details.
Income tax expense
Income tax expense
Effective tax rate
**
Not meaningful
Fiscal Year Ended June 30,
2020
2019
$ Change
% Change
(U.S. $ in thousands)
$
(4,445) $
(32,065) $
27,620
**
**
**
We reported a tax expense of $4.4 million on pretax loss of $346.2 million for the fiscal year ended June 30,
2020, as compared to a tax expense of $32.1 million on pretax loss of $605.6 million for the fiscal year ended June
30, 2019. Our effective tax rate substantially differed from the U.K. statutory income tax rate of 19.0% primarily due
to different tax rates in foreign jurisdictions such as the U.S. and Australia, the recognition of significant permanent
differences during the fiscal years ended 2020 and 2019, and non-cash charges to adjust the carrying value of our
U.S. and Australian deferred tax assets due to changes in our assessment of the realizability of our U.S. and
Australian deferred tax assets. In June 2019, as a result of our assessment of the realizability of its Australian
deferred tax assets, we recorded non-cash charges to tax expense of $54.7 million 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 expense to income tax 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, 2020, we had cash and cash equivalents totaling $1.5 billion, short-term investments totaling
$676.1 million and trade receivables totaling $112.0 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
2020, 2019 and 2018 were as follows:
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Fiscal Year Ended June 30,
2020
2019
2018
(U.S. $ in thousands)
$ 574,210 $ 466,342 $ 311,456
(318,931)
(604,198)
(51,696)
(42,575)
(3,187)
906,789
Effect of exchange rate changes on cash and cash equivalents
(1,176)
(855)
(630)
Net increase (decrease) in cash and cash equivalents
$ 211,528 $
(141,898) $ 1,165,919
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
54
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 depreciation and amortization, depreciation of right-of-use assets,
non-coupon impact related to the Notes and capped calls and expense associated with share-based awards, the
timing of employee-related costs such as bonus payments, collections from our customers, which is our largest
source of operating cash flows, and changes in other working capital accounts.
Accounts impacting working capital consist of trade receivables, prepaid expenses and other current assets,
trade and other payables, current provisions, and current deferred revenue. Our working capital may be impacted
by various factors in future periods, such as billings to customers for subscriptions, licenses and maintenance
services and the subsequent collection of those billings or the amount and timing of certain expenditures.
Net cash provided by operating activities was $574.2 million for the fiscal year ended June 30, 2020, as a
result of $346.2 million in loss before income tax expense adjusted by non-cash charges including the net loss of
marking to fair value of the embedded exchange feature of the Notes and related capped call transactions of $336.0
million, debt discount and issuance cost amortization of $35.6 million, share-based payment expense of $313.4
million, depreciation and amortization of $62.3 million, and depreciation of our right-of-use assets of $35.1 million.
The net increase of $143.0 million from our operating assets and liabilities was primarily attributable to a $131.5
million increase in our deferred revenue as a result of increased sales of subscriptions and renewals of
maintenance contracts and a $51.5 million increase in our trade and other payables, provisions and other non-
current liabilities, offset by a $29.4 million increase in trade receivables and a $10.6 million increase in prepaid
expenses and other assets. Net cash provided by operating activities was also impacted by interest received of
$29.2 million and income tax paid, net of tax refund received of $17.9 million.
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 net loss of
marking to fair 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 interest received of $30.3 million and tax refunds
received, net of income tax paid of $7.0 million.
Net cash used in investing activities during the fiscal year ended June 30, 2020 was $318.9 million. This was
primarily related to purchases of investments totaling $985.9 million, cash paid for business combinations, net of
cash acquired, totaling $53.2 million and capital expenditures totaling $35.7 million, offset by cash received from the
maturing of investments which totaled $513.3 million and proceeds from sales of investments of $245.5 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 financing activities for the fiscal year ended June 30, 2020 was $42.6 million and was
primarily related to payments of lease obligations of $38.1 million and coupon interest payments on the Notes of
$(6.3) million, offset by proceeds from exercises of employee share options of $1.8 million.
Net cash used by 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.
55
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, “Summary of Significant
Accounting Policies” to 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
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 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.
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 billing our customers. We receive payments
from customers based on a billing schedule as established in our contracts. Contract assets are recognized when
performance is completed in advance of scheduled billings. Deferred revenue is recognized when billings are in
advance of performance under the contract. Our revenue arrangements include standard warranty provisions that
our products and services will perform and operate in all material respects, with the applicable published
specifications, the financial impacts which have historically been and are expected to continue to be insignificant.
Our contracts do not include a significant financing component.
Our contracts with customers often include promises to transfer multiple products and services to a
customer. Determining whether products and services are considered distinct performance obligations that should
be accounted for separately versus together may require judgment.
We allocate the transaction price for each contract to each performance obligation based on the relative
standalone selling price (“SSP”) for each performance obligation. We use judgment in determining the SSP for
products and services. We typically determine an SSP range for our products and services which is reassessed on
a periodic basis or when facts and circumstances change. For all performance obligations other than perpetual and
term licenses, we are able to determine SSP based on the observable prices of products or services sold separately
in comparable circumstances to similar customers. In instances where performance obligations do not have
observable standalone sales, we utilize available information that may include market conditions, pricing strategies,
the economic life of the software, and other observable inputs to estimate the price we would charge if the products
and services were sold separately.
Our products are generally sold with a right of return, we may provide other credits or incentives, and in
certain instances we estimate customer usage of our services, which are accounted for as variable consideration
when determining the amount of revenue to recognize. Returns and credits are estimated at contract inception and
updated at the end of each reporting period if additional information becomes available. Variable consideration was
not material for the periods presented.
56
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 15, “Revenue,” to 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.
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 typically recognize revenue on the license portion of perpetual license arrangements once
the customer obtains control of the license, which is generally upon delivery of the license.
Other revenues
Other revenues include primarily fees received for sales of third-party apps in the Atlassian Marketplace.
Technical account management, consulting and training services are also included in other revenue. 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 on a net basis 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 consulting and training is recognized over time as the services are performed.
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.
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.
During the measurement period, which may be up to one year from the date of acquisition, we may record
adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed based on
57
additional information obtained affecting the fair value of those assets and liabilities, with the corresponding offset to
goodwill. In addition, uncertain tax positions are initially established in connection with a business combination as of
the acquisition date. We continue to collect information and reevaluate these provisional estimates and assumptions
as deemed reasonable by management. We record any adjustments to these provisional estimates and
assumptions against goodwill provided they arise within the measurement period. Upon the conclusion of the
measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever
comes first, any subsequent adjustments are recorded to the consolidated statements of operations.
Goodwill
Goodwill is the excess of the aggregate of the consideration transferred over the identifiable assets acquired
and liabilities assumed. Goodwill is tested for impairment annually during the fourth quarter of our fiscal year and
when circumstances indicate that the carrying value may be impaired. We perform our annual goodwill impairment
test at the level of our operating segment as there are no lower levels within the Group at which goodwill is
monitored. Impairment is determined for goodwill by assessing the recoverable amount of the operating segment.
When the recoverable amount of the operating segment is less than its carrying amount, an impairment loss is
recognized. Impairment losses relating to goodwill cannot be reversed in 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
1 - 12 years
2 - 10 years
2 - 7 years
Intangible assets with finite lives are assessed for impairment whenever there is an indication that the
intangible asset may be impaired. When the recoverable amount of an intangible asset is less than its carrying
amount, an impairment loss is recognized.
Impairment of non-financial assets
At the end of each reporting period, we assess whether there is an indication that an asset may be impaired.
If any indication exists, or when annual impairment testing for an asset is required, we estimate the asset’s
recoverable amount. The recoverable amount is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from other assets or groups of assets. An asset’s
recoverable amount is the higher of an asset’s or cash generating unit (“CGU”)’s fair value less costs of disposal
and its value in use. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-
tax discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such
transactions can be identified, an appropriate valuation model is used.
Leases
In January 2016, the IASB issued IFRS 16, which supersedes the previous leases standard, IAS 17, Leases
and related interpretations. The standard introduced 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 obligations. We
adopted IFRS 16 as of July 1, 2019, using the modified retrospective method and, therefore, the comparatives for
fiscal years 2019 and 2018 have not been restated.
Prior to adoption of IFRS 16
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
58
asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an
arrangement. We categorize 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.
After adoption of IFRS 16
Group as lessee
We determine if an arrangement is a lease at inception. Our lease agreements generally contain lease and
non-lease components. Lease payments under our lease arrangements are primarily fixed. Non-lease components
primarily include payments for maintenance and utilities and are expensed as incurred.
Lease liabilities are recognized at the present value of the future lease payments at the lease
commencement date. The interest rate used to determine the present value of the future lease payments is our
incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. Our
incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms
and payments, and in economic environments where the leased asset is located. Our lease terms include periods
under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We
generally use the base, non-cancelable, lease term when determining lease liabilities. We reassess the lease term if
and when a significant event or change in circumstances occurs within the control of the Group.
Right-of-use assets are recognized at cost at the lease commencement date. The cost of right-of-use assets
includes the amount of lease liabilities recognized, initial direct cost incurred, any prepaid lease payments less lease
incentives and an estimate of restoration cost. Right-of-use assets are depreciated on a straight-line basis over the
shorter of the lease term and the estimated useful lives of the assets.
We apply the short-term lease recognition exemption for our short-term leases and leases of low-value
assets. Short-term leases are leases with a lease term of 12 months or less. Low-value assets are primarily
comprised of office equipment. Payments associated with short-term leases and leases of low-value assets are
recognized on a straight-line basis over the lease term.
Taxation
Current tax
Current income tax assets and/or liabilities comprise amounts expected to be recovered or paid to Her
Majesty's Revenue & Customs (“HMRC”), the Australian Taxation Office, the United States Internal Revenue
Service (“IRS”) and other 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
results of operations. Deferred tax assets are adjusted for significant non-taxable income, expenses and specific
limits on the use of any unused tax loss or credit. Unrecognized deferred income tax assets are reassessed at each
reporting date and are recognized to the extent that it has become probable that future taxable income will allow the
deferred tax asset to be recovered.
59
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.
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.
Assumptions about the generation of future taxable income depend on management’s estimates of future cash
flows, future business expectations, capital expenditures, dividends, and other capital management transactions.
Management judgment is also required in relation to the application of income tax legislation, which involves
complexity and an element of 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.
New Standards, Interpretations and Amendments Not Yet Adopted in Fiscal Year 2020
The IASB has issued other amendments resulting from improvements to IFRS that management considers
do not have any impact on the accounting policies, financial position or performance of the Group. We do not expect
them to have a material impact on our accounting policies.
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 $989.1 million in research and development activities, excluding share-based
compensation, translating to 35.0% of the revenue generated over the same period. During this period, we released
new versions, features, and cloud platform capabilities to drive existing customer success and expansion as well as
attract new customers to our products.
As of June 30, 2020, 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.
60
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 EU, 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 EU, Brazil, Russia, India,
and China, and certain other jurisdictions, and will pursue additional trademark registrations to the extent we believe
it would be beneficial and cost effective.
As of June 30, 2020, we had 117 issued patents and have over 200 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
We operate with a long-term mindset to drive durable growth measured over decades.
In the fiscal year ended June 30, 2020, we completed the full rollout of free cloud editions across our core
products - Jira Software, Confluence and Jira Service Desk. We also launched the Atlassian Cloud Enterprise, a
complete ladder of cloud editions to fit any size customer’s needs. This is the direct result of our multi-year
investment in our cloud platform.
Migrating our larger customers to the cloud is one of our most important priorities over the next several
years. Consistent with our strategy, our server business is slowing. As a result, we expect perpetual license
revenue, mainly driven by new server sales and upgrades, will decline in the fiscal year ending June 30, 2021.
Maintenance revenue, mainly driven by server renewals, will be flat year over year as we expect a smaller impact
from price increases and a growing impact from server migrations.
While COVID-19 did not have a material adverse impact on our financial condition or results of operations
during the fiscal year ended June 30, 2020, the extent to which COVID-19 ultimately impacts our business, results
of operations, and financial position will depend on future developments, which are uncertain and cannot be
predicted at this time. For example, while our diverse customer base is a competitive advantage for us and helps
fuel our low-friction flywheel sales model, we have revenue exposure to customers who are small- and medium-
sized businesses and to industries that may be disproportionately impacted by COVID-19. Also, a majority of our
cloud customers choose to be billed on a monthly basis and many of these customers are small and medium-sized
businesses that may be adversely impacted by COVID-19. In addition, we may experience elongated sales cycles
and extended payment terms and concessions as the economic and social impacts of COVID-19 become more fully
realized.
Across our deployment options, we expect to see less revenue growth in the fiscal year ending June 30,
2021 from pricing and packaging. Any pricing optimizations will be specifically targeted to support our long-term
business strategy. We will offer loyalty discounts to incentivize eligible existing enterprise server customers to
migrate to our cloud products. We will also continue to support our customers that are facing challenging times as a
result of COVID-19’s impact on the macroeconomy.
We’ll continue investing to pursue the large market opportunities ahead of us, despite macroeconomic
headwinds and slower revenue growth. We expect to invest in additional personnel as we scale, with the majority in
research and development. We plan to invest in our platform, cloud services, migration tools, new product
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initiatives, and in improvements across the cloud portfolio. We expect our operating income and operating cash flow
to decrease in the fiscal year ended June 30, 2021.
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 results of operations or financial conditions.
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.
F. Contractual Obligations and Commitments
Our principal contractual obligations primarily consist of obligations under our Notes, leases for office space,
contractual commitments for hosting services and capital purchase obligations for the construction or purchase of
property and equipment.
At June 30, 2020 contractual obligations, were as follows:
Payments Due by Period
1 to 3
years
Less than
1 year
3 to 5
years
Total
After 5
years
(U.S. $ in thousands)
Exchangeable senior notes (1)
$ 2,211,244 $ 2,211,244 $
— $
— $
—
Lease liabilities (2)
Purchase obligations
Capital purchase obligations
Total
297,082
235,002
9,781
41,584
90,972
9,781
109,015
144,030
—
54,325
92,158
—
—
—
—
$ 2,753,109 $ 2,353,581 $ 253,045 $
54,325 $
92,158
(1) As of June 30, 2020, the closing price exchange condition of the Notes has been met and the Notes and exchange derivative liability are
classified as current on our consolidated statements of financial position and may be due in less than one year. The amount related to the Notes
represent the if-exchanged value using stock price as of June 30, 2020. Refer to Note 16, “Exchangeable Senior Notes,” to the notes to our
consolidated financial statements for more details on the Notes.
(2) Lease liabilities represent undiscounted lease payments excluding certain low-value and short-term leases. For further information, refer to
Note 2, “Summary of Significant Accounting Policies,” and Note 12, “Leases,” to the notes to our consolidated financial statements.
G. Safe Harbor
See “Special Note Regarding Forward-Looking Statements.”
Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The following table sets forth information for our directors and executive officers, including their ages as of
June 30, 2020. 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.
62
Name
Executive Officers and Employee Directors:
Age Position
Michael Cannon-Brookes
40 Co-Founder, Co-Chief Executive Officer and Director
Scott Farquhar
Jay Simons (1)
James Beer
Erika Fisher
Tami Rosen
Sri Viswanath
40 Co-Founder, Co-Chief Executive Officer and Director
47 President
59 Chief Financial Officer
35 General Counsel
49 Chief People Officer
45 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)
__________________________________
54 Director and Chair
44 Director
52 Director
47 Director
54 Director
51 Director
51 Director
(1) Mr. Simons continued to serve as the Company’s President until his departure from the Company in August
2020.
(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 through August 2020. 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.
63
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.
Erika Fisher has served as our General Counsel since July 2019. From April 2016 to July 2019, Ms. Fisher
served multiple roles at Atlassian, including Legal Counsel, Privacy & Product Counsel and Head of Privacy before
becoming General Counsel. From November 2013 to March 2016, Ms. Fisher served as an Associate at Goodwin
Procter LLP, focusing her practice on technology companies and intellectual property transactions. From January
2012 to June 2013, Ms. Fisher was an Associate at Weil, Gotshal & Manges LLP, where she worked on real estate
and structured finance transactions. Ms. Fisher began her legal career as a judicial intern in both the U.S. District
Court for the Southern District of Florida and the U.S. District Court for the Middle District of Florida. Ms. Fisher
holds a Juris Doctorate (JD) degree from the University of Pennsylvania, a Certificate in Business and Public Policy
from the Wharton School, and a Bachelor of Arts degree from the University of Miami.
Tami Rosen has served as our Chief People Officer since January 2020. From April 2018 to January 2020,
Ms. Rosen served as Chief People Officer at Luminar Technologies, and became their advisor from January 2020 to
April 2020. From July 2015 to May 2019, Ms. Rosen served as Vice President of People at Quora from May 2017 to
February 2018. From January 2014 to April 2017, Ms. Rosen served as the Senior Director Human Resources/
Faculty of Apple University at Apple. From May 1997 to October 2013, Ms. Rosen held multiple leadership roles at
Goldman Sachs, including Managing Director of Human Capital Management, Divisional HR Head for the
Investment Management Division, Global HR Co-Head for the Federation Divisions, Co-Head of Federation
Experience Hire Recruiting, and Divisional HR Head for the Operations Division. Ms. Rosen holds a Bachelor of Arts
degree in Law and Society from Binghamton University.
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 1995 to 2003, Dr. Brown was a consultant at McKinsey & Company, where she served as a partner from
2000 to 2003. 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
64
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.
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.
65
B. Compensation
Executive Officers’ Compensation
For the fiscal year ended June 30, 2020, we paid an aggregate of $3,615,460 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
2020.
Directors’ Compensation
Employee Directors
For the fiscal year ended June 30, 2020, 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, 2020:
Fiscal Year Ended June 30, 2020 Employee Directors’ Compensation (U.S. $) (1)
Name
Michael Cannon-Brookes
Salary/Fees(2)
$
46,323 $
Scott Farquhar
$
50,183 $
Benefits
Annual
Bonus(3)
Long-Term
Incentive
Retirement
Benefits(4)
Total
269 $
201 $
— $
— $
— $
— $
4,426 $
4,787 $
51,018
55,171
(1) For the fiscal year ended June 30, 2020, 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 2020 of AUD 1.49 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.
(3) Messrs. Cannon-Brookes and Farquhar each opted not to participate in our bonus plan during the fiscal year
ended June 30, 2020.
(4) These amounts represent our contributions to each employee director's retirement fund, as required by
applicable jurisdictional law.
Non-Employee Directors
On December 4, 2019 our shareholders approved a new policy (the “Director Compensation Policy”),
effective as of December 4, 2019, pursuant to which our non-employee directors are eligible to receive the following
cash retainers and equity awards (U.S. $):
Annual Retainer for Board 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
$ 55,000
$ 50,000
$ 20,000
$ 15,000
$ 10,000
On the date of each annual general meeting (“AGM”), each non-employee director who continues as a non-
employee director following the AGM is granted RSUs on the date of such AGM having a value of $250,000 (the
“Annual Grant”). A new non-employee director who joins other than at an AGM (on the first eligible grant date
following their appointment to our board of directors) is granted a pro-rata proportion of an Annual Grant based on
the time between their appointment and the next AGM. The Annual Grant vests in full on the earlier of: (i) the one-
year anniversary of the grant date; and (ii) the next AGM, subject to continued service as a director through the
applicable vesting date, unless the Compensation and Leadership Development Committee determines that
circumstances warrant continuation of vesting.
66
All awards granted to our non-employee directors are subject to 100% accelerated vesting upon the sale of
the company.
We reimburse all reasonable expenses incurred by non-employee directors in connection with their service
on our board of directors. This would include expenses incurred for attending board or committee meetings, or we
may alternatively provide a travel allowance for such purpose. We may reimburse reasonable expenses for items
which, for tax purposes, would be treated as a taxable benefit, in which case we may also pay any such tax on
behalf of the non-employee director or provide a tax gross-up. In addition, we provide liability-related insurance and
indemnification benefits to our 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, 2020, 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, 2020:
Fiscal Year Ended June 30, 2020 Non-Employee Directors’ Compensation (U.S. $)
Name
Salary/Fees
Benefits
Annual
Bonus
Long-Term
Incentives(5)
Retirement
Benefits
$
Shona Brown (1)
Heather Mirjahangir Fernandez $
$
Sasan Goodarzi (2)
Jay Parikh
Enrique Salem
Steven Sordello (3)
Richard P. Wong (4)
$
$
$
$
102,500
52,500
60,000
52,500
52,500
72,500
62,500
—
—
—
—
—
—
—
— $
— $
— $
— $
— $
— $
— $
250,027 (6)
250,027 (6)
250,027 (6)
250,027 (6)
250,027 (6)
250,027 (6)
250,027 (6)
— $
— $
— $
— $
— $
— $
— $
Total
352,527
302,527
310,027
302,527
302,527
322,527
312,527
(1) Dr. Brown was the chair of the Compensation and Leadership Development Committee through December 31,
2019 and chair of the board of directors.
(2) Mr. Goodarzi was the chair of the Compensation and Leadership Development Committee from January 1,
2020 through June 30, 2020.
(3) Mr. Sordello was the chair of the Audit Committee.
(4) Mr. Wong was the chair of the Nominating and Corporate Governance Committee.
(5) The equity awards are not subject to performance measures, so the value of the equity awards have been
included in full, notwithstanding that the equity awards are subject to outstanding service-based vesting
conditions.
(6) Each continuing non-employee member of our board of directors received an Annual 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.
67
We have not entered into a director agreement with Mr. Wong. In addition, we have not entered into a
director agreement or employment agreement with either Mr. Cannon-Brookes or Mr. Farquhar.
In addition, pursuant our Director Compensation Policy, Messrs. Wong, Parikh and Salem each were eligible
to receive cash retainers and an Annual Grant in accordance with the terms of our Director Compensation Policy.
We do not have service contracts with any of our non-employee directors that provide for benefits upon a
termination of service.
Executive Severance Plan
In December 2014, 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, 2020 pursuant to
our annual executive bonus plan (the “FY20 Bonus Plan”). Messrs. Cannon-Brookes and Farquhar each opted not
to participate in the FY20 Bonus Plan.
The FY20 Bonus Plan provided our executive officers with an opportunity to earn an annual bonus payment
with a target equal to 50% to 60% of their base salary and a maximum payout equal to 125%, as applicable, of their
base salary, based on company performance (measured by revenue) and individual performance. In fiscal year
2020, payout to our executive officers pursuant to the FY20 Bonus Plan was equal to 100% of each executive
officer’s bonus target amount.
Retirement Benefits
For the fiscal year ended June 30, 2020, we contributed approximately $9,213 into retirement funds on
behalf of our executive officers in Australia (as required by applicable jurisdictional law), and approximately $58,367
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 2020 of AUD $1.49 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
68
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, 2020, we granted 199,236 RSUs in the aggregate under our 2015
Share Incentive Plan (the “2015 Plan”) to our non-employee directors and executive officers. Our non-employee
directors were granted equity awards during such fiscal year in accordance with the Director Compensation Policy.
As of June 30, 2020, our executive officers held options to purchase 345,500 Class A ordinary shares, and
443,553 RSUs. As of June 30, 2020, our directors held 16,190 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
cCompensation 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, 2020, 7,371,743
RSUs, 9,582 restricted Class A ordinary shares, and 99,587 options to purchase Class A ordinary shares at a
weighted-average exercise price of approximately $0.73 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
69
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 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
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the 2015 Plan shall fully accelerate, and all awards with conditions and restrictions relating to the attainment of
performance goals may become vested and nonforfeitable in the plan administrator's discretion or to the extent
specified in the applicable award agreement, in each case prior to the effectiveness of the sale event and then shall
terminate. In the event of such termination, individuals holding options and share appreciation rights will be
permitted to exercise such options and share appreciation rights (to the extent exercisable) prior to the sale event.
In addition, in connection with the termination of the 2015 Plan upon a sale event, we may make or provide for a
cash payment to participants holding vested and exercisable options and share appreciation rights equal to the
difference between the per share cash consideration payable to shareholders in the sale event and the exercise
price of the options or share appreciation rights.
Our board of directors may amend or discontinue the 2015 Plan and our 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, 2020, options to
purchase 11,778 Class A ordinary shares remained outstanding under the Share Option Plan at a weighted-average
exercise price of approximately $3.18 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, 2020, options to purchase 346,809
Class A ordinary shares remained outstanding under the 2013 Plan at a weighted-average exercise price of
approximately $3.18 per share.
The 2013 Plan allowed for the grant of options to our employees, directors and consultants.
The 2013 Plan is administered by our Compensation and Leadership Development Committee. The
administrator has full power to select, from among the individuals eligible for options, the individuals to whom
71
options will be granted, to implement an option exchange program, to determine the specific terms and conditions of
each option and to construe and interpret the terms of the 2013 Plan and any award agreements thereunder.
The 2013 Plan permitted the granting of both options to purchase restricted shares intended to qualify as
incentive share options under Section 422 of the Code and options that do not so qualify. Incentive share options
were only granted to employees and were required to meet certain other requirements. The per share option
exercise price of each option was determined by our 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. As of June 30, 2020,
no RSUs remained outstanding under the 2014 Plan.
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.
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.
72
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.
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;
73
•
•
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. Mr. Goodarzi 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.
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, 2020, 2019 and 2018, we had 4,907, 3,616, and 2,638
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 and Related Party Transactions.”
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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, 2020 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 128,201,296 Class A ordinary shares and 119,761,681 Class
B ordinary shares outstanding as of June 30, 2020. In computing the number of shares beneficially owned by a
person and the percentage ownership of such person, we deemed to be outstanding all shares subject to options
held by the person that are currently exercisable or exercisable within 60 days of June 30, 2020 or issuable upon
the vesting of RSUs held by the person within 60 days of June 30, 2020.
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 Baillie Gifford & Co. (2)
7,593,631
5.92 %
Entities affiliated with T. Rowe Price Associates, Inc. (3)
16,391,824
12.79 %
—
—
—
—
*
*
Directors and Executive Officers:
Michael Cannon-Brookes (4)
Scott Farquhar (5)
Jay Simons (6)
James Beer (7)
Sri Viswanath (8)
Erika Fisher (9)
Tami Rosen
Shona Brown (10)
Heather Mirjahangir Fernandez (11)
Jay Parikh (12)
Enrique Salem (13)
Steven Sordello (14)
Sasan Goodarzi (15)
Richard P. Wong (16)
All directors and executive officers as a group (14
persons) (17)
_________
*Represents beneficial ownership of less than 1%
75
—
—
—
—
59,299,340 49.51 % 44.73 %
59,299,340 49.51 % 44.73 %
876,978
33,927
313,253
6,158
—
—
28,845
13,425
17,625
128,432
42,859
7,196
143,835
*
*
*
*
*
*
*
*
*
*
*
333,000
*
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
*
*
*
*
*
*
*
*
*
*
*
1,612,533
1.26 % 118,931,680 99.31 %
89.8 %
(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 Baillie Gifford & Co (“Baillie Gifford”) on Schedule 13G filed with the SEC on
January 16, 2020. Of the shares of Class A ordinary shares beneficially owned, Baillie Gifford reported that it has
sole dispositive power with respect to 7,593,631 shares, and sole voting power with respect to 3,493,567 shares.
Baillie Gifford listed their address as Calton Square, 1 Greenside Row, Edinburgh EH1 3AN, Scotland, UK.
(3) Based on information reported by T. Rowe Price Associates, Inc. (“T. Rowe Price”) on Schedule 13G filed with
the SEC on February 14, 2020. Of the shares of Class A ordinary shares beneficially owned, T. Rowe Price reported
that it has sole dispositive power with respect to 16,391,824 shares, and sole voting power with respect to
6,059,395 shares. Entities affiliated with T. Rowe Price listed their address as 100 E. Pratt Street, Baltimore,
Maryland 21202.
(4) Consists of (i) 4,850,850 Class B ordinary shares held of record by Mr. Cannon-Brookes and (ii) 54,448,490
Class B ordinary shares held of record by CBC Co Pty Limited as trustee for the Cannon-Brookes Head Trust.
(5) Consists of (i) 4,850,850 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.
(6) 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) 511,812 Class A ordinary shares held of record by Mr. Simons, (iv) 345,500 Class A ordinary shares
subject to outstanding options that are exercisable within 60 days of June 30, 2020, and (v) 19,666 RSUs that vest
within 60 days of June 30, 2020.
(7) Consists of (i) 10,208 Class A ordinary shares held of record by Mr. Beer as trustee of the James A & Lael L Beer
Trust and (ii) 23,719 RSUs that vest within 60 days of June 30, 2020.
(8) Consists of (i) 297,570 Class A ordinary shares held of record by Mr. Viswanath and (ii) 15,683 RSUs that vest
within 60 days of June 30, 2020.
(9) Consists of (i) 1,342 Class A ordinary shares held of record by Ms. Fisher and (ii) 4,816 RSUs that vest within 60
days of June 30, 2020.
(10) Consists of 28,845 Class A ordinary shares held of record by Dr. Brown.
(11) Consists of 13,425 Class A ordinary shares held of record by Ms. Mirjahangir Fernandez.
(12) Consists of 17,625 Class A ordinary shares held of record by Mr. Parikh.
(13) Consists of 128,432 Class A ordinary shares held of record by Mr. Salem.
(14) Consists of 42,859 Class A ordinary shares held of record by Mr. Sordello.
(15) Consists of (i) 6,944 Class A ordinary shares held of record by Mr. Goodarzi and (ii) 252 RSUs that vest within
60 days of June 30, 2020.
(16) Consists of 143,835 Class A ordinary shares held of record by Mr. Wong.
(17) Consists of (i) 1,202,897 Class A ordinary shares, (ii) 118,931,680 Class B ordinary shares, (iii) options to
purchase 345,500 Class A ordinary shares that are exercisable within 60 days of June 30, 2020 and (iv) 64,136
RSUs that vest within 60 days of June 30, 2020.
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, 2020, approximately 0.1% of our outstanding shares were Class B shares held in the United
States by one record holder. As of June 30, 2020, approximately 51.50% of our outstanding shares were Class A
shares held in the United States by one record holder (Cede and Company).
76
As of June 30, 2020, entities affiliated with each of Artisan Partners Limited Partnership, Capital Research
Global Investors, Sands Capital Management, respectively, and entities and individuals affiliated with FMR 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, 2020, 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, 2020, we granted RSUs to our non-employee directors and certain of
our executive officers.
Indemnification Agreements
We have entered into indemnification agreements with our directors and executive officers to indemnify them
to the maximum extent allowed under applicable law. These agreements indemnify these individuals against certain
costs, charges, losses, liabilities, damages and expenses incurred by such director in the execution or discharge of
his duties. These agreements do not indemnify our directors against any liability attaching to such individuals in
connection with any negligence, default, breach of duty or breach of trust in relation to the company of which he or
she is a director, which would be rendered void under the Companies Act.
We have obtained insurance policies under which, subject to the limitations of the policies, coverage is
provided to our directors and executive officers against loss arising from claims made by reason of breach of
fiduciary duty or other wrongful acts as a director or executive officer, including claims relating to public securities
matters, and to us with respect to payments that may be made by us to these directors and executive officers
pursuant to our indemnification obligations or otherwise as a matter of law.
Certain of our non-employee directors may, through their relationships with their employers, be insured and/
or indemnified against certain liabilities incurred in their capacity as members of our board of directors.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors,
executive officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
Registration Agreement
In July 2010, our predecessor entity, Atlassian Corporation Pty Ltd., entered into a Registration Agreement
with certain holders of our outstanding share capital, including Messrs. Cannon-Brookes and Farquhar. As of
June 30, 2020, certain holders of our Class A ordinary shares and our Class B ordinary shares, including Messrs.
Cannon-Brookes and Farquhar, are entitled to rights with respect to the registration of their shares under the
Securities Act.
Atlassian Foundation
The Atlassian Foundation was established in 2008 with the vision of helping to make the world better.
Together with the 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, Brookings Center for Universal Education, Co-Impact,
Educate!, Education Commission, Education Outcomes Fund, 40K Foundation, Global Business Coalition for
Education, Humanitix, Raspberry Pi Foundation, Room to Read, Ruangguru, and Teach for All.
We contribute approximately 1% of our annual profits and all revenues associated with our starter licenses
for on-premises products to the Atlassian Foundation. We donated $5.3 million to the Atlassian Foundation in fiscal
year 2020. 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
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In fiscal year 2020, we purchased approximately $5.2 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 2020, we purchased $3.1 million of services from Splunk Inc. (“Splunk”) for systems monitoring
purposes, in the ordinary course of business. Sri Viswanath, our Chief Technology Officer, is a director of Splunk.
The contract with Splunk was not negotiated by Mr. Viswanath and was executed before he joined the board. Mr.
Viswanath does not have a material interest in the relationship described above.
Intuit
In fiscal year 2020, Intuit purchased approximately $0.5 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.
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. We investigate these claims as they arise and
accrue estimates for resolution of legal and other contingencies when losses are probable and estimable. Although
the results of litigation and claims cannot be predicted with certainty, we believe there was not at least a reasonable
possibility that we had incurred a material loss with respect to such loss contingencies as of June 30, 2020.
Dividend Policy
While we have in the past paid limited dividends, we do not have any present or future plan to pay dividends
on our shares. Any future determination as to the declaration and payment of dividends, if any, will be at the
discretion of our board of directors, subject to applicable laws, and will depend on then existing conditions, including
our financial condition, results of operations, contractual restrictions, capital requirements, general business
conditions, business prospects and other factors our board of directors may deem relevant.
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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 the NASDAQ Global Select
Market under the symbol “TEAM.”
B. Plan of Distribution
Not applicable.
C. Markets
Our Class A ordinary shares are quoted on the NASDAQ Global Select Market under the symbol “TEAM.”
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
Item 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
The information required by this section, including a summary of certain key provisions of our articles of
association, is set forth in Exhibit 4.4 (Description of Share Capital) filed as an exhibit to our annual report filed with
the SEC on August 23, 2019, and is incorporated herein by reference.
C. Material Contracts
We have not entered into any material contracts other than in the ordinary course of business and other than
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.
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E. Taxation
Material United Kingdom Tax Considerations
The comments set out below are based on current United Kingdom 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-United Kingdom
residents), who hold Class A ordinary shares as an investment and who are the absolute beneficial owners thereof.
The discussion does not address all possible tax consequences relating to an investment in the Class A ordinary
shares. Certain categories of shareholders, including those carrying on certain financial activities, those subject to
specific tax regimes or benefiting 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 United
Kingdom tax law. In particular:
Taxation of Dividends
We will not be required to withhold amounts on account of United Kingdom tax at source when paying a
dividend.
Individuals
United Kingdom resident and domiciled holders do not have to pay tax on the first £2,000 of dividend income
received in the 2020/2021 tax year (the "dividend allowance"). However tax will be levied on any dividends received
over the dividend allowance at 7.5% on dividend income within the basic rate band, 32.5% on dividend income
within the higher rate band and 38.1% on dividend income within the additional rate band.
Corporate Shareholders
Although shareholders who are within the charge to corporation tax would strictly be subject to corporation
tax on dividends paid by us (subject to special rules for such shareholders that are “small” companies), generally
such dividends will fall within an exempt class and will not be subject to corporation tax (provided certain conditions
are met and anti-avoidance rules are satisfied). However, each shareholder's position will depend on its own
individual circumstances and shareholders within the charge to corporation tax should consult their own
professional advisers.
Non-Residents
A shareholder resident outside the United Kingdom may also be subject to foreign taxation on dividend
income under local law. Shareholders who are not resident for tax purposes in the United Kingdom should obtain
their own tax advice concerning tax liabilities on dividends received from us.
Taxation of Capital Gains on Disposals of Class A ordinary shares
United Kingdom Shareholders
Shareholders who are resident in the United Kingdom, and individual shareholders who are temporarily non-
resident and subsequently resume residence in the United Kingdom within a certain time, may depending on their
circumstances and the availability of exemptions or reliefs (including, for example, the annual exempt amount for
individuals), be liable to United Kingdom taxation on chargeable gains in respect of gains arising from a sale or
other disposal (or deemed disposal) of the Class A ordinary shares.
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Non-United Kingdom Shareholders
An individual holder who is not a United Kingdom resident shareholder will not be liable to United Kingdom
capital gains tax on chargeable gains realized on the disposal of 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 United Kingdom 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
United Kingdom through a permanent establishment to which the shares are attributable. In these circumstances, a
disposal of shares by such shareholder may give rise to a chargeable gain or an allowable loss for the purposes of
United Kingdom corporation tax.
Stamp Duty and Stamp Duty Reserve Tax
The statements in this section titled “Stamp Duty and Stamp Duty Reserve Tax (“SDRT”)” are intended as a
general guide to the current United Kingdom stamp duty and SDRT position. The discussion below relates to
shareholders wherever resident, but investors should note that certain categories of person are not liable to stamp
duty or SDRT and others may be liable at a higher rate or may, although not primarily liable for tax, be required to
notify and account for SDRT under the Stamp Duty Reserve Tax Regulations 1986.
General
Except in relation to depositary receipt systems and clearance services (to which the special rules outlined
below apply):
(i) No stamp duty or SDRT will arise on the issue of Class A ordinary shares in registered form by us.
(ii) An agreement to transfer Class A ordinary shares will normally give rise to a charge to SDRT at the rate
of 0.5% of the amount or value of the consideration payable for the transfer. SDRT is, in general, payable by
the purchaser.
(iii) Instruments transferring Class A ordinary shares will generally be subject to stamp duty at the rate of
0.5% of the consideration given for the transfer (rounded up to the next £5). The purchaser normally pays
the stamp duty.
(iv) If a duly stamped transfer completing an agreement to transfer is produced within six years of the date
on which the agreement is made (or, if the agreement is conditional, the date on which the agreement
becomes unconditional), any SDRT already paid is generally repayable, normally with interest, and any
SDRT charge yet to be paid is cancelled.
Depositary Receipt Systems and Clearance Services
United Kingdom domestic law provides that where our Class A ordinary shares are issued or transferred to
a depositary receipt system or clearance service (or their nominees or agents) SDRT (in the case of an issue of
shares) and stamp duty or SDRT (in the case of a transfer of shares) may be payable, broadly at the higher rate of
1.5% of the 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).
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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. We
consider that this position still holds notwithstanding the United Kingdom’s exit from the EU on January 31, 2020.
The HM Treasury Autumn Budget 2017 Report contained a statement that “The government will not reintroduce the
Stamp Duty and Stamp Duty Reserve Tax 1.5% charge on the issue of shares (and transfers integral to capital
raising) into overseas clearance services and depositary receipt systems following the UK’s exit from the EU”. As far
as we are aware there has been no subsequent government statement revising this position. Further, as EU
Directive 2008/7/EC, which is the basis for the European Court of Justice decisions referenced above (the
“Directive”) is not expressly identified as a provision which will not be binding on the United Kingdom during the
“implementation period,” we understand that the Directive currently remains effective to the same extent as it did
during the time when the United Kingdom was a member of the EU.
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 United Kingdom stamp duty or
SDRT.
Any liability for stamp duty or SDRT in respect of a transfer into a clearance service or depositary receipt
system, or in respect of a transfer within such a service, which does arise will strictly be accountable by the
clearance service or depositary receipt system operator or their nominee, as the case may be, but will, in practice,
be payable by the participants in the clearance service or depositary receipt system.
Certain Material U.S. Federal Income Tax Considerations for U.S. Holders
The following is a summary of certain material U.S. federal income tax considerations relating to the
ownership and disposition of Class A ordinary shares by a U.S. holder (as defined below). This summary addresses
only the U.S. federal income tax considerations for U.S. holders that hold Class A ordinary shares as capital assets
(generally, property held for investment) for U.S. federal income tax purposes. This summary does not address all
U.S. federal income tax matters that may be relevant to a particular U.S. holder. This summary does not address tax
considerations applicable to a holder of Class A ordinary shares that may be subject to special tax rules including,
without limitation, the following:
•
•
•
•
•
banks, financial institutions or insurance companies;
brokers, dealers or traders in securities, currencies, commodities, or notional principal contracts;
tax-exempt entities or organizations, including an “individual retirement account” or “Roth IRA” as defined in
Section 408 or 408A of the Code (as defined below), respectively;
real estate investment trusts, regulated investment companies or grantor trusts;
persons that hold the Class A ordinary shares as part of a “hedging,” “integrated,” “wash sale” or
“conversion” transaction or as a position in a “straddle” for U.S. federal income tax purposes;
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•
•
•
•
•
•
•
partnerships (including entities classified as partnerships for U.S. federal income tax purposes) or other
pass-through entities, or persons that will hold the Class A ordinary shares through such an entity;
certain former citizens or long term residents of the United States;
holders that own directly, indirectly, or through attribution 10% or more of the voting power or value of the
Class A ordinary shares;
persons who received the Class A ordinary shares as compensation;
persons subject to Section 451(b) of the Code;
holders that own directly, indirectly or through attribution Class B ordinary shares; and
holders that have a “functional currency” for U.S. federal income tax purposes other than the U.S. dollar.
Further, this summary does not address the U.S. federal estate, gift, or alternative minimum tax
considerations, or any U.S. state, local, or non-U.S. tax considerations of the ownership and disposition of the
Class A ordinary shares.
This description is based on the 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 by a court. We have not obtained, nor do we intend to obtain, a ruling with
respect to the U.S. federal income tax considerations relating to the purchase, ownership, or disposition of the Class
A ordinary shares. Holders should consult their own tax advisers concerning the U.S. federal, state, local and non-
U.S. tax consequences of owning and disposing of the Class A ordinary shares in their particular circumstances.
For the purposes of this summary, a “U.S. holder” is a beneficial owner of Class A ordinary shares that is (or
is treated as), for U.S. federal income tax purposes:
•
•
•
•
an individual who is a citizen or resident of the United States;
a corporation, or other entity that is treated as a corporation for U.S. federal income tax purposes, created
or organized in or under the laws of the United States, any state thereof, or the District of Columbia;
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust, if a court within the United States is able to exercise primary supervision over its administration and
one or more U.S. persons 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 ordinary shares will be taxable to the U.S. holder as a dividend to the extent of the U.S. holder's
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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.
A U.S. holder generally may claim the amount of any Australian withholding tax as either a deduction from
gross income or a credit against its U.S. federal income tax liability. The foreign tax credit is subject to numerous
complex limitations that must be determined and applied on an individual basis. Generally, the credit cannot exceed
the proportionate share of a U.S. holder’s U.S. federal income tax liability that such U.S. holder’s taxable income
from foreign sources bears to such U.S. holder’s worldwide taxable income. In applying this limitation, a U.S.
holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source”
or “U.S. source.” This limitation is calculated separately with respect to specific categories of income. The amount of
a distribution with respect to the Class A ordinary shares that is treated as a “dividend” may be lower for U.S. federal
income tax purposes than it is for Australian income tax purposes, potentially resulting in a reduced foreign tax
credit for the U.S. holder. In addition, the creditability of foreign taxes could be affected by actions taken by
intermediaries in the chain of ownership between the holders of the Class A ordinary shares and us if, as a result of
such actions, the holders of the Class A ordinary shares are not properly treated as beneficial owners of the
underlying ordinary shares. Each U.S. holder should consult its own tax advisors regarding the foreign tax credit
rules.
In general, the amount of a distribution paid to a U.S. holder in a foreign currency will be the dollar value of
the foreign currency calculated by reference to the spot exchange rate on the day the U.S. holder receives the
distribution, regardless of whether the foreign currency is converted into U.S. dollars at that time. Any foreign
currency gain or loss a U.S. holder realizes on a subsequent conversion of foreign currency into U.S. dollars will be
U.S. source ordinary income or loss. If dividends received in a foreign currency are converted into U.S. dollars on
the day they are received, a U.S. holder should not be required to recognize foreign currency gain or loss in respect
of the dividend.
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Sale, Exchange or Other Taxable Disposition of the Class A Ordinary Shares
A U.S. holder will generally recognize gain or loss for U.S. federal income tax purposes upon the sale,
exchange or other taxable disposition of Class A ordinary shares in an amount equal to the difference between the
U.S. dollar value of the amount realized from such sale or exchange and the U.S. holder's tax basis for those
Class A ordinary shares. Subject to the discussion in “—Passive Foreign Investment Company Considerations”
below, this gain or loss will generally be a capital gain or loss. The adjusted tax basis in the Class A ordinary shares
generally will be equal to the cost of such Class A ordinary shares. Capital gain from the sale, exchange or other
taxable disposition of Class A ordinary shares of a non-corporate U.S. holder is generally eligible for a preferential
rate of taxation applicable to capital gains, if the non-corporate U.S. holder's holding period determined at the time
of such sale, exchange or other taxable disposition for such Class A ordinary shares exceeds one year (i.e., such
gain is long-term taxable gain). The deductibility of capital losses for U.S. federal income tax purposes is subject to
limitations under the Code. Any such gain or loss that a U.S. holder recognizes generally will be treated as U.S.
source income or loss for foreign tax credit limitation purposes.
For a cash basis taxpayer, units of foreign currency paid or received are translated into U.S. dollars at the
spot rate on the settlement date of the purchase or sale. In that case, no foreign currency exchange gain or loss will
result from currency fluctuations between the trade date and the settlement date of such a purchase or sale. An
accrual basis taxpayer, however, may elect the same treatment required of cash basis taxpayers with respect to
purchases and sales of the Class A ordinary shares that are traded on an established securities market, provided
the election is applied consistently from year to year. Such election may not be changed without the consent of the
IRS. For an accrual basis taxpayer who does not make such election, units of foreign currency paid or received are
translated into U.S. dollars at the spot rate on the trade date of the purchase or sale. Such an accrual basis
taxpayer may recognize exchange gain or loss based on currency fluctuations between the trade date and the
settlement date. Any foreign currency gain or loss a U.S. holder realizes will be U.S. source ordinary income or loss.
Net Investment Income Tax
Certain U.S. holders that are individuals, estates or trusts may be subject to a 3.8% tax on all or a portion of
their “net investment income,” which may include all or a portion of their dividend income and net gains from the
disposition of Class A ordinary shares. Each U.S. holder that is an individual, estate or trust is urged to consult its
tax advisors regarding the applicability of the net investment income tax to its income and gains in respect of its
investment in the Class A ordinary shares.
Passive Foreign Investment Company Considerations
If we are classified as a PFIC in any taxable year, a U.S. holder would be subject to special rules generally
intended to reduce or eliminate any benefits from the deferral of U.S. federal income tax that a U.S. holder could
derive from investing in a non-U.S. company that does not distribute all of its earnings on a current basis.
A corporation organized outside the United States generally will be classified as a PFIC for U.S. federal
income tax purposes in any taxable year in which, after applying certain look-through rules with respect to the
income and assets of its subsidiaries, either: (i) at least 75% of its gross income is “passive income” or (ii) at least
50% of the average quarterly value of its total gross assets (which, assuming we are not a controlled foreign
corporation for the year being tested, would be measured by the fair market value of our assets) is attributable to
assets that produce “passive income” or are held for the production of “passive income.”
Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from
commodities and securities transactions, the excess of gains over losses from the disposition of assets which
produce passive income, and includes amounts derived by reason of the temporary investment of cash, including
any funds raised in prior or future offerings. If a non-U.S. corporation owns directly or indirectly at least 25% by
value of the stock of another corporation, the non-U.S. corporation is treated for purposes of the PFIC tests as
owning its proportionate share of the assets of the other corporation and as receiving directly its proportionate share
of the other corporation’s income. The determination of whether we are a PFIC is a fact-intensive determination
made on an annual basis and the applicable law is subject to varying interpretation. If we are classified as a PFIC in
any taxable year during which a U.S. holder owns the Class A ordinary shares, such U.S. holder will be subject to
special tax rules discussed below and could suffer adverse tax consequences.
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We do not believe that we are a PFIC, and we do not expect to become a PFIC in the forseeable future.
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 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
86
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 at www.atlassian.com.
I. Subsidiary Information
Not applicable.
Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Currency Risk
We operate globally and are exposed to foreign exchange risk arising from exposure to various currencies in
the ordinary course of business. Our exposures primarily consist of the Australian Dollar, 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 we
trade with several counterparties to reduce our concentration risk with any single counterparty. We do not have
significant exposure to counterparty credit risk at this time. We do not require nor are we required to post collateral
of any kind related to our foreign currency derivatives.
Foreign currency exchange rate exposure
We hedged material foreign currency denominated monetary assets and liabilities using balance sheet
hedges. The fluctuations in the fair market value of balance sheet hedges due to foreign currency rates generally
offset those of the hedged items, resulting in no material effect on profit. Consequently, we are primarily exposed to
significant foreign currency exchange rate fluctuations with regard to the spot component of derivatives held within a
designated cash flow hedge relationship affecting other comprehensive income
Foreign currency sensitivity
A sensitivity analysis performed on our hedging portfolio as of June 30, 2020 and 2019 indicated that a
hypothetical 10% strengthening of the U.S. dollar against the Australian dollar applicable to our business would
decrease the fair value of our foreign currency contracts by $27.0 million and $22.5 million, respectively, and a
hypothetical 10% weakening of the U.S. dollar against the Australian dollar would increase the fair value of our
foreign currency contracts by $27.0 million and $22.5 million, respectively.
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,
2020, we had cash and cash equivalents totaling $1.5 billion and short-term investments totaling $676.1 million.
87
A sensitivity analysis performed on our portfolio as of June 30, 2020 and 2019 indicated that a hypothetical
100 basis point increase in interest rates would decrease the market value of our investments by $5.4 million and
$2.3 million, respectively, and a hypothetical 100 basis point decrease in interest rates would increase the market
value of our investments by $1.6 million and $2.3 million, respectively. This estimate is based on a sensitivity model
that measures market value changes when changes in interest rates occur.
Equity Price Risk
We are exposed to equity price risk 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
as of June 30, 2020 and 2019 indicated that a hypothetical 10% increase in our share price would increase the fair
value of the Notes embedded exchange derivative and capped call transactions by $192.6 million and $122.4
million, respectively, and a hypothetical 10% decrease in our share price would decrease the fair value of the Notes
embedded exchange derivative and capped call transactions by $184.8 million and $116.3 million, respectively.
We are 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, 2020 and 2019, our marketable equity investments are fair valued at $100.2
million and $58.9 million, respectively. A hypothetical 10% increase in the respective share prices of our equity
investments as of June 30, 2020 and 2019 would increase the fair value of our marketable equity investments by
$10.0 million and $5.9 million, respectively, and a hypothetical 10% decrease in the respective share prices of our
equity investments would decrease the fair value of our marketable equity investments by $10.0 million and $5.9
million, respectively.
See Note 5, “Financial Assets and Liabilities,” to the notes to our consolidated financial statements for more
details on our quantitative and qualitative disclosure about market risk.
Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
PART II
Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
None.
Item 15. CONTROLS AND PROCEDURES
Disclosure controls and procedures
Our Co-Chief Executive Officers and Chief Financial Officer, after evaluating the effectiveness of our
disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of June 30, 2020, 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.
88
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, 2020. 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, 2020 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.
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, 2020 and 2019 were as follows:
Audit fees (1)
Audit-related fees (2)
Tax fees (3)
Other fees (4)
Total
2020
2019
(U.S. $ in thousands)
2,745 $
876
243
11
3,875 $
2,980
648
220
8
3,856
$
$
89
(1) Audit Fees consist of fees incurred for professional services rendered for the integrated audit of our
annual consolidated financial statements, review of the quarterly consolidated financial statements and foreign
statutory audits and services that are normally provided by Ernst & Young LLP in connection with statutory and
regulatory filings or engagements. Audit fees also include accounting consultations, research related to the
integrated audit.
(2) Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to
the performance of the audit or review of the Company’s consolidated financial statements and are not reported
under “Audit Fees.” This primarily consists of fees for service organization control audits 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.
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.
90
PART III
Item 17. FINANCIAL STATEMENTS
See “Item 18. Financial Statements.”
Item 18. FINANCIAL STATEMENTS
The following financial statements are filed as part of this annual report, together with the report of the
independent registered public accounting firm:
•
•
•
•
•
•
•
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the fiscal years ended June 30, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Loss for the fiscal years ended June 30, 2020, 2019 and 2018
Consolidated Statements of Financial Position as of June 30, 2020 and 2019
Consolidated Statements of Changes in Equity for the fiscal years ended June 30, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2020, 2019 and 2018
Notes to the Consolidated Financial Statements
91
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 (7)
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 #
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.
92
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.
(7)
Incorporated by reference to the company’s report on Form 20-F filed on August 23, 2019.
#
Indicates management contract or compensatory plan, contract or agreement.
93
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 14, 2020
By:
By:
94
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-5
F-6
F-7
F-8
F-9
F-10
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, 2020 and 2019, 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, 2020, 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, 2020 and 2019,
and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2020, 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, 2020, 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 14, 2020 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 accounting
for leases as a result of the adoption of IFRS 16, Leases, and the amendments effective July 1, 2019 under the
modified retrospective method.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of the critical audit matter does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to
which it relates.
F-2
Description of the Matter
How We Addressed the
Matter in Our Audit
As described in Note 2 to the consolidated financial statements, the Company
primarily derives revenues from cloud-based services agreements and subscription-
based and perpetual software license arrangements that include bundled support and
maintenance services for the term of the license period. The Company’s contracts with
customers often contain multiple performance obligations, including promises to
transfer multiple software products and/or services to a customer. To account for
promised goods and services in accordance with IFRS 15, Revenue from Contracts
with Customers, the Company allocates the transaction price to the distinct
performance obligations on a relative standalone selling price basis and recognizes
revenue when control of the distinct performance obligation is transferred to the
customer. For example, the Company recognizes software license revenue at the time
of delivery of the license and recognizes subscription and support revenue over time
as the services are performed.
Auditing the Company’s recognition of revenue was challenging and complex due to
the effort required to analyze the accounting treatment for the Company’s various
software product and service offerings in accordance with IFRS 15. This involved
assessing the impact of terms and conditions of new or amended contracts with
customers or new product or service offerings, the determination of the relative
standalone selling prices for each distinct performance obligation and the timing of
recognition of revenue.
We obtained an understanding, evaluated the design and tested the operating
effectiveness of the Company's internal controls over the relevant terms of its
contracts, the appropriate accounting for those terms under IFRS 15, including the
identification of performance obligations, determination of the relative standalone
selling price for each performance obligation, and the determination of the timing of
recognition of revenue. This included testing relevant controls over the information
systems that are important to the initiation, recording and billing of revenue
transactions.
Among other procedures to evaluate management’s identification and determination of
the distinct performance obligations, we read executed contracts for a sample of sales
transactions to understand the contract, identified the promised goods and services in
the contract and identified the distinct performance obligations. To test management’s
determination of relative standalone selling price for each performance obligation, we
performed audit procedures, among others, to assess the appropriateness of the
methodology applied, tested mathematical accuracy of the underlying data and
calculations, and tested sample selections to corroborate the data underlying the
Company’s calculations. We also evaluated whether the Company appropriately
applied its revenue recognition policy to a sample of sales transactions to determine
whether revenue was recognized in the correct amount and period. Finally, we
assessed the appropriateness of the related disclosures in the consolidated financial
statements.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2012.
San Francisco, California
August 14, 2020
F-3
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, 2020, 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, 2020, 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 Company’s 2020 consolidated financial statements, and our report dated August 14, 2020
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 control over financial reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ Ernst & Young LLP
San Francisco, California
August 14, 2020
F-4
ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. $ and shares in thousands, except per share data)
Notes
Fiscal Year Ended June 30,
2019
2018
2020
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 income (loss)
Other non-operating expense, net
Finance income
Finance costs
Loss before income tax expense
Income tax expense
Net loss
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
(1)
Amounts include share-based payment expense, as follows:
Cost of revenues
Research and development
Marketing and sales
General and administrative
$
931,455 $
633,950 $
410,694
394,526
326,511
469,350
95,162
118,206
93,593
88,058
15
1,614,173
1,210,127
268,807
1,345,366
210,285
999,842
763,188
299,683
268,409
579,134
268,356
215,714
1,331,280
1,063,204
83,171
60,602
880,978
172,690
708,288
415,776
187,315
151,242
754,333
6
8
18
18
18
18
14,086
(63,362)
(46,045)
(338,486)
(535,453)
(15,157)
27,801
33,500
(49,610)
(40,241)
9,877
(6,806)
(346,209)
(605,556)
(58,131)
(4,445)
(32,065)
(55,301)
$
(350,654) $
(637,621) $
(113,432)
$
$
(1.43) $
(1.43) $
(2.67) $
(2.67) $
(0.49)
(0.49)
244,844
244,844
238,611
238,611
231,184
231,184
$
19,787 $
17,450 $
204,150
149,049
41,960
47,498
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
$
29,509 $
27,997 $
21,188
166
12,860
60
—
28,744
36,090
The above consolidated statements of operations should be read in conjunction with the accompanying notes.
F-5
ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(U.S. $ in thousands)
Net loss
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:
Fiscal Year Ended June 30,
Notes
2020
2019
2018
$
(350,654) $
(637,621) $
(113,432)
5
41,255
38,662
(9,380)
(8,813)
31,875
29,849
—
—
—
Foreign currency translation adjustment
(613)
(35)
118
Net change in unrealized gain (loss) on investments classified at
fair value through other comprehensive income
Net gains (losses) on derivative instruments
Income tax effect
Other comprehensive income (loss) after tax that will be
reclassified to profit or loss in subsequent periods
Other comprehensive income (loss), net of tax
Total comprehensive loss, net of tax
5
5
5,053
16,711
1,340
1,539
(8,961)
(553)
12,190
44,065
2,291
32,140
(586)
(8,341)
2,502
(6,307)
(6,307)
$
(306,589) $
(605,481) $
(119,739)
The above consolidated statements of comprehensive loss should be read in conjunction with the accompanying notes.
F-6
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
Right-of-use assets, net
Other non-current assets
Total non-current assets
Total assets
Liabilities
Current liabilities:
Notes
2020
2019
June 30,
14
$
1,479,969 $
1,268,441
5
9
5,16
14
10
8
11
11
12
14
676,072
112,019
1,509
327,487
46,730
445,046
82,525
707
215,156
30,236
2,643,786
2,042,111
97,648
35,351
645,140
129,690
217,683
124,774
1,250,286
81,459
17,084
608,907
150,975
—
76,722
935,147
$
3,894,072 $
2,977,258
Trade and other payables
14
$
202,570 $
159,487
Tax liabilities
Provisions
Deferred revenue
Lease obligations
Derivative liabilities
Current portion of exchangeable senior notes, net
Total current liabilities
Non-current liabilities:
Deferred tax liabilities
Provisions
Deferred revenue
Lease obligations
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
14
15
12
5,16
16
8
14
15
12
17
17
17
17
19,583
14,291
573,813
34,743
1,284,596
889,183
3,018,779
31,304
9,493
27,192
229,825
2,173
299,987
11,703
8,983
440,954
—
855,005
853,576
2,329,708
13,872
6,082
27,866
—
34,263
82,083
3,318,766
2,411,791
24,744
459,892
1,130,918
76,144
(1,116,392)
575,306
24,199
458,166
816,660
32,079
(765,637)
565,467
$
3,894,072 $
2,977,258
The above consolidated statements of financial position should be read in conjunction with the accompanying notes.
F-7
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
Accumulated
deficit
Total equity
Balance as of June 30, 2017
Net loss
Other comprehensive income (loss), net of tax
Total comprehensive 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
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 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
Share-based payment
Replacement equity awards related to business combination
Tax benefit from share plans
Balance as of June 30, 2019
Net loss
Other comprehensive income (loss), net of tax
Total comprehensive 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
Share-based payment
Replacement equity awards related to business combination
Tax benefit from share plans
17
17
17
7
8
17
17
17
7
13
17
17
17
7
13
Cumulative effect of applying new accounting pronouncement
2
$ 22,726 $ 450,959 $
437,346 $
2,215 $
4,289 $
(258) $
(14,584) $
902,693
—
—
—
243
37
525
—
—
—
—
—
—
3,761
46
—
—
—
—
805
3,807
—
—
—
—
—
(525)
162,873
140
(42,734)
119,754
—
(5,839)
(5,839)
—
—
—
—
—
—
—
—
118
118
—
—
—
—
—
—
—
—
(586)
(586)
(113,432)
(113,432)
—
(6,307)
(113,432)
(119,739)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,004
83
—
162,873
140
(42,734)
124,366
$ 23,531 $ 454,766 $
557,100 $
(3,624) $
4,407 $
(844) $
(128,016) $
907,320
—
—
—
150
51
467
—
—
—
—
—
—
3,392
8
—
—
—
—
—
—
—
—
—
(467)
257,777
1,768
482
668
3,400
259,560
—
1,077
1,077
—
—
—
—
—
—
—
—
(35)
(35)
—
—
—
—
—
—
—
—
(637,621)
(637,621)
31,098
31,098
—
32,140
(637,621)
(605,481)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,542
59
—
257,777
1,768
482
263,628
$ 24,199 $ 458,166 $
816,660 $
(2,547) $
4,372 $
30,254 $
(765,637) $
565,467
—
—
—
76
64
405
—
—
—
—
—
—
—
1,726
—
—
—
—
—
—
—
—
—
—
(32)
(405)
313,706
552
437
—
545
1,726
314,258
—
8,714
8,714
—
(613)
(613)
—
(350,654)
(350,654)
35,964
35,964
—
44,065
(350,654)
(306,589)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(101)
(101)
1,802
32
—
313,706
552
437
(101)
316,428
Balance as of June 30, 2020
$ 24,744 $ 459,892 $ 1,130,918 $
6,167 $
3,759 $
66,218 $ (1,116,392) $
575,306
The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
F-8
ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. $ in thousands)
Operating activities
Loss before income tax expense
Adjustments to reconcile loss before income tax expense to net cash provided
by operating activities:
Depreciation and amortization
Depreciation of right-of-use assets
Gain on sale of investments, disposal of assets and other
Net unrealized foreign currency gain
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
Tax refunds received (income tax paid), net
Net cash provided by operating activities
Investing activities
10, 11
12
7
6
16
9
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
Proceeds from issuance of exchangeable senior notes, net of discount and
issuance costs (payment of issuance cost)
Purchase of capped calls
Payments of lease obligations
Interest paid
Repayment of exchangeable senior notes
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
—
(1,163)
(188)
162,873
12,414
7,478
(9,877)
1,113
(8,449)
43,477
97,676
8,679
(4,246)
—
—
Fiscal Year Ended June 30,
Notes
2020
2019
2018
$
(346,209) $
(605,556) $
(58,131)
70,248
79,435
62,271
35,127
(993)
(1,503)
313,395
335,953
35,608
—
(2,357)
(770)
257,762
533,908
33,939
(27,801)
(33,500)
14,002
6,302
(30,211)
(19,635)
(29,440)
(10,608)
51,532
1,085
75,624
15
131,535
122,502
29,217
(17,876)
30,328
7,038
574,210
466,342
311,456
—
(2,110)
(35,709)
(44,192)
(30,209)
—
3,721
2,775
(985,931)
(648,036)
(347,822)
513,268
245,498
(2,085)
(760)
485,021
20,545
(552)
—
206,119
123,862
(3,131)
(3,290)
(318,931)
(604,198)
(51,696)
16
16
12
16
1,802
3,542
3,995
—
—
(38,125)
(6,250)
(2)
(42,575)
(1,176)
(410)
990,494
—
—
(6,319)
—
(87,700)
—
—
—
(3,187)
906,789
(855)
(630)
211,528
(141,898)
1,165,919
1,268,441
1,410,339
244,420
$ 1,479,969 $ 1,268,441 $ 1,410,339
Business combinations, net of cash acquired
13
(53,212)
(418,595)
The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.
F-9
ATLASSIAN CORPORATION PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate Information
Atlassian Corporation Plc (the “Company”) is a public company limited by shares, incorporated and
registered in the United Kingdom. The registered office of the Company and its subsidiaries (collectively, “Atlassian,”
the “Group,” “our,” or “we”) is located at Exchange House, Primrose Street, London EC2A 2EG, c/o Herbert Smith
Freehills LLP.
We design, develop, license and maintain software and provision software hosting services to help teams
organize, discuss and complete their work. Our primary products include Jira Software, targeting software teams,
and Jira Core, targeting other business teams (collectively, “Jira”), Confluence for team content creation and
sharing, Trello for capturing and adding structure to fluid, fast-forming work for teams, Jira Service Desk for team
service and support applications, Opsgenie for incident management, Jira Align for enterprise agile planning,
Bitbucket for code sharing and management and Atlasian Access for enterprise-grade security and centralized
administration.
The accompanying consolidated financial statements of the Group for the year ended June 30, 2020 were
authorized for issue in accordance with a resolution of the board of directors on August 14, 2020.
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, 2019, we adopted the requirements of IFRS 16, Leases, (“IFRS 16”) using the modified
retrospective method as discussed below. We recognized the cumulative effect of the initial application of the
standard as an adjustment to the opening balance of accumulated deficit on the date of initial application while the
prior period amounts were not adjusted.
Use of estimates
The preparation of the financial statements requires management to make judgments, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually evaluates its
judgments and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management
bases its judgments and estimates on historical experience and on other various factors it believes to be reasonable
under the circumstances, the result of which forms the basis of the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates under different assumptions
and conditions and may materially affect the financial results or the financial position reported in future periods.
Significant estimates, assumptions and judgments made by management include revenue recognition and
impairment of non-financial assets (see Note 3, “Critical Accounting Estimates and Judgments”). Other estimates,
assumptions and judgments made by management include business combinations, fair value measurement of
financial instruments and accounting for income taxes.
F-10
In January 2020, the World Health Organization declared a novel coronavirus (“COVID-19”) a Public Health
Emergency of International Concern, and a pandemic in March 2020. The impact of COVID-19 continues to unfold
and the extent of the impact will depend on a number of factors, including the duration and spread of the outbreak,
its severity, the actions taken by governments and authorities to contain the virus or treat its impact, and how quickly
and to what extent normal economic and operating conditions can resume. The Group considered the impact of
COVID-19 on the assumptions and estimates used, including the allowance for credit losses for accounts
receivable, the credit worthiness of customers entering into revenue arrangements, our impairment assessment of
assets, the fair values of our financial instruments, and income taxes, which require increased judgement and carry
a higher degree of estimate uncertainty. The Group determined that there were no material adverse impacts on the
consolidated financial statements for the year ended June 30, 2020. As events continue to evolve and additional
information becomes available, the Group’s assumptions and estimates may change in future periods.
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 operating segment, which is also its reporting segment. An operating
segment is defined as a component of an entity for which discrete financial information is available and whose
results of operations are regularly reviewed by the chief operating decision maker. The Group's chief operating
decision makers are the Group's Co-Chief Executive Officers, who review results of operations to make decisions
about allocating resources and assessing performance based on consolidated financial information. Accordingly, the
Group has determined it operates in 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 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, net in the consolidated statements of operations for the period.
Revenue recognition
Policies, Estimates and Judgments
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 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.
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.
F-11
The timing of revenue recognition may differ from the timing of billing our customers. We receive payments
from customers based on a billing schedule as established in our contracts. Contract assets are recognized when
performance is completed in advance of scheduled billings. Deferred revenue is recognized when billings are in
advance of performance under the contract. Our revenue arrangements include standard warranty provisions that
our products and services will perform and operate in all material respects with the applicable published
specifications, the financial impacts which have historically been and are expected to continue to be insignificant.
Our contracts do not include a significant financing component.
Our contracts with customers often include promises to transfer multiple products and services to a
customer. Determining whether products and services are considered distinct performance obligations that should
be accounted for separately versus together may require judgment.
We allocate the transaction price for each contract to each performance obligation based on the relative
standalone selling price (“SSP”) for each performance obligation. We use judgment in determining the SSP for
products and services. We typically determine an SSP range for our products and services which is reassessed on
a periodic basis or when facts and circumstances change. For all performance obligations other than perpetual and
term licenses, we are able to determine SSP based on the observable prices of products or services sold separately
in comparable circumstances to similar customers. In instances where performance obligations do not have
observable standalone sales, we utilize available information that may include market conditions, pricing strategies,
the economic life of the software, and other observable inputs to estimate the price we would charge if the products
and services were sold separately.
Our products are generally sold with a right of return, we may provide other credits or incentives, and in
certain instances we estimate customer usage of our services, which are accounted for as variable consideration
when determining the amount of revenue to recognize. Returns and credits are estimated at contract inception and
updated at the end of each reporting period if additional information becomes available. Variable consideration was
not material for the periods presented.
Recognition of revenue
Revenue 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 15, “Revenue.”
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.
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 typically recognize revenue on the license portion of perpetual license arrangements once
the customer obtains control of the license, which is generally upon delivery of the license.
F-12
Other revenues
Other revenues include primarily fees received for sales of third-party apps in the Atlassian Marketplace.
Technical account management, consulting and training services are also included in other revenues. Revenue from
the sale of third-party 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 on a net basis 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 consulting and training is recognized over time as the services are performed.
Cash and cash equivalents
The Group considers all highly liquid investments purchased with an original maturity of three months or less
and subject to an insignificant risk of changes in value to be cash equivalents. Cash equivalents also include
amounts due from third-party credit card processors as they are both short-term and highly liquid in nature and are
typically converted to cash within three days of the sales transaction.
Current versus non-current classification
The Group presents assets and liabilities in the consolidated statements of financial position based on
current or non-current classification. An asset is current when it is: expected to be realized or intended to be sold or
consumed in the normal operating cycle; expected to be realized within twelve months after the reporting period; or
cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve
months after the reporting period. All other assets are classified as non-current. A liability is current when it is due to
be settled within twelve months after the reporting period. The Group classifies all other liabilities as non-current.
Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability
or equity instrument of another entity.
Our financial assets include trade receivables and contract assets, debt and equity investments and
derivative financial instruments. We generally classify financial assets into the following categories: subsequently
measured at amortized cost, at fair value through other comprehensive income, and at fair value through profit or
loss depending on the contractual cash flows of and our business model for holding the respective asset. Financial
assets that are measured at fair value on a recurring basis include debt and equity investments and derivative
financial instruments. Trade receivables and contract assets are measured at amortized cost. Purchases or sales of
financial assets that require delivery of assets within a time frame established by regulation or convention in the
market place (regular way trades) are recognized on the trade date.
Our financial liabilities include trade and other payables, exchangeable senior notes (the “Notes”) and
derivative financial instruments. We generally classify financial liabilities as subsequently measured at amortized
cost and at fair value through profit or loss. Financial liabilities that are measured at fair value are the derivative
financial instruments. Trade and other payables are measured at amortized cost and the Notes are measured at
amortized cost using the effective interest rate (“EIR”) method.
Debt investments
The Group’s marketable debt securities were classified as instruments at fair value through other
comprehensive income. These debt securities give rise to cash flows that are solely payments of principal and
interest on the principal amount outstanding. After consideration of our objectives, as well as our liquidity
requirements, we may sell these debt securities prior to their stated maturities. As we view these securities as
available for use to support current operations, we classify highly liquid securities with maturities beyond 12 months
as current assets under the caption short-term investments on the consolidated statements of financial position. Fair
value changes of marketable debt securities that have been recognized in other comprehensive income are
reclassified to profit or loss upon sale of the financial asset.
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.
F-13
Marketable equity securities are measured at fair value using readily determinable market value. Non-
marketable equity securities are measured at fair value using market data, such as publicly available financing
round valuations. Judgment is required particularly in estimating the fair values of non-marketable equity securities.
Exchangeable senior notes
The Notes are classified as financial liabilities at amortized cost and measured using the EIR method.
Amortized cost is calculated by taking into account any discount and issuance cost that are an integral part of the
EIR. The EIR amortization is included as finance costs in the consolidated statements of operations.
Derivative financial instruments
The Group enters into foreign exchange forward contracts with the objective to mitigate certain currency
risks associated with cost of revenues and operating expenses denominated in foreign currencies. These foreign
exchange forward contracts are designated as cash flow hedges. 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.
At the inception of a hedge relationship, the Group formally designates and documents the hedge
relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for
undertaking the hedge.
The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk
being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness
requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A
hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
•
•
•
There is ‘an economic relationship’ between the hedged item and the hedging instrument;
The effect of credit risk does not ‘dominate the value changes’ that result from that economic relationship;
and
The hedge ratio of the hedging relationship is the same as the ratio resulting from the quantity of the
hedged item and the quantity of the hedging instrument.
For derivative instruments designated as cash flow hedges, the effective portion of the gains (losses) on the
derivatives is initially reported as a component of other comprehensive income and is subsequently recognized in
earnings when the hedged exposure is recognized in earnings. Amounts reclassified from cash flow hedge reserve
to profit or loss are recorded to the same functional expense as the hedged item or items. Gains (losses) on
derivatives representing hedge ineffectiveness are recognized in earnings. For derivative instruments that are not
designated as hedges, gains (losses) from changes in fair values are primarily recognized in other income
(expense), net.
The Group has other derivatives such as embedded exchange feature of the Notes and capped call
transactions (“Exchange and Capped Call Derivatives”). Please see Note 16, “Exchangeable Senior Notes” for
details. The Exchange and Capped Call Derivatives are measured at fair value at each reporting date and gains
(losses) from changes in fair values are recognized in other non-operating expense, net. The Group used Black-
Scholes option pricing models to fair value the Exchange 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 debt investments at fair value through other comprehensive income
at an amount equal to lifetime expected credit losses (“ECLs”), except for securities that are determined to have low
credit risk at the reporting date and other securities and bank balances for which credit risk has not increased
significantly since initial recognition, which are measured as 12-month ECLs. ECLs are a probability-weighted
estimate of the difference in the present value of contractual cash flows and the present value of cash flows that the
Group expects to receive. Lifetime ECLs are the ECLs that result from all possible default events over the expected
life of a financial instrument. 12-month ECLs are the portion of ECLs that result from default events that are possible
within the 12 months following the reporting date.
F-14
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.
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
1 - 3 years
1 - 5 years
3 - 10 years
Leasehold improvements
Shorter of the remaining lease term or 7 years
F-15
Business combinations
We include the results of operations of the businesses that we acquire as of the acquisition date. We record
the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price
over the fair values of these identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses
are recognized separately from the business combination and are expensed as incurred.
We use our best estimates and assumptions to accurately assign fair value to the intangible assets acquired
at the acquisition date. The estimation is primarily due to the judgmental nature of the inputs to the valuation models
used to measure the fair value of these intangible assets, as well as the sensitivity of the respective fair values to
the underlying significant assumptions. Our estimates are inherently uncertain and subject to refinement. We use a
discounted cash flow method of the income approach to measure the fair value of these intangible assets.
Assumptions used to estimate the fair value of the intangible assets include revenue growth rates, technology
migration curves, customer attrition rates and discount rates. These assumptions are forward-looking and could be
affected by future economic and market conditions.
During the measurement period, which may be up to one year from the date of acquisition, the Group may
record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed based
on additional information obtained affecting the fair value of those assets and liabilities, with the corresponding
offset to goodwill. In addition, uncertain tax positions are initially established in connection with a business
combination as of the acquisition date. The Group continues to collect information and reevaluates these provisional
estimates and assumptions as deemed reasonable by management. The Group records any adjustments to these
provisional estimates and assumptions against goodwill provided they arise within the measurement period. Upon
the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities
assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of
operations. Please refer to Note 13, “Business combinations,” for details.
Goodwill
Goodwill is the excess of the aggregate of the consideration transferred over the identifiable assets acquired
and liabilities assumed. Goodwill is tested for impairment annually during the fourth quarter of the Group's fiscal
year and when circumstances indicate that the carrying value may be impaired. The Group performs its goodwill
impairment test at the level of its operating segment as there are no lower levels within the Group at which goodwill
is monitored. Impairment is determined for goodwill by assessing the recoverable amount of the operating segment.
When the recoverable amount of the operating segment is less than its carrying amount, an impairment loss is
recognized. Impairment losses relating to goodwill cannot be reversed in future periods.
Intangible assets
We acquire intangible assets separately or in connection with business combinations. Intangible assets are
measured at cost initially. All of our intangible assets are with finite lives and are amortized over their estimated
useful life using the straight-line method. The amortization expense on intangible assets is recognized in the
consolidated statements of operations in the expense category, consistent with the function of the intangible asset.
The estimated useful lives for each intangible asset class are as follows:
Patents, trademarks and other rights
Customer relationships
Acquired developed technology
1 - 12 years
2 - 10 years
2 - 7 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.
F-16
Impairment of non-financial assets
At the end of each reporting period, the Group assesses whether there is an indication that an asset may be
impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates
the asset’s recoverable amount. The recoverable amount is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent of those from other assets or groups of assets. An
asset’s recoverable amount is the higher of an asset’s or cash generating unit (“CGU”)’s fair value less costs of
disposal and its value in use. When the carrying amount of an asset or CGU exceeds its recoverable amount, the
asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-
tax discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such
transactions can be identified, an appropriate valuation model is used.
Share-based payments
Share-based payments cover equity-settled awards including stock options, restricted share units (“RSUs”)
and restricted shares issued to our employees in exchange of their service. The cost of the equity-settled awards is
determined by the fair value at the grant date. The fair value of RSUs or restricted shares is equal to the market
value of our common stock on the grant date. The Group estimates the fair value of stock options using the Black-
Scholes option pricing model. This option-pricing model requires the input of assumptions, including the awards’
expected life and the price volatility of the underlying stock.
We recognize equity-settled awards cost, net of estimated forfeitures, over the awards’ requisite service
period on a graded-vesting basis. No compensation cost is recognized for awards that do not ultimately vest
because service conditions have not been met and we estimate forfeiture based on historical experience. The
respective expenses are recognized as employee benefits and classified in our consolidated statements of
operations according to the activities that the employees perform.
The Group also issues replacement awards in connection with business combinations in exchange for
awards held by employees of the acquiree. We recognize the portion of the acquiree award that is attributable to
pre-combination service as purchase consideration. The portion of the replacement award attributable to post-
combination service is recognized as employee benefits and classified in our consolidated statements of operations
according to the activities that the employees perform.
Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a
past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of
money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks
specific to the liability. When discounting is used, the increase in the provision due to the passage of time is
recognized as a finance cost.
Leases
Prior to adoption of IFRS 16
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-17
After adoption of IFRS 16
Group as lessee
We determine if an arrangement is a lease at inception. Our lease agreements generally contain lease and
non-lease components. Lease payments under our lease arrangements are primarily fixed. Non-lease components
primarily include payments for maintenance and utilities and are expensed as incurred.
Lease liabilities are recognized at the present value of the future lease payments at the lease
commencement date. The interest rate used to determine the present value of the future lease payments is our
incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. Our
incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms
and payments, and in economic environments where the leased asset is located. Our lease terms include periods
under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We
generally use the base, non-cancelable, lease term when determining lease liabilities. We reassesses the lease
term if and when a significant event or change in circumstances occurs within the control of the Group.
Right-of-use assets are recognized at cost at the lease commencement date. The cost of right-of-use assets
includes the amount of lease liabilities recognized, initial direct cost incurred, any prepaid lease payments less lease
incentives and an estimate of restoration cost. Right-of-use assets are depreciated on a straight-line basis over the
shorter of the lease term and the estimated useful lives of the assets.
We apply the short-term lease recognition exemption for our short-term leases and leases of low-value
assets. Short-term leases are leases with a lease term of 12 months or less. Low-value assets are primarily
comprised of office equipment. Payments associated with short-term leases and leases of low-value assets are
recognized on a straight-line basis over the lease term.
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.
F-18
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 results of operations. Deferred tax assets are adjusted for significant non-taxable income, expenses and
specific limits on the use of any unused tax loss or credit. Unrecognized deferred income tax assets are reassessed
at each reporting date and are recognized to the extent that it has become probable that future taxable income will
allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are calculated, without discounting, at tax rates and in accordance with
laws that are expected to apply to their respective period of realization, provided the tax rates and laws are enacted
or substantively enacted by the end of the reporting period. The carrying amount of deferred tax assets are
reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable income
will be available to allow all or part of the deferred tax asset to be utilized.
Deferred tax liabilities and assets are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities on a net basis. Changes in deferred tax assets or
liabilities are recognized as a component of tax expense (benefit) in the consolidated statements of operations,
except where they relate to items that are recognized in other comprehensive income or directly in equity, in which
case the related deferred tax is also recognized in other comprehensive income or equity, respectively. Where
deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting
for the business combination.
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.
Assumptions about the generation of future taxable income depend on management’s estimates of future cash
flows, future business expectations, capital expenditures, dividends, and other capital management transactions.
Management judgment is also required in relation to the application of income tax legislation, which involves
complexity and an element of 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, “Income Tax.”
New Standards, Interpretations and Amendments Adopted in Fiscal Year 2020
IFRS 16, Leases
In January 2016, the IASB issued IFRS 16, which supersedes the previous leases standard, IAS 17, Leases
(“IAS 17”), and related interpretations. The standard introduced 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
obligations. We adopted IFRS 16 as of July 1, 2019, using the modified retrospective method and, therefore, the
comparatives for fiscal year 2019 and 2018 have not been restated.
We applied IFRS 16 using the following practical expedients permitted under the new standard:
•
•
•
•
The use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
Reliance on previous assessments on whether leases are onerous;
The exclusion from recognition of right-of-use assets or lease obligations for leases of low value or for leases
with a term ending within 12 months as of July 1, 2019; and,
The exclusion of initial direct costs for the measurement of the right-of-use asset as of July 1, 2019.
On adoption of IFRS 16, we recognized lease obligations in relation to leases which had previously been
classified as ‘operating leases’ under the principles of IAS 17. These liabilities were measured at the present value
of the remaining lease payments, discounted using our incremental borrowing rate as of July 1, 2019. The
weighted-average incremental borrowing rate applied to the lease obligations on July 1, 2019 was 2.91%. Right-of-
use assets were recognized as an amount equal to the lease liability, adjusted by the amount of any prepaid or
accrued lease payments.
F-19
The adoption of IFRS 16 affected the following items on our consolidated statements of financial position as
of July 1, 2019:
Prepaid expenses and other current assets – increased by $9.5 million;
Right-of-use assets, net – increased by $241.4 million;
Property and equipment, net – decreased by $1.2 million;
•
•
•
• Other non-current assets – increased by $0.9 million;
Trade and other payables – decreased by $1.4 million;
•
•
Lease obligations, current – increased by $29.8 million;
• Other non-current liabilities – decreased by $33.8 million; and
Lease obligations, non-current – increased by $256.2 million.
•
The net impact on accumulated deficit as of July 1, 2019 was an increase of $0.1 million.
The following table presents the reconciliation of our operating lease commitments disclosed as of June 30,
2019 to our lease obligations recognized as of July 1, 2019:
Operating lease commitments disclosed as of June 30, 2019
Less: Short-term leases recognized on a straight-line basis as expense
Undiscounted lease commitments, excluding short-term leases
Discounted using incremental borrowing rate and recognized as lease obligations as of July
1, 2019
Lease obligations, current
Lease obligations, non-current
Total lease obligations
July 1, 2019
(U.S. $ in thousands)
$
$
$
$
330,848
(1,756)
329,092
285,973
29,787
256,186
285,973
There is no material impact on other comprehensive income and basic and diluted earnings per share from
the adoption of IFRS 16.
IFRIC Interpretations 23, Uncertainty over Income Tax Treatments (“IFRIC 23”)
On June 7, 2017, the IFRS IC issued IFRIC 23, which clarifies how the recognition and measurement
requirements of IAS 12, Income Taxes, are applied where there is uncertainty over income tax treatments. IFRIC 23
applies to all aspects of income tax accounting where there is an uncertainty regarding the treatment of an item,
including taxable profit or loss, the tax bases of assets and liabilities, and tax losses and credits. This interpretation
became effective for annual periods beginning on, or after January 1, 2019 and did not have a significant impact on
our consolidated financial statements.
New Standards, Interpretations and Amendments Not Yet Adopted in Fiscal Year 2020
The IASB has issued other amendments resulting from improvements to IFRS that management considers
do not have any impact on the accounting policies, financial position or performance of the Group. The Group does
not expect them to have a material impact on the accounting policies.
F-20
3. Critical Accounting Estimates and Judgments
Management has identified the following critical accounting policies for which significant judgments,
estimates and assumptions are made.
Critical accounting estimates and assumptions
Revenue recognition
Determining the SSP for products and services requires estimates and assumptions. We typically determine a
SSP range for our products and services which is reassessed on a periodic basis or when facts and circumstances
change. For all performance obligations other than perpetual and term licenses, we are able to determine SSP
based on the observable prices of products or services sold separately in comparable circumstances to similar
customers. In instances where performance obligations do not have observable standalone sales, we utilize
available information that may include market conditions, pricing strategies, the economic life of the software, and
other observable inputs to estimate the price we would charge if the products and services were sold separately.
Critical accounting judgments
Impairment of non-financial assets
For assets excluding goodwill, and CGUs, impairment assessments are made at each reporting date by
evaluating conditions specific to the Group and to the particular asset that may lead to impairment. Goodwill is
tested for impairment annually during the fourth quarter of the Group's fiscal year and when circumstances indicate
that the carrying value may be impaired. These include product performance, technology, economic and political
environments, and future product expectations. If an impairment trigger exists or when annual impairment testing for
an asset is required, the recoverable amount of the asset is determined.
There was no goodwill impairment in the fiscal years ended 2020, 2019 and 2018. No indicators of
impairment existed that were significant enough to warrant non-financial assets other than goodwill to be tested for
impairment in the fiscal years ended 2020, 2019 and 2018. For details of non-financial assets, please refer to Note
10, “Property and Equipment” and Note 11, “Goodwill and Intangible assets.”
F-21
4. Group Information
As of June 30, 2020, the Group’s subsidiaries, all of which are wholly owned, were as follows:
Name
Atlassian (UK) Limited
Atlassian (UK) Holdings Limited
Atlassian (Australia) Limited
Atlassian (UK) Operations Limited
Atlassian, Inc.
Atlassian Network Services, Inc.
Dogwood Labs, Inc.
Trello, Inc.
AgileCraft LLC
AgileCraft Australia Pty Ltd (1)
OpsGenie, Inc.
Opsgenie Yazılım Anonim Şirketi
iFountain, LLC
Halp, Inc
Atlassian Australia 1 Pty Ltd
Atlassian Australia 2 Pty Ltd
Atlassian Corporation Pty. Ltd.
Atlassian Pty Ltd
Good Software Co. Pty Ltd
Code Barrel Pty Ltd
Lead Green Pty Ltd
Lead Green Trust
Vertical First Pty Ltd
Vertical First Trust
Atlassian Capital Pty. Ltd.
MITT Australia Pty Ltd
MITT Trust
Atlassian Holdings B.V.
Atlassian K.K.
Atlassian Germany GmbH
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 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
United States of America
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Netherlands
Japan
Germany
Philippines
France
Netherlands
Canada
India
(1)
AgileCraft Australia Pty Ltd is currently in liquidation.
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.
F-22
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 (“AUD”),
British pound, Euro (“EUR”), 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 (“USD”). 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 select financial institutions to reduce our credit risk, and we trade
with several counterparties to reduce our concentration risk with any single counterparty. We do not have significant
exposure to counterparty credit risk at this time. We do not require nor are we required to post collateral of any kind
related to our foreign currency derivatives.
Cash flow hedging
We enter into foreign exchange forward contracts with the objective to mitigate certain currency risks
associated with forecast cost of revenues and operating expenses denominated in Australian dollars. These foreign
exchange forward contracts are designated as cash flow hedges.
There is an economic relationship between the hedged items and the hedging instruments as the terms of
the foreign exchange and forward contracts match the terms of the expected highly probable forecast transactions
(i.e., notional amount and expected payment date). The Group has established a hedge ratio of 1:1 for the hedging
relationships as the underlying risk of the foreign exchange and forward contracts are identical to the hedged risk
components. We measure ineffectiveness in a cash flow hedge relationship using the hypothetical derivative
method. Ineffectiveness occurs only if the present value of the cumulative gain or loss on the derivative instrument
exceeds the present value of the cumulative gain or loss on the hypothetical derivative, which is used to measure
changes of expected future cash flow. Ineffectiveness mainly rises from the differences in the timing of the cash
flows of the hedged items and the hedging instruments.
It is our policy to enter into cash flow hedges to hedge cost of revenues and operating expenses up to 24
months.
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. 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.
F-23
Foreign currency exchange rate exposure
The Group hedges material foreign currency denominated monetary assets and liabilities using balance
sheet hedges. The fluctuations in the fair market value of balance sheet hedges due to foreign currency rates
generally offset those of the hedged items, resulting in no material effect on profit. Consequently, we are primarily
exposed to significant foreign currency exchange rate fluctuations with regard to the spot component of derivatives
held within a designated cash flow hedge relationship affecting other comprehensive income.
The following table sets forth foreign currency sensitivity analysis of a hypothetical 10% change in
exchange rate of the U.S. dollar against the Australian dollar to our cash flow hedging portfolio:
Foreign Currency Sensitivity
Effect on other comprehensive income,
before tax
2020
2019
(U.S. $ in thousands)
Foreign currency forward contracts - cash flow hedging:
U.S. dollar +10%, decrease in fair value of foreign currency forward
contracts
U.S. dollar -10%, increase in fair value of foreign currency forward
contracts
$
(26,999) $
(22,526)
26,999
22,526
Equity Price Risk
The Group is exposed to equity price risk in connection with our Notes, including exchange and settlement
provisions based on the price of our Class A ordinary shares at exchange or maturity of the Notes. In addition, the
capped call transactions associated with the Notes also include settlement provisions that are based on the price of
our Class A ordinary shares. The amount of cash we may receive from capped call counterparties in connection with
the capped calls is determined by the price of our Class A ordinary shares. The Group is also exposed to equity
price risk in connection with our equity investments. The Group’s marketable and non-marketable equity
investments are susceptible to market price risk from uncertainties about future values of the investment securities.
The following table sets forth equity price sensitivity analysis of a hypothetical 10% change in share prices:
Equity Price Sensitivity
Effect on other non-operating
expense, net
Effect on other comprehensive
income, before tax
2020
2019
2020
2019
(U.S. $ in thousands)
Fair Value change of the Exchange and Capped
Call Derivatives:
Increase in our share price of 10%
$
(192,641) $
(122,443) $
Decrease in our share price of 10%
184,784
116,343
— $
—
—
—
Fair value change of marketable equity
investments:
Increase in respective share prices of 10%
Decrease in respective share prices of 10%
Interest rate risk
—
—
—
—
10,019
(10,019)
5,893
(5,893)
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,
2020, the Group had cash and cash equivalents totaling $1.5 billion and short-term investments totaling $676.1
million.
The following table sets forth an interest rate sensitivity analysis of a hypothetical 100 basis point change in
interest rates. This estimate is based on a sensitivity model that measures market value changes when changes in
interest rates occur:
F-24
Interest Rate Sensitivity
Effect on other comprehensive income,
before tax
2020
2019
(U.S. $ in thousands)
Change in market value of debt investments:
Interest Rate +100bps, decrease in market value of debt investments $
Interest Rate -100bps, increase in market value of debt investments
(5,397) $
1,617
(2,285)
2,285
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 rating 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, “Trade Receivables” 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 presents the contractual undiscounted cash flows relating to the Group’s financial liabilities
at the balance sheet date. The cash flows are grouped based on the remaining period to the contractual maturity
date. The Group has sufficient funds, including its cash, cash equivalents, short-term investments 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-25
Contractual maturities of financial liabilities are as follows:
Less than 1
year
1 - 3 years
3 - 5 years
More than 5
years
Total
(U.S. $ in thousands)
As of June 30, 2020
Financial liabilities:
Trade and other payables
$
202,570 $
— $
— $
— $
202,570
Lease liabilities (1)
Derivative liabilities
41,584
1,507
Exchangeable senior notes (2)
2,211,244
109,015
54,325
92,158
2
—
—
—
—
—
297,082
1,509
2,211,244
$ 2,456,905 $
109,017 $
54,325 $
92,158 $ 2,712,405
As of June 30, 2019
Financial liabilities:
Trade and other payables
$
159,487 $
— $
— $
— $
159,487
Derivative liabilities
Exchangeable senior notes (2)
3,879
1,604,923
74
—
—
—
—
—
3,953
1,604,923
$ 1,768,289 $
74 $
— $
— $ 1,768,363
(1) Lease liabilities represent undiscounted lease payments excluding certain low-value and short-term leases, refer to Note 12,
“Leases” for details.
(2) The amount related to Notes represent the if-exchanged value using stock price as of June 30, 2020 and 2019, respectively.
Refer to Note 16, “Exchangeable Senior Notes” for details.
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, 2020 and 2019. During the fiscal year ended June 30, 2018, the Group issued $1.0 billion of the
Notes 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.
F-26
Fair Value Measurements
The following table presents the Group’s financial assets and liabilities as of June 30, 2020, by level within
the fair value hierarchy:
Level 1
Level 2
Level 3
Total
(U.S. $ in thousands)
Description
Assets measured at fair value
Cash and cash equivalents:
Money market funds
U.S. treasury securities
Agency securities
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
Municipal securities
Current derivative assets:
Derivative assets - hedging
Derivative assets - capped call transactions
Other non-current assets:
Certificates of deposit and time deposits
Marketable equity securities
Non-marketable equity securities
$
439,947 $
— $
— $
439,947
—
—
—
—
—
—
—
—
—
—
—
—
—
100,187
—
5,599
8,749
167,248
27,365
296,118
24,586
12,052
31,937
308,651
2,728
16,879
3,347
—
—
—
—
—
—
—
—
—
—
—
—
—
310,608
—
—
3,750
5,599
8,749
167,248
27,365
296,118
24,586
12,052
31,937
308,651
2,728
16,879
310,608
3,347
100,187
3,750
Total assets measured at fair value
$
540,134 $
905,259 $
314,358 $ 1,759,751
Liabilities measured at fair value
Current derivative liabilities:
Derivative liabilities - hedging
Derivative liabilities - exchangeable feature of
Notes
Non-current derivative liabilities:
Derivative liabilities - hedging
$
— $
1,507 $
— $
1,507
—
—
—
1,283,089
1,283,089
2
—
2
Total liabilities measured at fair value
$
— $
1,509 $ 1,283,089 $ 1,284,598
F-27
The following table presents the Group’s financial assets and liabilities as of June 30, 2019, by the level
within the fair value hierarchy:
Level 1
Level 2
Level 3
Total
(U.S. $ in thousands)
Description
Assets measured at fair value
Cash and cash equivalents:
Money market funds
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:
Certificates of deposit and time deposits
Marketable equity securities
Non-marketable equity securities
$
593,696 $
— $
— $
593,696
—
—
—
—
—
—
—
—
—
—
—
—
—
—
58,932
—
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
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
$
— $
3,879 $
— $
3,879
—
—
—
74
851,126
851,126
—
74
Total liabilities measured at fair value
$
— $
3,953 $
851,126 $
855,079
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.
F-28
Determination of fair value
The following table sets forth a description of the valuation techniques and the inputs used in fair value
measurement:
Type
Money market fund
Marketable debt securities
Marketable equity securities
Valuation Technique
Quoted price in active market
Quoted market price to the extent
possible or alternative pricing sources
and models utilizing market
observable inputs
Quoted price in active market
Non-marketable equity securities
Publicly available financing round
valuation
Foreign currency forward contracts
Discounted cash flow
Exchange and Capped Call Derivatives Black-Scholes option pricing models
Inputs
N/A
N/A
N/A
N/A
Foreign currency spot and forward rate
Interest rate
Credit quality of counterparties
Stock price
Time to expiration of the options
Stock price volatility
Interest rate
Exchangeable senior notes
Quoted market price
N/A
Level 3 financial instruments disclosure
In April 2018, the Group issued $1 billion in Notes and entered into related capped call transactions. Please
refer to Note 16, “Exchangeable Senior Notes” for details. Exchange and Capped Call Derivatives are classified as
level 3 as the Group uses stock price volatility implied from options traded with a substantially shorter term, which
makes this an unobservable input that is significant to the valuation.
The table below present stock price volatility sensitivity analysis of the fair value change assume a 10%
higher volatility, holding other inputs constant:
Stock Price Volatility Sensitivity
Effect on Other non-operating expense, net
Stock price volatility range as of fiscal year end
39.2% - 42.8%
43.8% - 47.3%
Fair Value change of the Exchange and Capped Call Derivatives:
$
(37,366) $
(46,888)
2020
2019
(U.S. $ in thousands)
F-29
The following table presents the reconciliations of Level 3 financial instrument fair values:
Capped Call
Embedded
exchange feature
of Notes
Non-marketable
equity
investments
(U.S. $ in thousands)
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, net
114,665
(648,573)
Recognized in other comprehensive income
—
—
—
23,000
(20,942)
270
—
672
Balance as of June 30, 2019
Change in unrealized gains (losses) relating to assets and
liabilities held as of June 30, 2019
214,597
(851,126)
3,000
Recognized in other non-operating expense, net
114,665
(648,573)
—
Balance as of June 30, 2019
$
214,597 $
(851,126) $
Purchases
Gains (losses)
—
1
Recognized in other non-operating expense, net
96,011
(431,964)
Balance as of June 30, 2020
Change in unrealized gains (losses) relating to assets and
liabilities held as of June 30, 2020
$
310,608 $
(1,283,089) $
3,000
750
—
3,750
Recognized in other non-operating expense, net
96,011
(431,964)
—
There were no transfers between levels during fiscal year 2020. There were transfers out from Level 3 due
to initial public offerings of the respective investees during fiscal year 2019.
Investments
As of June 30, 2020, 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
Municipal 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)
$ 294,103 $
2,017 $
(2) $ 296,118
24,280
15,399
31,937
305,448
2,700
306
—
—
3,205
28
—
—
—
24,586
15,399
31,937
(2)
308,651
—
2,728
$ 673,867 $
5,556 $
(4) $ 679,419
$
20,270 $
79,917 $
— $ 100,187
3,750
—
—
3,750
$
24,020 $
79,917 $
— $ 103,937
$ 697,887 $
85,473 $
(4) $ 783,356
F-30
As of June 30, 2020, the Group had $676.1 million of investments which were classified as short-term
investments on the Group’s consolidated statements of financial position. Additionally, the Group had marketable
equity securities totaling $100.2 million, non-marketable equity securities totaling $3.8 million, and certificates of
deposit and time deposits totaling $3.3 million which were classified as long-term and were included in other non-
current assets on the Group’s consolidated statements of financial position.
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 $
(7) $ 101,759
26,936
24,126
94,035
33
—
—
(3)
—
—
26,966
24,126
94,035
201,552
$ 448,212 $
292
528 $
(24)
201,820
(34) $ 448,706
$
20,270 $
38,662 $
— $
58,932
3,000
—
—
3,000
$
23,270 $
38,662 $
— $
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.
The effects of the Group’s investments on the consolidated financial statements were as follows (amounts
presented are prior to any income tax effects):
2020
Fiscal Year Ended June 30,
2019
(U.S. $ in thousands)
2018
Unrealized gains (losses) recognized in other comprehensive income
Gains (losses) recognized into profit or loss
$
$
46,975 $
40,017 $
697 $
15 $
(601)
(15)
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
As of June 30,
2020
2019
(U.S. $ in thousands)
$
$
443,324 $
236,095
679,419 $
442,964
5,742
448,706
F-31
Derivative financial instruments
The Group has derivative instruments that are used for hedging activities as discussed below and derivative
instruments relating to the Notes and the capped calls as discussed in Note 16, “Exchangeable Senior Notes.”
The fair value of the hedging derivative instruments were as follows:
Statement of Financial
Position Location
As of June 30,
2020
2019
(U.S. $ in thousands)
Derivative assets - hedging
Derivatives designated as hedging instruments:
Foreign exchange forward contracts
Current derivative assets
$
14,195 $
Foreign exchange forward contracts
Other non-current assets
—
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts
Current derivative assets
2,684
Total derivative assets
$
16,879 $
247
77
312
636
Derivative liabilities - hedging
Derivatives designated as hedging instruments:
Foreign exchange forward contracts
Current derivative liabilities
$
1,164 $
3,854
Foreign exchange forward contracts
Other non-current liabilities
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts
Current derivative liabilities
Total derivative liabilities
2
343
74
25
$
1,509 $
3,953
The following table sets forth the notional amounts of our hedging derivative instruments as of June 30, 2020
(U.S. $ in thousands):
Notional Amounts of Derivative Instruments
Notional Amount by Term to Maturity
Over 12
Under 12
months
months
Total
Classification by Notional Amount
Cash Flow
Hedge
Non Hedge
Total
AUD/USD forward contracts:
Notional amount
Average forward rate
EUR/USD forward contracts:
Notional amount
Average forward rate
$ 393,705 $
8,441 $ 402,146 $ 256,890 $ 145,256 $ 402,146
0.6610
0.6844
—
0.6536
0.6754
—
7,205
1.1179
—
—
7,205
—
—
—
7,205
1.1179
7,205
—
Total
$ 400,910 $
8,441 $ 409,351 $ 256,890 $ 152,461 $ 409,351
F-32
The following table sets forth the notional amounts of our hedging derivative instruments as of June 30, 2019
(U.S. $ in thousands):
Notional Amounts of Derivative Instruments
Notional Amount by Term to Maturity
Over 12
Under 12
months
months
Total
Classification by Notional Amount
Cash Flow
Hedge
Non Hedge
Total
AUD/USD forward contracts:
Notional amount
Average forward rate
EUR/USD forward contracts:
Notional amount
Average forward rate
$ 253,472 $ 14,477 $ 267,949 $ 230,264 $ 37,685 $ 267,949
0.7156
0.7085
—
0.7181
0.6979
—
6,202
1.1302
—
—
6,202
—
—
—
6,202
1.1302
6,202
—
Total
$ 259,674 $ 14,477 $ 274,151 $ 230,264 $ 43,887 $ 274,151
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):
2020
Fiscal Year Ended June 30,
2019
(U.S. $ in thousands)
2018
Gains (losses) recognized into general and administrative - ineffective
portion
Gross unrealized gains (losses) recognized in other comprehensive
income (loss)
Net gains (losses) 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
(159) $
24 $
12
3,048 $
(8,369) $
(4,387)
(13,663) $
(9,908) $
3,954
(807)
(713)
(9,647)
(6,935)
(273)
(194)
(2,936)
(2,066)
134
2,532
112
1,176
Change in fair value used for measuring ineffectiveness:
Cash flow hedging instruments
Hedged item - highly probable forecast purchases
$
2,889 $
(8,345) $
3,048
(8,369)
(4,375)
(4,387)
6. Other Non-Operating Expense, Net
Other non-operating expense, net consisted of the following:
Fiscal Year Ended June 30,
2020
2019
2018
(U.S. $ in thousands)
(533,908) $
$
(335,953) $
910
(5,282)
1,839
—
(702)
(3,629)
2,786
—
$
(338,486) $
(535,453) $
(12,414)
(413)
(1,856)
1,311
(1,785)
(15,157)
Net unrealized loss on exchange derivative and capped calls
Foreign currency exchange gain (loss), net
Contributions to Atlassian Foundation
Other income
Exchange derivative allocated issuance costs
Other non-operating expense, net
F-33
7. Expenses
Loss before income tax expense included the following expenses:
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
Fiscal Year Ended June 30,
2020
2019
2018
(U.S. $ in thousands)
$
2,077 $
1,336 $
1,214
1,096
3,000
13,563
19,736
5,377
8,086
29,072
42,535
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
$
62,271 $
70,248 $
79,435
$ 468,178 $ 351,401 $ 273,326
82,391
53,189
62,106
42,020
33,067
30,478
313,395
257,762
162,873
29,783
35,343
63,362
22,566
27,263
53,654
16,839
23,666
44,877
Total employee benefits expense
$ 1,045,641 $ 816,772 $ 585,126
8. Income Tax
The major components of income tax expense for the fiscal years ended 2020, 2019 and 2018 are as follows:
Current income tax:
Current income tax charge
Fiscal Year Ended June 30,
2020
2019
2018
(U.S. $ in thousands)
$
(25,715) $
(15,788) $
(1,956)
Adjustments in respect of current income tax of previous years
1,276
(361)
(48)
Deferred tax:
Benefit (expense) relating to origination and reversal of temporary
differences
Adjustments in respect of temporary differences of previous years
Income tax expense
18,702
1,292
30,417
(19,934)
(46,333)
(33,363)
$
(4,445) $
(32,065) $
(55,301)
A reconciliation between income tax expense and the product of accounting loss multiplied by the U.K.'s
domestic tax rate for the fiscal years ended 2020, 2019 and 2018, is as follows:
F-34
Loss before income tax expense
At the United Kingdom's statutory income tax rate of 19% in fiscal
years 2020, 2019 and 2018
Tax effect of amounts that are not taxable (deductible) in calculating
taxable income:
Fiscal Year Ended June 30,
2020
2019
2018
(U.S. $ in thousands)
$
(346,209) $
(605,556) $
(58,131)
65,688
115,031
12,508
Research and development incentive
6,816
660
Non-deductible charges relating to exchangeable senior notes
(80,262)
(104,445)
2,620
(3,195)
Share-based payment
Foreign tax credits not utilized
Foreign tax paid
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
(10,619)
(3,729)
(11,199)
(93)
4,765
—
1,416
8,835
(3,559)
(7,013)
1,276
1,292
—
—
—
—
(4)
(31)
1,685
6,337
(4,968)
(14,602)
(906)
(3,023)
14,629
(21,890)
(361)
(48)
(46,333)
(33,363)
Income tax expense
$
(4,445) $
(32,065) $
(55,301)
F-35
Details of deferred taxes, recognized and unrecognized:
Depreciation for tax purposes
Provisions, accruals and prepayments
Deferred revenue
Consolidated Statements of
Financial Position
As of June 30,
Consolidated Statements
of Operations
Fiscal Year Ended
June 30,
2020
2019
2020
2019
(U.S. $ in thousands)
$
500 $
35 $
465 $
(2,564)
152
697
(454)
(3,073)
240
3,775
(7,164)
(23,932)
Unrealized foreign currency exchange gains
(1,414)
(428)
(986)
(26,133)
(8,213)
2,034
2,452
9,943
551
889
—
5,893
3,571
17,538
1,012
1,230
—
1,001
—
421
3,430
1,055
9,445
459
(91)
—
(101)
(405)
(409)
(3,005)
13,095
331
300
10,605
(2,667)
(524)
1,781
— $
19,994 $
(15,916)
Unrealized investment losses (gains)
Carried forward tax losses (gains)
Carried forward tax credits—credited to profit and loss
Intangible assets
Tax benefit from share plans—income
Tax benefit (expense) from share plans—equity
Deferred foreign taxes
Other, net
Deferred tax benefit (expense)
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
$
4,047 $
3,212
$
35,351 $
17,084
(31,304)
(13,872)
$
4,047 $
3,212
7,197
19,561
45,874
92
4,804
13,421
37,342
—
616,667
401,108
1,818,086
1,963,534
54,066
89,151
1,291
70,259
—
10,787
45,849
109,061
1,391
47,537
1,076
10,610
$ 2,733,031 $ 2,635,733
F-36
Reconciliation of deferred tax assets, net
Balance at the beginning of
Deferred tax expense for the year
Debited to equity
Impact from business combinations
Currency revaluation impact
Balance at the end of
2020
2019
(U.S. $ in thousands)
$
3,212 $
19,994
(17,867)
(1,401)
109
$
4,047 $
47,060
(15,916)
(8,884)
(19,092)
44
3,212
In June 2019, as a result of the Group’s assessment of the realizability of its Australian deferred tax assets,
the Group recorded non-cash charges to tax expense of $54.7 million. 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.
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 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
2020
2019
(U.S. $ in thousands)
$
(17,867) $
(8,884)
The Group has the following losses and credits available for offsetting future profit and taxes:
U.S. net operating loss (Pre - 2017 Tax Reform)
U.S. net operating loss (Post - 2017 Tax Reform)
Expiration
June 30, 2031 - December 30,
2038
None
Amount
carried
forward
Amount
recognized as of
June 30, 2020
$
126,612 $
384
2,598,427
5,122
State net operating loss- various states
June 30, 2024 - June 30, 2040
774,308
U.S. research and development credits
June 30, 2030 - June 30, 2040
State research and development credits- California None
State research and development credits- Texas
June 30, 2036 - June 30, 2040
Australia capital loss
State enterprise zone credits
None
June 30, 2020 - June 30, 2024
49,848
20,621
2,923
4,637
436
422
468
175
2,923
—
4
F-37
9. Trade Receivables
The Group’s trade receivables consisted of the following:
Gross trade receivables
Expected credit loss allowance
Total trade receivables
As of June 30,
2020
2019
(U.S. $ in thousands)
$
$
113,175 $
(1,156)
112,019 $
83,044
(519)
82,525
As of June 30, 2020, one customer represented 11% of the total trade receivables balance. As of June 30,
2019, two customers represented 13% and 13% of the total trade receivables balance, respectively.
Expected Credit Loss Allowance
The movements in the ECL allowance were as follows:
As of June 30, 2018
Change in estimate
As of June 30, 2019
Change in estimate
As of June 30, 2020
(U.S. $ in thousands)
$
$
$
629
(110)
519
637
1,156
The following table sets forth the information about the credit risk exposure on the Group's trade receivables
using a provision matrix:
As of June 30, 2020
ECL rate
Trade receivables carrying amount
ECL allowance
As of June 30, 2019
ECL rate
Trade receivables carrying amount
ECL allowance
Past due days
Current
< 90 days
> 90 days
Total
(U.S. $ in thousands except ECL rate)
0.5 %
105,585
489
—
71,883
—
4.1 %
6,858
280
—
9,961
—
52.9 %
732
387
43.3 %
1,200
519
113,175
1,156
83,044
519
For the purpose of the provision matrix, customers are clustered into different risk classes, mainly based on
past due days of trade receivables. We also consider market information such as the country risk assessment of
their country of origin, type of industry and objective evidence of credit impairment for individual receivables. Loss
rates used to reflect lifetime ECL are based on its historical credit loss experience, adjusted for forward-looking
factors specific to the debtors and the economic environment.
F-38
10. Property and Equipment
Property and equipment, net consisted of the following:
Computer
Hardware
and
Software
Equipment
Furniture
and
Fittings
Leasehold
Improvements
and Other
(U.S. $ in thousands)
Construction
in progress
Total
As of June 30, 2019
Opening cost balance
Additions
Disposals
$
5,224 $
9,147 $ 11,031 $
61,456 $
3,460
1,911
4,268
(829)
(514)
(689)
Effect of change in exchange rates
2
4
(4)
Closing cost balance
7,857
10,548
14,606
Opening accumulated depreciation
(3,064)
(6,830)
(3,895)
Depreciation expense
(1,336)
(1,476)
(2,031)
Disposals
Effect of change in exchange rates
741
1
498
—
493
5
Closing accumulated depreciation
(3,658)
(7,808)
(5,428)
Net book amount
$
4,199 $
2,740 $
9,178 $
33,838
(5,339)
83
90,038
(21,413)
(8,604)
5,339
(18)
(24,696)
65,342 $
— $ 86,858
—
43,477
—
—
—
—
—
—
—
(7,371)
85
123,049
(35,202)
(13,447)
7,071
(12)
—
(41,590)
— $ 81,459
As of June 30, 2020
Opening cost balance
$
7,857 $ 10,548 $ 14,606 $
Adjustment due to IFRS 16 adoption
—
—
—
Additions
Disposals
1,967
1,825
5,190
(118)
(289)
(105)
Effect of change in exchange rates
(54)
(19)
(4)
Closing cost balance
9,652
12,065
19,687
90,038 $
(2,767)
17,608
(1,116)
(663)
103,100 $
— $ 123,049
—
(2,767)
10,985
—
276
37,575
(1,628)
(464)
11,261
155,765
Opening accumulated depreciation
(3,658)
(7,808)
(5,428)
Adjustment due to IFRS 16 adoption
—
—
—
Depreciation expense
(2,077)
(1,096)
(3,000)
Disposals
Effect of change in exchange rates
104
13
289
4
39
1
Closing accumulated depreciation
(5,618)
(8,611)
(8,388)
Net book amount
$
4,034 $
3,454 $ 11,299 $
(24,696)
1,521
(13,563)
1,116
122
(35,500)
67,600 $
—
—
—
—
—
(41,590)
1,521
(19,736)
1,548
140
—
(58,117)
11,261 $ 97,648
The Company had disposals of property and equipment in 2020 and 2019, with a net carrying amount of
$0.1 million and $0.3 million, respectively. Construction in progress is related to development costs associated with
additional office space in Sydney, Australia.
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, or when indicators of impairment exist.
F-39
Goodwill consisted of the following:
Balance as of June 30, 2018
Additions
Effect of change in exchange rates
Balance as of June 30, 2019
Additions
Effect of change in exchange rates
Balance as of June 30, 2020
Goodwill
Note
(U.S. $ in thousands)
$
13
$
13
$
311,943
297,010
(46)
608,907
36,261
(28)
645,140
Additions to goodwill during fiscal year 2020 were as a result of the acquisition of Code Barrel Pty Ltd
(“Code Barrel”), Halp, Inc. (“Halp”) and net working capital adjustments related to the acquisition of AgileCraft LLC
(“AgileCraft”). See Note 13, “Business combinations” for additional information regarding acquisitions.
Impairment test for goodwill
The Group operates as a single operating segment and the Group performs the goodwill impairment test at
the level of its operating segment as there are no lower levels within the Group at which goodwill is monitored. The
recoverable amount of goodwill was assessed by comparing the market capitalization of the Group to its book
value, among other qualitative factors, when reviewing for impairment. There was no impairment of goodwill during
the fiscal years ended 2020, 2019 and 2018.
F-40
Intangible assets
Intangible assets consisted of the following:
As of June 30, 2019
Opening cost balance
Additions
Disposals
Effect of change in exchange rates
Closing cost balance
Patents,
Trademarks
and Other
Rights
Acquired
Developed
Technology
Customer
Relationships
Total
(U.S. $ in thousands)
$
21,745 $
137,050 $
58,684 $
217,479
5,550
—
—
72,589
(12,443)
(103)
67,168
—
—
145,307
(12,443)
(103)
27,295
197,093
125,852
350,240
Opening accumulated amortization
(10,032)
(101,971)
(41,899)
(153,902)
Amortization charge
Disposals
Effect of change in exchange rates
Closing accumulated amortization
(7,796)
(27,990)
(21,015)
(56,801)
—
—
11,365
73
—
—
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, 2020
Opening cost balance
Additions
Disposals
$
27,295 $
197,093 $
125,852 $
350,240
500
—
18,100
(449)
2,650
—
21,250
(449)
Closing cost amount
27,795
214,744
128,502
371,041
Opening accumulated amortization
(17,828)
(118,523)
(62,914)
(199,265)
Amortization charge
Disposals
(5,377)
(29,072)
(8,086)
(42,535)
—
449
—
449
Closing accumulated amortization
(23,205)
(147,146)
(71,000)
(241,351)
Net book amount
$
4,590 $
67,598 $
57,502 $
129,690
As of June 30, 2020, no development costs have qualified for capitalization, and all development costs have
been expensed as incurred.
As of June 30, 2020, the remaining amortization period for patents, trademarks and other rights ranged from
one year to eleven years. 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 two
years to eight years.
12. Leases
The Group leases various offices in locations including, Sydney, Australia; the San Francisco Bay Area,
California, New York, New York, Austin, Texas, and Boston, Massachusetts, in the United States; Amsterdam, the
Netherlands; Manila, the Philippines; Bengaluru, India; Yokohama, Japan; and Ankara, Turkey under 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. We do not assume renewals in our determination of the lease term unless the
renewals are deemed to be reasonably assured at lease commencement. Our lease agreements generally do not
contain any material residual value guarantees or material restrictive covenants.
F-41
The following table sets forth the carrying amounts of our right-of-use assets and lease obligations and the
movements during the fiscal year ended June 30, 2020:
As of July 1, 2019
Additions
Disposals
Depreciation expense
Interest expense
Payments
Effect of change in exchange rates
As of June 30, 2020
Lease obligations, current
Lease obligations, non-current
Total lease obligations, as of June 30, 2020
Office Leases
Right-of-Use Assets
Lease Obligations
(U.S. $ in thousands)
$
241,421 $
14,270
(2,388)
(35,127)
—
—
(493)
$
217,683 $
$
$
285,973
13,213
(2,388)
—
7,702
(38,125)
(1,807)
264,568
34,743
229,825
264,568
During the fiscal year ended June 30, 2020, we recognized expense from short-term leases and low value
leases of $2.0 million and $0.3 million, respectively. Total cash outflows for leases were $42.5 million, including cash
outflows of $30.4 million for the principal portion of the lease obligations, $7.7 million for the interest portion of the
lease obligations and $4.4 million for short-term leases and low value leases.
As of June 30, 2020, we have entered into leases with future lease payments of $94.2 million that have not
yet commenced and are not yet recorded on our consolidated statements of financial position. These leases will
commence between 2020 and 2022 with non-cancelable lease terms of 2 to 12 years.
Supplemental information for comparative periods
As of June 30, 2019, prior to the adoption of IFRS 16, future minimum payments under operating leases
having initial or remaining non-cancelable lease terms in excess of one year were as follows:
Fiscal Period:
Year ending 2020
Years ending 2021 - 2024
Thereafter
Total commitments
Operating Leases
(U.S. $ in thousands)
$
$
38,790
148,021
144,037
330,848
Rent expenses under operating leases were $38.6 million and $23.6 million during the fiscal year ended
June 30, 2019 and 2018, respectively.
13. Business combinations
Fiscal Year 2020
Code Barrel
On October 15, 2019, we acquired 100% of the outstanding equity of Code Barrel, a workflow automation
tool for Jira. Total purchase price consideration for Code Barrel was approximately $39.1 million in cash. In addition,
the Company granted $27.0 million worth of restricted shares of the Company to key employees of Code Barrel,
which are subject to future vesting provisions based on service conditions and accounted for as share based
compensation.
F-42
Code Barrel is the creator of ‘Automation for Jira,’ a tool for easily automating several aspects of Jira. The
acquisition of Code Barrel enhances Jira by helping customers automate more of the time-consuming and error-
prone tasks in Jira. We have included the financial results of Code Barrel in our consolidated financial statements
from the date of acquisition, which have not been material. Pro forma results of operations have not been presented
for the twelve months ended June 30, 2020 because the effect of the acquisition was not material to the financial
statements.
The following table summarizes the preliminary estimated fair values of assets acquired and liabilities
assumed as of the date of acquisition:
Cash and cash equivalents
Intangible assets
Goodwill
Trade and other payables
Deferred revenue
Deferred tax liabilities
Net assets acquired
Fair Value
(U.S. $ in thousands)
$
$
1,970
15,900
23,124
(617)
(600)
(639)
39,138
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets
acquired was recorded as goodwill. The goodwill balance is primarily attributed to the assembled workforce and
expanded market opportunities. The goodwill balance is deductible in Australia and not deductible in the U.S. for
income tax purposes. The fair values assigned to tangible assets acquired, liabilities assumed and identifiable
intangible assets were based on management’s estimates and assumptions. The deferred tax liabilities were
primarily a result of the difference in the book basis and tax basis related to the identifiable intangible assets.
The following table sets forth the components of identifiable intangible assets acquired and their estimated
useful lives as of the date of acquisition:
Developed technology
Customer relationships
Trade name
Total intangible assets subject to amortization
Fair Value
Useful Life
(U.S. $ in thousands)
(years)
$
$
13,700
1,800
400
15,900
4
3
1
The amount recorded for developed technology represents the estimated fair value of Code Barrel’s
workflow automation technology. The amount recorded for customer relationships represents the fair value of the
underlying relationships with Code Barrel’s customers. The amount recorded for trade name represents the fair
value of Code Barrel’s brand recognition as of acquisition date.
Halp
On May 11, 2020, we acquired 100% of the outstanding equity of Halp, a message-based conversational
help desk ticketing solution. Total purchase price consideration for Halp was approximately $17.6 million, which
consisted of approximately $17.0 million in cash and $0.6 million in fair value of replacement shares attributable to
service provided prior to acquisition. The Company issued 9,929 replacement shares and the fair value of the
replacement shares was based on grant date stock price of the Company. In addition, the Company granted
$4.1 million worth of restricted shares of the Company to key employees of Halp, which are subject to future vesting
provisions based on service conditions and accounted for as share based compensation.
The Group acquired Halp to provide customers a standalone solution that allows them to turn their internal
messaging tool into a help desk. For customers using Jira Service Desk or similar service management tools, Halp
integrates their messaging tool seamlessly with their established workflows. The Group has included the financial
results of Halp 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, 2020 because
the effect of the acquisition was not material to the financial statements.
F-43
The following table summarizes the preliminary 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
Deferred revenue
Deferred tax liabilities
Net assets acquired
Fair Value
(U.S. $ in thousands)
$
$
664
36
22
475
5,350
12,322
(50)
(1,237)
17,582
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets
acquired was recorded as goodwill. The goodwill balance is primarily attributed to the assembled workforce and
expanded market opportunities. The goodwill balance is not deductible for income tax purposes. The fair values
assigned to tangible assets acquired, liabilities assumed and identifiable intangible assets were based on
management’s estimates and assumptions. The fair value of acquired receivables approximates the gross
contractual amounts receivable.
The following table sets forth the components of identifiable intangible assets acquired and their estimated
useful lives as of the date of acquisition:
Developed technology
Customer relationships
Trade name
Total intangible assets subject to amortization
Fair Value
Useful Life
(U.S. $ in thousands)
(years)
$
$
4,400
850
100
5,350
6
6
1
The amount recorded for developed technology represents the estimated fair value of Halp’s message-based
help desk ticketing technology. The amount recorded for customer relationships represents the fair value of the
underlying relationships with Halp’s customers. The amount recorded for trade name represents the fair value of
Halp’s brand recognition as of the acquisition date.
The Group’s purchase price allocations are preliminary and subject to revision as additional information
existing as of the acquisition date but unknown to us may become available within the respective measurement
period (up to one year from the respective acquisition date). The primary areas of the purchase price allocation that
are not yet finalized are identification of contingencies.
Fiscal Year 2019
AgileCraft
On April 3, 2019, we acquired 100% of the outstanding equity of AgileCraft, a leading provider of enterprise
agile planning software. Total purchase price consideration for AgileCraft was approximately $156.6 million, which
consisted of approximately $154.9 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 and accounted for as share based compensation.
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.
F-44
The following table summarizes the estimated fair values of assets acquired and liabilities assumed:
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
101,999
(1,196)
(2,230)
156,550
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)
(years)
$
$
34,600
16,900
1,400
52,900
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. Measurement period adjustments, which were not material, mostly
related to working capital adjustments. The purchase price allocation was finalized in fiscal year 2020.
OpsGenie
On October 1, 2018, we acquired 100% of the outstanding equity of OpsGenie, Inc., a leader in incident
alerting and 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 and accounted for as share based compensation. The
Group acquired OpsGenie to complement our current product offerings and enable customers to plan for and
respond to IT service disruptions. The Group has included the financial results of OpsGenie in its consolidated
financial statements from the date of acquisition, which have not been material to date. Pro forma results of
operations have not been presented for the twelve months ended June 30, 2019 because the effect of the
acquisition was not material to the financial statements.
F-45
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)
(years)
$
$
35,600
48,600
3,700
87,900
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. The purchase price allocation was finalized in fiscal year 2020 without further
adjustment.
Other fiscal year 2019 business combinations
On April 8, 2019, the Group acquired 100% of the outstanding equity of Good Software Co. Pty Ltd (“Good
Software”) for cash consideration of approximately $2.7 million. In addition, the Company granted $1.3 million worth
of restricted shares of the Company to a key employee of Good Software, which are subject to future vesting
provisions based on service conditions and accounted for as share based compensation. Good Software provides
analytics tools for Confluence. The Company acquired Good Software to integrate the analytics tool into Confluence
and to complement our current Confluence product. The purchase price was allocated to net tangible assets of $0.2
million, developed technology of $0.6 million, customer relationship of $0.3 million and goodwill of $1.6 million. The
goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities when
integrating with Confluence. The goodwill balance is partially deductible for income tax purposes. The purchase
price allocation was finalized without further adjustment.
F-46
On December 10, 2018, the Group acquired the intangible assets of Ludable LLC related to Butler for
Trello, a workflow automation tool, for cash consideration of approximately $6.0 million. In addition, the Company
granted $3.5 million worth of restricted shares of the Company to the key employee of Ludable LLC, which are
subject to future vesting provisions based on service conditions and accounted for as share based compensation.
The transaction was accounted for as a business combination in accordance with the relevant guidance. The
Company acquired the Butler for Trello assets to complement our existing Trello offerings and to help automate
manual and repetitive tasks. The purchase price was allocated to developed technology of $1.5 million and goodwill
of $4.5 million. The goodwill balance is primarily attributed to the assembled workforce and expanded market
opportunities when integrating with Trello. The goodwill balance is deductible for income tax purposes. The
purchase price allocation was finalized without further adjustment.
Fiscal Year 2018
The Group did not have any business combinations during the fiscal year ended June 30, 2018.
14. Other Balance Sheet Accounts
Cash and cash equivalents
Cash and cash equivalents consisted of the following:
As of June 30,
2020
2019
(U.S. $ in thousands)
Cash and bank deposits
$
823,985 $
565,030
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
7,076
5,599
27,365
8,749
167,248
439,947
—
9,904
6,996
7,560
8,084
67,327
593,696
9,844
$
1,479,969 $
1,268,441
The majority of the Group’s cash and cash equivalents are held in bank deposits, money market funds and
short-term investments which have a maturity of three months or less to enable us to meet our short-term liquidity
requirements. Money market funds are quoted in active markets and are subject to insignificant risk of changes in
value. The Group only purchases investment grade securities rated A- and above, which are highly liquid and
subject to insignificant risk of changes in value.
Prepaid expenses and other current assets
Prepaid expenses and other current assets consisted of the following:
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,
2020
2019
(U.S. $ in thousands)
$
31,527 $
3,329
11,305
569
46,730 $
$
23,588
3,072
1,977
1,599
30,236
F-47
Other non-current assets
Other non-current assets consisted of the following:
Marketable equity securities
Non-marketable equity securities
Security deposits
Restricted cash
Other
Total other non-current assets
As of June 30,
2020
2019
(U.S. $ in thousands)
100,187 $
3,750
4,873
9,174
6,790
124,774 $
58,932
3,000
5,010
7,078
2,702
76,722
$
$
As of June 30, 2020 and 2019, the Group had certificates of deposit and time deposits totaling $3.3 million
and $3.7 million, respectively, which were classified as long-term and were included in security deposits. The
Group’s restricted cash was primarily used for commitments of standby letters of credit related to facility leases and
was 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
Customer deposits
Other payables
Operating lease payable
Total trade and other payables
Current provisions
Current provisions consisted of the following:
As of June 30,
2020
2019
(U.S. $ in thousands)
$
30,738 $
76,358
72,627
9,009
7,897
5,941
—
24,993
53,802
54,507
9,158
7,943
7,471
1,613
$
202,570 $
159,487
As of June 30,
2020
2019
(U.S. $ in thousands)
Employee benefits
$
14,291 $
8,983
Current provisions for employee benefits include accrued annual leave, long service leave and retention
benefits. Long service leave covers all unconditional entitlements where employees have completed the required
period of service and those where employees are entitled to pro rata payments.
Non-current provisions
Non-current provisions consisted of the following:
Employee benefits
Dilapidation provision
Total non-current provisions
F-48
As of June 30,
2020
2019
(U.S. $ in thousands)
$
$
6,036 $
3,457
9,493 $
3,323
2,759
6,082
The non-current provision for employee benefits includes long service leave and retention benefits as
described above.
The dilapidation provision relates to certain lease arrangements for office space entered into by the Group.
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
right-of-use assets at the expiration of these leases.
Other non-current liabilities
Other non-current liabilities consisted of the following:
As of June 30,
2020
2019
(U.S. $ in thousands)
Deferred rent
Other
—
2,173
Total other non-current liabilities
$
2,173 $
33,845
418
34,263
15. Revenue
Deferred revenues
We record deferred revenues when cash payments are received or due in advance of our performance,
including refundable amounts. The increase in the deferred revenue balance for the twelve months ended June 30,
2020 is primarily driven by cash payments received or due in advance of satisfying our performance obligations,
offset by $441.0 million of revenues recognized that were included in the deferred revenue balance as of June 30,
2019. Acquisitions contributed $0.7 million to the increase in deferred revenue balance (for more information, see
Note 13, “Business combinations”).
Transaction price allocated to remaining performance obligations
Transaction price allocated to the remaining performance obligations represents contracted revenue that has
not yet been recognized, which includes unearned revenue and unbilled amounts that will be recognized as revenue
in future periods. Transaction price allocated to the remaining performance obligations is influenced by several
factors, including the timing of renewals, the timing of delivery of software licenses, average contract terms, and
foreign currency exchange rates. Unbilled portions of the remaining performance obligations are subject to future
economic risks including bankruptcies, regulatory changes and other market factors.
As of June 30, 2020, approximately $639.4 million of revenue is expected to be recognized from transaction
price allocated to remaining performance obligations. We expect to recognize revenue on approximately 92% of
these remaining performance obligations over the next 12 months with the balance recognized thereafter.
Disaggregated revenue
Marketplace apps revenue totaled approximately $103.5 million, $77.4 million and $53.1 million for the fiscal
years ended 2020, 2019, and 2018, respectively, which is included in other revenue.
The Group’s revenues by geographic region based on end-users who purchased our products or services
are as follows:
Americas
EMEA
Asia Pacific
Total revenues
Fiscal Year Ended June 30,
2020
2019
2018
(U.S. $ in thousands)
$ 802,499 $ 603,959 $ 439,363
633,735
177,939
474,712
131,456
347,509
94,106
$ 1,614,173 $ 1,210,127 $ 880,978
F-49
Revenues from the United States totaled approximately $700.9 million, $528.8 million, and $386.0 million
for the fiscal years ended 2020, 2019, and 2018, respectively. Revenues from our country of domicile, the United
Kingdom, totaled approximately $110.9 million, $86.0 million, and $63.0 million for the fiscal years ended 2020,
2019, and 2018, respectively. No one customer has accounted for more than 10% of revenue for the fiscal years
ended 2020, 2019, and 2018.
16. 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 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 $1,283.1 million and $851.1
million as of June 30, 2020 and 2019, respectively.
F-50
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 can be exercised on each
exchange date that the related Notes are submitted for exchange. The capped call transactions are expected to
generally offset cash payments due, limited by a capped price per share. The initial cap price of the capped 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 $310.6 million and $214.6 million as of June 30, 2020 and 2019, 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, 2020, the closing price exchange condition has been met and the
Notes, exchange derivative liability and the capped call assets are classified as current. Please refer to Note 5,
“Financial Assets and Liabilities” for details on the valuation of exchange feature derivative liability and capped call
assets. As of June 30, 2020, we have settled one exchange request and have received additional requests for
immaterial amounts of the Notes.
The Notes including the exchangeable features are Level 2 instruments, and the fair value of the Notes was
$2,234 million and $1,697 million as of June 30, 2020 and 2019, respectively.
The principal amount, unamortized debt discount, unamortized issuance costs and net carrying amount of
the liability component of the Notes as of June 30, 2020 and 2019 were as follow:
Principal amount
Unamortized debt discount
Unamortized issuance cost
Net liability
As of June 30,
2020
2019
(U.S. $ in thousands)
$
999,999 $
1,000,000
(105,963)
(140,011)
(4,853)
(6,413)
$
889,183 $
853,576
The effective interest rate, contractual interest expense and amortization of debt discount for the Notes for
the fiscal year ended June 30, 2020 and 2019 were as follow:
Effective interest rate
Contractual interest expense
Amortization of debt discount
Amortization of issuance cost
Fiscal Year Ended June 30,
2020
2019
(U.S. $ in thousands)
4.83 %
4.83 %
$
$
$
6,250
34,048
1,560
$
$
$
6,267
32,453
1,486
F-51
Reconciliation of assets and liabilities arising from financing activities:
Capped call
assets
Exchangeable
Notes, net
Embedded
exchange
feature of Notes
Accrued
interest
(U.S. $ in thousands)
Balance as of June 30, 2018
$
(99,932) $
819,637 $
202,553 $
1,094
Cash flows
Amortization of debt discount and issuance cost
Fair value changes
Accrual of interest
—
—
(114,665)
—
—
33,939
—
—
—
—
648,573
—
Balance as of June 30, 2019
$
(214,597) $
853,576 $
851,126 $
Cash flows
Amortization of debt discount and issuance cost
Fair value changes
Accrual of interest
—
—
(96,011)
—
(1)
35,608
—
—
(1)
—
431,964
—
Balance as of June 30, 2020
$
(310,608) $
889,183 $
1,283,089 $
(6,319)
—
—
6,267
1,042
(6,250)
—
—
6,250
1,042
17. 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, 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
Conversion of Class B ordinary shares
Exercise of share options
Issuance for settlement of RSUs
Vesting of early exercised shares
Balance as of June 30, 2020
As of June 30,
2020
2019
(number of shares)
As of June 30,
2019
2020
(U.S. $ in thousands)
127,685,599
117,273,566 $
12,768 $
119,761,681
124,722,559
11,976
247,447,280
241,996,125 $
24,744 $
11,727
12,472
24,199
Number of Shares
Amount
(U.S. $ in
thousands)
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
4,960,878
761,945
4,048,319
640,891
127,685,599 $
496
76
405
64
12,768
Class A shares as of June 30, 2020 and June 30, 2019 does not include 515,697 and 911,367 shares of
restricted stock outstanding, respectively, that are subject to forfeiture or repurchase.
F-52
Movements in Class B ordinary share capital
Details
Balance as of June 30, 2018
Conversion to Class A ordinary shares
Balance as of June 30, 2019
Conversion to Class A ordinary shares
Balance as of June 30, 2020
Ordinary shares
Nominal value
Ordinary shares have a nominal value of $0.10.
Conversion
Number of Shares
Amount
(U.S. $ in
thousands)
129,942,506 $
(5,219,947)
124,722,559 $
(4,960,878)
119,761,681 $
12,994
(522)
12,472
(496)
11,976
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 in total at June 30, 2020, 2019
and 2018. 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
F-53
The change in fair value for the Group’s derivatives designated as hedging instruments are recognized in
other comprehensive income and accumulated in a separate reserve within equity. The effect of the cash flow
hedges determined to be effective is reclassified to the consolidated statements of operations in the same period as
the hedged transactions. Gains or losses related to ineffective portion of cash flow hedges, if any, are recognized
immediately to the consolidated statements of operations.
Foreign currency translation reserve
Exchange differences arising on translation of foreign subsidiaries are recognized in other comprehensive
income and accumulated in a separate reserve within equity. The cumulative amount is reclassified to the
consolidated statements of operations when the net investment is disposed.
Investments at fair value through other comprehensive income reserve
The change in fair value for the Group’s financial instruments classified at fair value through other
comprehensive income are recognized in other comprehensive income and accumulated in a separate reserve
within equity. The cumulative amount related to the Group’s debt investments is reclassified to the consolidated
statements of operations upon the sale of the investment or at maturity date. In contrast, the cumulative amount
related to the Group’s equity investments will remain in other comprehensive income upon the sale of the
investment.
18. Earnings Per Share
Basic earnings per share is computed by dividing the net income attributable to ordinary shareholders by
the weighted-average number of ordinary shares outstanding during the period. Diluted earnings per share is
computed by giving effect to all potential weighted-average dilutive shares. The dilutive effect of outstanding awards
is reflected in diluted earnings per share by application of the treasury stock method.
A reconciliation of the calculation of basic and diluted loss per share is as follows:
Fiscal Year Ended June 30,
2020
2019
2018
(U.S. $ and shares in thousands, except per
share data)
Numerator:
Net loss attributable to ordinary shareholders:
$
(350,654) $
(637,621) $
(113,432)
Denominator:
Weighted-average ordinary shares outstanding—basic
Weighted-average ordinary shares outstanding—diluted
Net loss per share attributable to ordinary shareholders:
Basic net loss per share
Diluted net loss per share
244,844
244,844
238,611
238,611
231,184
231,184
$
$
(1.43) $
(1.43) $
(2.67) $
(2.67) $
(0.49)
(0.49)
For fiscal years ended June 30, 2020, 2019 and 2018, potential anti-dilutive weighted-average shares
excluded from the computation of net loss per share were 6.8 million, 9.6 million and 12.8 million, respectively.
19. Commitments
The Group has contractual commitments for services with third-parties related to its cloud services platform
and data centers. These commitments are non-cancellable and expire within two to three years.
Additionally, the Group has capital purchase obligations for the construction or purchase of property and
equipment.
The following table sets forth commitments for purchase obligations as of June 30, 2020 and 2019:
F-54
Capital purchase obligations
Other contractual commitments
Total purchase obligation
Fiscal Year Ended June 30,
2020
2019
(U.S. $ in thousands)
$
$
9,781 $
235,002
244,783 $
—
328,320
328,320
Leasing activities are now in the scope of IFRS 16. Please refer to Note 12, “Leases” for details.
Maturities of purchase obligations as of June 30, 2020 were as follows:
Fiscal Period:
Year ending 2021
Years ending 2022 - 2023
Total commitments
20. Related Party Transactions
Key management personnel compensation
Capital purchase
obligations
Other contractual
commitments
Total
(U.S. $ in thousands)
$
$
9,781 $
—
9,781 $
90,972 $
100,753
144,030
235,002 $
144,030
244,783
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
$
3,334 $
3,835 $
2,991
Fiscal Year Ended June 30,
2020
2019
2018
(U.S. $ in thousands)
Post-employment benefits
Share-based payments
Board of directors:
Cash remuneration
Share-based payments
68
15,509
109
17,144
99
9,335
$
18,911 $
21,088 $
12,425
$
$
455 $
430 $
1,741
1,772
2,196 $
2,202 $
362
1,577
1,939
F-55
21. Geographic Information
The Group’s non-current operating assets by geographic regions are as follows:
Non-current operating assets:
United States
Australia
India
Total non-current operating assets
Fiscal Year Ended June 30,
2020
2019
(U.S. $ in thousands)
$
975,446 $
819,227
102,950
10,233
18,842
9,286
$
1,088,629 $
847,355
Non-current operating assets for this purpose consist of property and equipment, right-of-use assets,
goodwill, intangible assets and other non-current assets.
22. Share-based Payments
The Group maintains three share-based employee compensation plans: the 2015 Share Incentive Plan
(“2015 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, 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.
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. Performance-based RSUs have non-market performance
vesting conditions. Individuals must continue to provide services to a Group entity in order to vest.
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 four 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.
F-56
RSU and Class A ordinary share option activity was as follows:
Balance as of June 30, 2018
Increase in shares authorized:
2015 Plan
RSUs granted
RSUs canceled
RSUs settled
Share options exercised
Share options canceled
Balance as of June 30, 2019
Increase in shares authorized:
RSUs granted
RSUs canceled
RSUs settled
Share options exercised
Share options canceled
Balance as of June 30, 2020
Share options vested and exercisable as of
June 30, 2020
Share options vested and exercisable as of
June 30, 2019
Share Options
Shares
Available
for Grant
Outstanding
Weighted
Average
Exercise
Price
RSUs
Outstanding
30,600,215
2,723,182 $
2.41
9,602,673
11,807,109
(5,397,681)
1,113,870
—
—
5,481
—
—
—
—
(1,496,875)
(5,481)
38,128,994
1,220,826
(3,083,015)
874,564
—
—
707
—
—
—
(761,945)
(707)
35,921,250
458,174 $
—
—
—
—
2.37
0.65
2.47
—
—
—
2.37
1.03
2.65
—
5,397,681
(1,113,870)
(4,674,873)
—
—
9,211,611
3,083,015
(874,564)
(4,048,319)
—
—
7,371,743
457,663 $
2.65
1,027,372 $
2.55
During fiscal year ended 2019, the Company added 11,807,109 Class A ordinary shares to the pool of shares
available for issuance, pursuant to an evergreen provision contained in the 2015 Plan.
The weighted-average remaining contractual life for options outstanding as of both fiscal year end, June 30,
2020 and 2019, were 3.6 years. Options exercisable as of June 30, 2020 and 2019, had a weighted-average
remaining contractual life of approximately 3.6 years and 3.2 years, respectively.
The following table summarizes information about share options outstanding as of June 30, 2020:
Range of
Exercise Prices
$0.59 - 0.66
$1.14
$3.18
Options Outstanding
Number
Outstanding
Weighted
Average
Exercise
Price
Options Exercisable
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Years
Number
Exercisable
78,563 $
21,024
358,587
458,174 $
0.62
1.14
3.18
2.65
78,563 $
20,513
358,587
457,663 $
0.62
1.14
3.18
2.65
4.86
6.07
3.23
3.64
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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
Weighted-
Average
Exercise
Price
Number
Exercisable
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Years
196,206 $
65,107
17,828
299,613
642,072
0.63
1.14
2.09
2.47
3.18
143,346 $
20,868
17,828
299,613
545,717
1,220,826 $
2.47
1,027,372 $
0.62
1.14
2.09
2.47
3.18
2.55
5.83
7.07
0.45
0.86
3.81
3.24
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, 2020
and 2019 was $139.2 and $83.90 per share, respectively. There were no share options granted during the fiscal
year ended June 30, 2020 and 2019.
As of June 30, 2020, the Group had an aggregate of $328.6 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 the fiscal year 2020 and 2019, the Company granted 245,221 and 593,567 shares of restricted stock
that were subject to forfeiture, respectively. The weighted average grant fair value date of these restricted shares
was $135.64 and $98.72, respectively. As of June 30, 2020 and 2019, there were 515,697 and 911,367 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.
23. Events after the reporting period
In July 2020, we acquired Mindville AB, an asset and configuration management company based in Sweden.
With the acquisition of Mindville, Atlassian brings critical configuration management database capability to Jira
Service Desk to better meet the needs of its IT customers. The consideration is comprised of approximately
$36 million in cash. We are in the process of finalizing the intangible assets valuation and acquisition price
allocation.
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