Annual
Report 2018
Global leader in audio
networking, distributing top
quality digital audio signals
over computer networks
Contents
FY18 Financials
Financial Report 2018
2
4 Chairman’s Letter
5 CEO’s Letter
7
9 Corporate directory
10 Directors’ Report
26 Auditor’s independence declaration
27
Consolidated statement of profit or loss
and other comprehensive income
28 Consolidated statement of financial position
29 Consolidated statement of changes in equity
30 Consolidated statement of cash flows
31 Notes to the consolidated financial statements
57 Directors’ declaration
58
62 Shareholder Information
Independent auditor’s report
| Audinate Annual Report 2018
About Audinate
Audinate is the leading provider of professional audio networking technologies
globally, with approximately five times the market adoption of its closest competitor.
Dante is Audinate’s technology platform that distributes digital audio signals over
computer networks.
Audio networking is a form of digital distribution using computer networks. Audio
networking technologies route the audio signal as digital data, which enables the use
of low cost, readily available Ethernet or fibre optic cables to connect audio devices
and carry multiple signals (e.g. multiple audio sources, voice, data etc) over the same
cable. The key benefits of audio networking compared to analogue audio systems
include:
- Improved audio quality;
- Reduced cabling and installation;
- Improved flexibility; and
- Convergence of voice, data and audio networks means audio
networking uses existing IP infrastructure.
Dante comprises software and hardware that resides inside the audio products
of its Original Equipment Manufacturer (OEM) customers. Key products include
chips, modules and cards (with embedded software); adapter products; reference
designs; and software to enable network configuration and management. Audinate’s
customers are spread across Asia, EMEA and the Americas. End users of Professional
AV systems that utilise the Dante platform cover a wide range of market segments,
including commercial installations, broadcast, transport, stadiums, and live sound.
Audinate is based in Sydney and now has an overseas presence in USA, UK, Hong
Kong, Japan and Germany.
1
1
Audinate Annual Report 2018 |
FY18 Financials
Revenue
A$19.7m
Gross Margin
75%
EBITDA
A$0.6m
Net cash from
operating activities
A$1.0m
2
| Audinate Annual Report 2018 Gross Margin
75%
Net cash from
operating activities
A$1.0m
• 35% growth delivers revenue
of USD $15.2m
• 38% growth in chips, cards
& modules
• 58% growth in Dante
software units
• 438 OEMs licensed Dante
• 18,000+ people trained on
Dante this year
Growing network effect
Number of Dante-enabled products drives economic network effect
Note: per financial half-year
3
Audinate Annual Report 2018 | Chairman’s Letter
Dear shareholders,
On behalf of the Directors, it is my
pleasure to present the Audinate
Group Limited Annual Report for
the Financial Year ended 30 June
2018 (FY18). FY18 was our first full
year as a company listed on the
Australian Securities Exchange and
pleasingly we were able to exceed
all the key financial and operational
metrics set out in the prospectus.
The foundation of the business
is the delivery of our Dante
technology to original equipment
manufacturers (OEMs) within the
professional Audio Visual (AV)
industry. This technology enables
the distribution of digital audio
signals over computer networks,
rather than the incumbent
approach of connecting devices
with analogue cabling. For end-
users this means interoperability
between audio devices and delivers
high quality, flexible audio solutions
typically with a lower total cost of
ownership compared to analogue
installations. This analogue to digital
conversion is still in its early stages,
albeit with growing momentum
as users become accustomed to
the benefits and flexibility of a
digital approach.
Once again Audinate delivered
a strong financial performance,
headlined by USD revenue growth
of 35%. In our reporting currency
of AUD this amounted to revenue
of $19.7 million which generated
EBITDA of $0.6 million, significantly
better than the prospectus forecast
of an EBITDA loss of $1.2 million.
Net Profit After Tax amounted
to $2.5 million as the Company
generated a one-time tax benefit
from forming a tax consolidated
group in Australia.
In a strategic sense the business
also achieved all its critical
milestones in FY18. We successfully
launched the Dante Domain
Manager software platform,
which represents a new revenue
source sold to end-users of Dante
technology via a reseller channel
comprising of system integrators
who are already responsible for
specifying, installing and managing
Dante installations. In the fourth
quarter we also commenced
shipping a range of Dante AVIO
adapters. These are an easy and
cost-effective way to connect
legacy analogue equipment to
a range of products containing
our next generation Dante
technology. Lastly, we successfully
conducted two video technology
demonstrations at a major
tradeshow in June. This will form
the basis of a video product which
we expect to launch during FY19,
representing our first foray into an
addressable market the same size
as our existing audio business.
In addition to the continued roll-
out of these new product initiatives
we will continue to invest in our
core business in the forthcoming
year. This includes the geographic
expansion of our sales and support
teams, as well as broadening our
suite of core Dante products to
accelerate penetration with our
OEM customers.
On behalf of the Board or Directors
of Audinate, we wish to thank the
executive management team and
all our employees globally for their
passion, drive and commitment.
These qualities were instrumental
to our great results in FY18 and are
also critical to the ongoing success
of our business.
I would also like to acknowledge
the significant contribution of our
two venture capital shareholders,
Starfish Ventures and Innovation
Capital, who showed vision and
foresight in backing our fledgling
business back in 2007. For over
a decade they have been an
instrumental part of shaping and
growing Audinate. Post the release
of the FY18 financial results they
sold their shareholdings via a block
trade on 30th August 2018 and a
distribution to unitholders.
As a part of this transaction several
existing institutional investors
increased their shareholdings
complemented by a range of new
blue-chip investors. We appreciate
the support of all our stakeholders
and will continue to focus on the
consistent execution of our strategy
to bring the IT revolution to the
AV industry.
DAVID KRALL
Chairman
4
| Audinate Annual Report 2018 CEO’s Letter
Dear shareholders,
FY 2018 was an exciting year for
Audinate as we progressed our
strategy to revolutionise the AV
industry. We delivered strong
revenue growth and results through
the proliferation of our Dante®
networking solution. Dante is the
realisation of our disruptive media
networking platform, that enables
high-quality, low latency media
signals to be distributed over
existing computer data networks.
Over the last ten years, our Dante
media networking solution has
become the defacto standard for
the professional audio industry.
Audinate’s primary customers are
the leading global OEM brands who
integrate Audinate’s technology
platform, into their professional
audio products. By using Dante,
manufacturers get guaranteed
interoperability between multi-
vendor audio devices allowing
end users to enjoy high quality,
flexible audio solutions, typically
with a lower total cost of ownership
compared to analogue installations.
Our OEM customers benefit from
our trusted expertise in the field of
media networking, which enables
them to accelerate their product
initiatives without the need to make
investments in developing their own
networking capability.
Financial Results
Audinate had another outstanding
year delivering strong financial
results in both revenue growth and
EBITDA. Audinate grew revenues
30% to AUD$19.7 million, and in
US dollars, revenues increased to
USD$15.2 million while maintaining a
75% gross profit margin.
Executing on our growth strategy
The adoption of audio networking
to replace legacy analogue
connectivity for the professional
AV industry continues to grow.
The core audio networking part
of the business has consistently
delivered strong historic growth
in both revenue and units
shipped. One of the key economic
engines that drives our growth
is getting designed into as many
manufacturer products available to
system integrators and customers
for designing a complete system.
As Audinate increases its customer
base, and the number of Dante-
enabled devices within the
ecosystem increases, more choices
are available for consultants,
system designers, integrators, and
end-users. This network effect
fuels further growth as system
integrators request Dante as part of
their designs, thereby encouraging
more manufacturers to embed
Dante into their future products.
Once the OEM has designed the
Dante platform into one of its
products, it needs to reorder Dante
chips, modules, cards or pay a
software royalty fee at the time of
manufacture. The number of Dante
enabled manufacturer products
available in market grew 39% to
1,639 products. In FY 18, growth
in product shipments of Dante
chips, modules, cards and software
units was more than 398,000
units shipped.
New Product Initiatives
During the past year, Audinate
has executed on our strategy to
more than double the addressable
market through three new product
initiatives. During Q4 in FY 18, we
began shipping our new Dante
AVIO family of adapters. These
adapters are problem solvers which
enable customers to add Dante to
their existing brown-field legacy
installations, which are typically
analogue. Strategically this is an
important tactic for the Company
as these adapters enable the wider
proliferation of Dante technology in
a cost-effective manner into legacy
installed systems.
Audinate began shipping our Dante
Domain Manager (DDM) software
in Q3. Dante Domain Manager is
a complete network management
software solution that enables
user authentication, role-based
security and audit capabilities for
Dante networks.
The initial market response to Dante
AVIO and Dante Domain Manager
has been well received since its
introduction and we have begun to
execute on our strategy of building
out a reseller channel. Resellers will
primarily be system integrators who
already install Dante products.
5
Audinate Annual Report 2018 | CEO’s Letter (cont)
Key Priorities to drive ongoing growth in FY19
Geographically expand the sales and support teams
Broaden our suite of core Dante products to accelerate penetration within OEMs
Invest in the development of our Dante video solution by end of FY19
Continue the roll-out of Dante Domain Manager and Dante AVIO adapters
Audinate will continue to invest in growth initiatives to drive future revenue
- Reliable ongoing execution of the Group’s strategy
- Revenue growth in a range consistent with USD historical performance
- Further investment in R&D and expanding the sales footprint
and practices that promote and
protect the long-term interests of
our employees, our customers, and
our shareholders.
LEE ELLISON
Chief Executive Officer
At Infocomm, a major trade show
held in the US in June of this past
year, Audinate demonstrated a
prototype of a Dante video solution
which is expected to commercially
launch by the end of FY19. Dante
Video will enable audio and video
signals from HDMI to be transported
and routed independently across
an IT network. The Dante Video
solution will enable a common
management platform for both the
audio and video signal distribution.
Investing in the future
We have taken significant strides to
expand the scalability and support
for the business and our customers.
During the year, we strengthened
and expanded our executive team
by bringing in experienced talented
people. During the past 12 months
we hired a new Chief Operating
Officer, Mathew Mornington-West.
We also expanded the executive
leadership team by bringing in
a new Vice President of Product
Management and Vice President of
Human Resources.
We have invested in new back-
end accounting office systems to
improve our ability to support the
financial systems needed to grow
the business.
The AV market is still in the early
stages of transformation to digital
networking, and Audinate is well
positioned to capitalise on this
growing market. As the market
leader, we have built a strong
global brand and will continue
to invest wisely in R&D and
other growth initiatives to make
Dante the best available media
networking technology.
Once again on behalf of the Board
of Directors, and our employees,
we thank all our shareholders
who have placed their trust in
our management team and our
business. We are committed to
implementing effective and strong
corporate governance policies
6
| Audinate Annual Report 2018 Financial
Report 2018
7
Audinate Annual Report 2018 | Contents
Audinate Group Limited
Contents
30 June 2018
Corporate directory
Directors' report
Auditor's independence declaration
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members of Audinate Group Limited
9
2
10
3
26
19
27
20
28
21
29
22
30
23
31
24
57
50
58
51
1
8
| Audinate Annual Report 2018
Corporate directory
Audinate Group Limited
Corporate directory
30 June 2018
Directors
David Krall
Lee Ellison
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
Company secretary
Rob Goss
Registered office
Share register
Auditor
Solicitors
Level 1
458 Wattle Street
Ultimo NSW 2007
Tel: 02 8280 7100
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
Tel: 1300 554 474
Deloitte Touche Tohmatsu
Grosvenor Place
225 George Street
Sydney NSW 2000
Maddocks
Level 27
123 Pitt Street
Sydney NSW 2000
Stock exchange listing
Audinate Group Limited shares are listed on the Australian Securities Exchange (ASX
code: AD8)
Website
www.audinate.com
Corporate Governance Statement
The corporate governance statement which is approved at the same time as the
Annual Report can be found at:
https://www.audinate.com/company/governance
2
9
Audinate Annual Report 2018 |
Audinate Group Limited
Directors' report
30 June 2018
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'Group') consisting of Audinate Group Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities
it controlled at the end of, or during, the year ended 30 June 2018.
Directors
The following persons were directors of Audinate Group Limited during the whole financial year and up to the date of this
report, unless otherwise stated:
David Krall
Lee Ellison
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
Principal activities
The Group's principal activity is the development and sale of digital Audio Visual ('AV') networking solutions. Dante is the
Group’s technology platform that distributes uncompressed digital audio signals over computer networks. Dante comprises
software and hardware that is sold to and integrated inside the AV products of its Original Equipment Manufacturer ('OEM')
customers. Audinate also sells application software through its own channel to provide management and control for these
installations.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
The directors consider EBITDA to reflect the core earnings of the Group. EBITDA is a financial measure which is not
prescribed by Australian Accounting Standards ('AAS') and represents the profit under AAS adjusted for non-cash and
significant items.
Profit/(loss) after income tax expense for the year
Interest revenue
Other expense/(revenue)
Finance cost
Income tax (benefit)/expense
Depreciation and amortisation
One-off impacts of:
Conversion of redeemable preference shares
Initial public offering expenses
EBITDA
Consolidated
2018
$
2017
$
2,544,339
(227,285)
70,028
-
(3,279,906)
1,451,757
(20,443,388)
(51,541)
(101,010)
400
47,974
1,088,987
-
-
18,547,790
1,694,328
558,933
783,540
For the year ended 30 June 2018, the Group reported an increase in revenue of 30.5% to $19.7 million from $15.1 million
in the prior year. As the Group invoices its customers in US dollars, this currency is a more relevant measure of sales
performance. In US dollars, revenue increased by 34.5% to US$15.2 million in 2018 from US$11.3 million in the prior year.
The Group has grown its OEM base to 438 manufacturer brands at 30 June 2018, up from 369 at 30 June 2017. Once the
OEM has designed the Dante platform into one of its products, the Group will receive revenue at each production run in the
form of sales of Dante chips, modules, cards and/or royalties. Dante enabled OEM products available for sale increased to
1,639 products, up 38.7% from 1,182 at the end of June 2017. Dante chips, modules and cards, shipped in 2018 increased
to more than 248,000, a 37.9% increase over the prior year. Audinate revenue from software includes royalties, consumer
software and Dante Domain Manager. During the year units of software sold increased to approximately 150,000 for the
year ended 30 June 2018, up by 58.0% from 2017.
3
10
Directors’ report30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Directors' report
30 June 2018
Operating expenses, which consist of employee benefit expenses, marketing expenses and administration and other
operating expenses increased by approximately 34.4% to $14.1 million in 2018 from $10.5 million in the prior year. This
increase was due to additional headcount to drive new product initiatives and additional public company costs of
approximately $0.9 million. Earnings before interest, tax, depreciation and amortisation ('EBITDA'), was $0.6 million in
2018 compared to $0.8 million in 2017. Prior year EBITDA excludes the additional one-off costs described above.
Following the Initial Public Offer ('IPO'), the Group entered into a tax consolidated group with effect from 1 July 2017 and
the impact of this decision is recorded as an income tax benefit in the current year, amounting to approximately $2.4
million. The Group continues to be eligible for a research and development incentive from the Australian Tax Office which
is now recorded as an income tax benefit in the profit or loss for the year ended 30 June 2018.
In the prior year the Group recorded a non-cash charge for the change in fair value of the convertible redeemable
preference shares ('CRPS') issued by Audinate Pty Limited amounting to approximately $18.5 million. These instruments
were converted into ordinary shares in Audinate Group Limited as a part of the capital reconstruction that occurred as a
part of the IPO, that occurred on 30 June 2017.
The Group recorded a profit after tax of $2.5 million for the year ended 30 June 2018 compared to a loss of $20.4 million
for the prior year, which included the expense for the CRPS described above.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
No matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect the
Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Likely developments and expected results of operations
The Group will continue to execute on the strategy to maintain revenue growth in the core business.
The Group’s growth strategy is multi-faceted and seeks to:
●
●
●
●
●
drive market participants’ adoption of Dante by working with consultants, integrators, and major customers to create a
"network effect" as the adoption of the Dante accelerates;
increase the adoption of Dante across a customer’s product portfolio to expand the ecosystem of available Dante
enabled products;
continue to grow the OEMs adopting Dante;
extend the Dante portfolio of products for OEMs and end-users; and
deliver software and services to end-users to better manage and control Dante deployed systems.
As the Group increases its customer base, and the number of Dante-enabled devices within the ecosystem increases,
more choices are available for consultants, system designers, integrators, and end users to design turnkey systems. This
in turn, further entrenches Dante as the preferred networking technology for professional AV installations, and encourages
OEMs to be part of the Dante ecosystem to ensure their products are considered for new installations as well as upgrades
to existing installations.
In the coming year the Group will also focus upon initiatives to drive the uptake of the Dante Domain Manager software
and Dante AVIO adaptors which were two key products launched earlier in 2018. Engineering resources will be focused
upon the development of a video solution to deliver a commercially available product during FY 2019. Collectively, all of
these new products and services are designed to more than double the Group’s total addressable market.
The Group will also continue to invest in the system and process improvements to support the ongoing growth of the
business.
Environmental regulation
The Group is not directly subject to any significant environmental regulation under Australian Commonwealth or State law.
4
11
Audinate Annual Report 2018 |
Audinate Group Limited
Directors' report
30 June 2018
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
David Krall
Chairman and Non-Executive Director
David has a Master of Business Administration from Harvard University and both a
Bachelor of Science degree and Masters degree in Engineering from Massachusetts
Institute of Technology.
David serves as a director and/or strategic advisor to several technology companies,
combining a strong educational background in engineering and business with 30
years of professional experience. David currently acts as Strategic Advisor for
Universal Audio. He is the former President and Chief Operating Officer of Roku Inc.,
a market leader in television streaming. He was also formerly President and Chief
Executive Officer of Avid Technology Inc. (NASDAQ: AVID)
Director of Progress Software Corporation (NASDAQ: PRGS); Director of Harmonic
Inc. (NASDAQ: HLIT)
Former directorships (last 3 years): Director of Quantum Corp. (NYSE: QTM)
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Member of the Remuneration and Nomination Committee
293,958 ordinary shares
186,042 options over ordinary shares
None
Experience and expertise:
Name:
Title:
Qualifications:
Lee Ellison
Chief Executive Officer
Lee has a Bachelor of Science degree from The Ohio State University. Lee also
completed an executive management program at the University of Virginia's Darden
Business School.
Lee has held a series of senior management roles in both start-up and listed
companies in telecom and computer technology industries. Lee has held various
senior executive and leadership roles over the last 30 years. Lee formerly served as
founding Senior Vice President of Worldwide Sales at Dilithium Networks. Previously,
Lee served as Vice President of Global Sales and International Operations for
Tektronix, Inc. During his 16-year tenure with Glenayre Electronics, Lee held various
executive management positions.
Other current directorships:
None
Former directorships (last 3 years): None
None
Special responsibilities:
820 ordinary shares
Interests in shares:
320,000 options over ordinary shares
Interests in options:
2,262,811 performance rights over ordinary shares
Interests in rights:
5
12
Directors’ report30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Directors' report
30 June 2018
Experience and expertise:
Name:
Title:
Qualifications:
John Dyson
Non-Executive Director
John has a Master of Business Administration from RMIT University and a Bachelor
of Science degree from Monash University. He has a Graduate Diploma in Finance
and Investment from the Securities Institute of Australia and is a member of the
Australian Institute of Company Directors.
John is a director and one of the founders of Starfish Ventures. He played a crucial
role in the establishment of Starfish Ventures and has personally overseen and
managed investments across a range of technologies and industries. John is
currently a director of Atmail Pty Ltd., Myriax Pty Ltd., Nitro Software Pty Ltd, Aktana
Inc., Design Crowd Pty Ltd and Hearables 3D Pty Limited. John is also a director at
the Walter and Eliza Hall Institute of Medical Research. Formerly, John was General
Manager (Australia) of JAFCO Investment (Asia Pacific), a Singapore based private
equity manager. Prior to joining JAFCO, John worked in the investment banking and
stockbroking
for Schroders, Nomura Securities, KPMG and ANZ
McCaughan.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
industries
Member of the Remuneration and Nomination Committee and Audit and Risk
Management Committee
10,807,523 ordinary shares
None
None
Interests in shares:
Interests in options:
Interests in rights:
Name:
Title:
Qualifications:
Experience and expertise:
Roger Price
Non-Executive Director
Roger has an Engineering degree from the University of Technology, Sydney.
Roger is also a director at Innovation Capital, a venture capital firm in Sydney, one of
the early investors in the Group. Roger is currently the Chairman and Chief Executive
Officer of Windlab Limited, a wind energy company. Roger has a depth of operational
experience including senior engineering, manufacturing, information technology
service and international business development roles for a number of technology
based companies. Prior to joining Innovation Capital, Roger was the Chief Executive
Officer of Reino Intl., a developer of advanced parking solutions. Roger commenced
his career at Alcatel, and has held senior positions with a number of Australian
technology businesses and NASDAQ listed software companies.
Director of Windlab Limited (ASX: WND)
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Member of the Audit and Risk Management Committee
67,356 ordinary shares
None
None
6
13
Audinate Annual Report 2018 | Audinate Group Limited
Directors' report
30 June 2018
Name:
Title:
Qualifications:
Experience and expertise:
Alison Ledger
Non-Executive Director
Alison has a Master of Business Administration from Harvard University and
graduated magna cum laude, with a Bachelor of Arts degree in Economics from
Boston College. She is a graduate and member of the Australian Institute of
Company Directors.
Alison has more than 30 years of experience and has held various leadership roles in
Australia, the United Kingdom, and the United States of America. She is currently a
Non-Executive Director of Latitude Financial Services. Alison held various senior
management and strategic roles while at Insurance Australia Group for eight years,
including Head of Group Strategy and Executive General Manager, Product, Pricing
and eBusiness. During her tenure as a Partner with McKinsey and Company she
advised some of the leading global and Australian banks on strategy and
organisational change. Alison began her professional career in the banking industry
working with leading financial institutions.
Non-Executive Director of Countplus Limited (ASX: CUP)
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Chair of Remuneration and Nomination Committee
None
None
None
Experience and expertise:
Name:
Title:
Qualifications:
Tim Finlayson
Non-Executive Director
Tim has degrees in Economics and Laws from Macquarie University. He is a member
of Chartered Accountants Australia and New Zealand and is admitted as a Solicitor of
the Supreme Court of New South Wales.
Tim is a chartered accountant with more than 25 years of experience in professional
services, telecommunications and infrastructure industries and has held finance and
operational leadership roles in Australia, Singapore and Vietnam. Tim is currently
Chief Operating Officer with King & Wood Mallesons Australia, a leading international
law firm. During his time at PricewaterhouseCoopers, Tim was a partner of Tax and
Legal Services in Indochina advising foreign companies on setting up and operating
in Vietnam, Cambodia and Laos, following tax advisory roles in Sydney and
Singapore. Tim was previously Chief Financial Officer for Sydney Airport Corporation
(ASX: SYD) and Hutchison Telecommunications (Australia) Limited (ASX: HTA).
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Chair of Audit and Risk Management Committee
122,951 ordinary shares
None
None
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships of all other types of entities, unless otherwise stated.
Company secretary
Rob Goss is the Chief Financial Officer and Company Secretary, responsible for finance and accounting operations and
administration of the Group. Rob has extensive experience in finance in publicly listed companies. Rob is a member of the
Chartered Accountants Australia and New Zealand and has a Bachelor of Business degree, majoring in Accounting, from
the University of Technology, Sydney.
Before joining the Group in 2017, Rob served as Chief Financial Officer for BuildingIQ, Inc. (ASX: BIQ), a commercial
energy platform to manage building heating and cooling via the cloud to save on energy costs. Prior to BuildingIQ, Rob
was Chief Financial Officer at iProperty Group Limited (ASX: IPP), an online property and portal operating in Malaysia,
Hong Kong, Indonesia, Singapore and Thailand. Previously, Rob held senior finance roles at ANZ Bank and Allco Finance
Group after commencing his career as a chartered accountant at KPMG.
7
14
Directors’ report30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Directors' report
30 June 2018
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the
year ended 30 June 2018, and the number of meetings attended by each director were:
David Krall
Lee Ellison
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
Full Board
Attended
Held
Remuneration and
Nomination Committee
Attended
Held
Audit and Risk Management
Committee
Attended
Held
11
11
11
11
11
11
11
11
11
11
11
11
2
-
2
-
2
-
2
-
2
-
2
-
-
-
3
3
-
3
-
-
3
3
-
3
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance
with the requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The objective of the Group's executive reward framework is to ensure reward for performance is competitive, and
appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives
and the creation of value for shareholders, and it is considered to conform to good market practices for the delivery of
reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good
reward governance practices:
●
●
●
●
competitiveness and reasonableness;
acceptability to shareholders;
performance linkage / alignment of executive compensation; and
transparency.
The Remuneration and Nomination Committee is responsible for advising the Board on the composition of the Board and
its committees, evaluating potential Board candidates and advising on their suitability, and ensuring appropriate succession
plans are in place.
The Remuneration and Nomination Committee establishes, amends and reviews the compensation and equity incentive
plans with respect to senior management and employees of the Group including determining individual elements of the
total compensation of the chief executive officer, and other members of senior management.
The Remuneration and Nomination Committee may seek external advice to determine the appropriate level and structure
of the remuneration packages from time to time (refer to the section 'Use of remuneration consultants' below).
The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it
should seek to enhance shareholders' interests by:
●
focusing on sustained growth in shareholder wealth and delivering constant or increasing return on assets as well as
focusing the executive on key non-financial drivers of value; and
attracting and retaining high calibre executives.
●
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Audinate Annual Report 2018 |
Audinate Group Limited
Directors' report
30 June 2018
Additionally, the reward framework should seek to enhance executives' interests by:
●
●
●
rewarding capability and experience;
reflecting competitive reward for contribution to growth in shareholder wealth; and
providing a clear structure for earning rewards.
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive
directors' fees and payments are reviewed annually by the Board. The Board may, from time to time, receive advice from
independent remuneration consultants to ensure non-executive directors' fees and payments are appropriate and in line
with the market. The Chairman's fees are determined independently to the fees of other non-executive directors based on
comparative roles in the external market. The Chairman is not present at any discussions relating to the determination of
his own remuneration.
ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a general
meeting. This amount is currently capped under the Constitution at $750,000 per annum. Any increase to the aggregate
amount needs to be approved by shareholders. Directors will seek approval from time to time, as appropriate. This
aggregate annual sum does not include any special remuneration which the Board may grant to the directors for special
exertions or additional services performed by a director for or at the request of the Group, which may be in addition to or in
substitution of the director's fees.
The Company has entered into an appointment letter with each of its non-executive directors. Non-executive fees, inclusive
of superannuation but exclusive of GST (where applicable), are currently as follows:
Name of Non-Executive Director
Fees per annum
David Krall
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
$120,000
$65,000
$65,000
$65,000
$65,000
Non-executive directors also receive an additional $15,000 per annum for chairing a Board committee.
Executive remuneration
The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which
has both fixed and variable components.
The executive remuneration and reward framework has four components:
●
●
●
●
base pay and non-monetary benefits;
short-term performance incentives;
long-term performance incentives; and
other remuneration such as superannuation and long service leave.
The combination of these comprises the executive's total remuneration.
The Remuneration and Nomination Committee recommends to the Board the fixed remuneration packages for the
executive team and these are reviewed annually.
Short-term incentive plan ('STI Plan')
The STI Plan is designed to reward eligible employees for their efforts toward the accomplishment of the Group's goals
during the plan year. Under the STI Plan, the decision to pay any bonus remains at the full discretion of the Board, based
on recommendations by the Remuneration and Nomination Committee.
The key components of the cash-based STI Plan are:
●
●
participants are entitled to receive a percentage of their fixed remuneration as an annual cash bonus;
payment of an annual cash bonus is based on individual key performance targets and objectives and the Group's
performance against key performance indicators; and
key performance indicators are set annually and may include measures such as revenue, earnings before interest,
tax, depreciation and amortisation ('EBITDA'), gross profit margin and growth targets, or other targets as considered
appropriate and set by the Board.
9
●
16
Directors’ report30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Directors' report
30 June 2018
Long-term incentive plan ('LTI Plan')
The LTI Plan is designed to assist in the reward, retention and motivation of the Group's senior management and other key
employees ('participants'). Under the rules of the LTI Plan, the Board has a discretion to offer awards (being options to
acquire shares; performance rights to acquire shares; and/or shares, including those acquired under a limited recourse
loan funded arrangement) to nominated participants.
A summary of the rules of the LTI Plan is set out below:
●
●
the LTI Plan is open to participants, as determined by the Board. Participation is voluntary;
the Board may determine the type/number of awards to be issued under the LTI Plan to each participant and other
terms of issue such as: service-based conditions and/or performance hurdles; any amount payable on the grant of the
awards; the exercise price of any option granted; the period during which a vested option can be exercised; and any
forfeiture conditions or disposal restrictions applying to the awards and any shares that a participant receives upon
exercise of their options or performance rights;
the Board may, in its discretion, also determine that the Company will issue limited recourse loans to participants to
use for the purchase of shares as part of a share award under the LTI Plan;
when any service-based conditions and/or performance hurdles have been satisfied, participants will receive fully
vested shares or their options/performance rights will become vested and will be exercisable over shares, as
applicable;
each vested option and performance right enables the participant to be issued or to be transferred one share upon
exercise, subject to the rules governing the LTI Plan and the terms of any particular offer;
participants holding options or performance rights are not permitted to participate in new issues of securities by the
Company but adjustments may be made to the number of shares over which the options or performance rights are
granted and/or the exercise price (if any) to take into account changes in the capital structure of the Company that
occur by way of pro rata and bonus issues in accordance with the rules of the LTI Plan and the ASX Listing Rules.
the LTI Plan limits the aggregate number of awards that the Company may grant without shareholder approval, such
that the sum of all awards on issue (assuming all options and performance rights were exercised) do not at any time
exceed in aggregate 10% of the total issued capital of the Company as at the date of any proposed new awards; and
the Board may delegate management and administration of the LTI Plan, together with any of their powers or
discretions under the LTI Plan, to a committee of the Board or to anyone or more persons selected by them as the
Board thinks fit.
●
●
●
●
●
●
During the financial year the Group offered performance rights to eligible participants under the LTI Plan.
Group performance and link to remuneration
Remuneration for all staff is directly linked to the performance of the Group. The overall level of reward is based on the
achievement of revenue and EBITDA thresholds as well as the individual's performance assessment score. No bonus is
payable unless the thresholds are met and the ultimate amount payable remains at the discretion of the Board. Refer to the
section ''Additional information" below for details of the total shareholders return and earnings. Total shareholders return
represents a key measure for the LTI plan.
Use of remuneration consultants
The Group did not engage remuneration consultants during the year ended 30 June 2018 (2017: $30,000).
Voting and comments made at the Company's 2017 Annual General Meeting ('AGM')
At the AGM, 99.8% of the votes received supported the adoption of the remuneration report for the year ended 30 June
2017. The Company did not receive any specific feedback at the AGM regarding its remuneration practices.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the Group are set out in the following tables.
The key management personnel of the Group consisted of the following directors of Audinate Group Limited:
●
●
●
●
●
●
David Krall - Chairman and Non-Executive Director
Lee Ellison - Chief Executive Officer
John Dyson - Non-Executive Director
Roger Price - Non-Executive Director
Alison Ledger - Non-Executive Director
Tim Finlayson - Non-Executive Director
10
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Audinate Annual Report 2018 |
Audinate Group Limited
Directors' report
30 June 2018
And the following persons:
●
●
Rob Goss - Chief Financial Officer and Company Secretary
Aidan Williams - Chief Technology Officer
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long
service
leave
$
Equity-
settled
$
Total
$
120,000
59,831
59,360
73,060
73,079
-
-
-
-
-
-
-
-
-
-
-
5,169
5,640
6,940
6,921
365,802
191,449
17,970
-
-
-
-
-
-
-
-
-
-
-
-
120,000
65,000
65,000
80,000
80,000
58,684
633,905
237,830
203,256
1,192,218
64,969
58,937
315,355
-
-
17,970
19,940
19,940
64,550
-
12,401
12,401
19,561
39,123
342,300
333,657
117,368 1,719,862
2018
Non-Executive Directors:
David Krall (Chairman)
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
Executive Directors:
Lee Ellison
Other Key Management
Personnel:
Rob Goss
Aidan Williams
The 2017 table below represents remuneration paid by the Group consisting of Audinate Pty Ltd and its subsidiaries for the
entire financial year and Audinate Group Limited and its subsidiaries for the one day to 30 June 2017.
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long
service
leave
$
Equity-
settled
$
Total
$
69,370
12,970
11,845
10,892
10,892
-
-
-
-
-
-
-
-
-
-
-
-
1,125
1,035
1,035
335,964
167,905
18,249
-
108,003
216,354
776,290
47,500
48,802
264,207
-
-
18,249
9,744
16,987
29,926
-
-
-
-
-
-
-
-
-
-
-
-
-
-
69,370
12,970
12,970
11,927
11,927
11,311
533,429
63,480
9,550
228,727
291,693
84,341 1,173,013
2017
Non-Executive Directors:
David Krall (Chairman)
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
Executive Directors:
Lee Ellison
Other Key Management
Personnel:
Rob Goss
Aidan Williams
11
18
Directors’ report30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Directors' report
30 June 2018
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Executive Directors:
Lee Ellison
Other Key Management
Personnel:
Rob Goss
Aidan Williams
Fixed
remuneration
2018
2017
At risk - STI
2018
2017
At risk - LTI
2018
2017
61%
67%
30%
31%
9%
2%
75%
71%
51%
80%
19%
18%
21%
17%
6%
11%
28%
3%
Non-executive directors did not receive share options or other performance linked incentives during the year ended 30
June 2018 and 30 June 2017.
No cash bonus was forfeited by key management personnel for the year ended 30 June 2018 and 30 June 2017.
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements.
Details of these agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Lee Ellison
Chief Executive Officer
19 April 2017
Ongoing, employed by Audinate, Inc.
Fixed: Lee receives a fixed remuneration package ('FRP') of US$283,000 and is
eligible to participate in various employee benefit programs maintained by Audinate,
Inc., which includes 80% company sponsored payment of health and dental
insurance coverage, as well as other employee related benefits.
STI: Lee is also eligible to receive an annual STI of up to 50% of his FRP, subject to
achieving the annual targets against key performance indicators and personal
objectives as agreed with the Board for that year. Any payment for over achievement
of annual targets, is at the discretion of the Board.
LTI: Lee has participated in the Company's legacy Employee Share Option Plan
('ESOP') and may exercise his vested options under the ESOP. Lee is also eligible to
participate in the LTI Plan and was issued an initial grant of 267,811 performance
rights for nil consideration on listing. In addition, subsequent to listing, the Company
has granted Lee 1,995,000 performance rights which will be automatically exercised
into shares on 15 September 2019 provided Lee does not resign for the period of nine
months from the date of grant.
Termination: Either party may terminate the employment contract by giving 6 months'
written notice. The Company can elect in its discretion to make a payment in lieu of
notice or place Lee on garden leave for all or part of that notice period.
Restraint: After termination Lee will be subject to non-competition, non-solicitation of
client and non-poaching of employees' restrictions, within the United States of
America and Australia for a maximum period of 6 months.
12
19
Audinate Annual Report 2018 |
Audinate Group Limited
Directors' report
30 June 2018
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Rob Goss
Chief Financial Officer and Company Secretary
19 April 2017
Ongoing, employed by Audinate Group Limited
Fixed: Rob receives a FRP of $257,000 including mandatory superannuation
contributions.
STI: Rob is also eligible to receive an annual STI up to 25% of his FRP, subject to
achieving the annual targets against key performance indicators and personal
objectives as agreed with the Board for that year. Any payment for over achievement
of annual targets, is at the discretion of the Board.
LTI: Rob has participated in the Company's ESOP and may exercise his vested
options under the ESOP.
Termination: Either party may terminate the employment contract by giving 3 months'
written notice. The Company can elect in its discretion to make a payment in lieu of
notice or place Rob on garden leave for all or part of that notice period.
Restraint: After termination Rob will be subject to non-competition, non-solicitation of
client and non-poaching of employees' restrictions, within the United States of
America, Australia and the United Kingdom for a maximum period of 12 months.
Aidan Williams
Chief Technology Officer
19 April 2017
Ongoing, employed by Audinate Group Limited
Fixed: Aidan receives a fixed remuneration package of $235,000 including mandatory
superannuation contributions.
STI: Aidan is also eligible to receive an annual STI up to 25% of his FRP, subject to
achieving the annual targets against key performance indicators and personal
objectives as agreed with the Board for that year. Any payment for over achievement
of annual targets, is at the discretion of the Board.
LTI: Aidan has participated in the Company's ESOP and may exercise his vested
options under the ESOP.
Termination: Either party may terminate the employment contract by giving 6 months'
written notice. The Company can elect in its discretion to make a payment in lieu of
notice or place Aidan on garden leave for all or part of that notice period.
Restraint: After termination Aidan will be subject to non-competition, non-solicitation
of client and non-poaching of employees' restrictions, within the United States of
America, Australia and the United Kingdom for a maximum period of 12 months.
All other senior management are employed under written terms of employment with the Group. The key terms and
conditions of their employment include:
●
●
●
●
remuneration packages;
eligibility to participate in the STI and LTI Plans;
notice of termination of employment provisions, with the relevant notice period of up to 3 months; and
for some of those executives, post-employment restrictions covering non-competition, non-solicitation of clients for a
maximum duration of up to 3 months.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
13
20
Directors’ report30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Directors' report
30 June 2018
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2018.
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key
management personnel in this financial year or future reporting years are as follows:
Grant date
30/06/2017
30/06/2017
30/06/2017
30/06/2017
Vesting date and
exercisable date
30/06/2017
30/06/2017
30/06/2017
30/06/2017
Expiry date
17/08/2019
23/06/2022
23/08/2022
16/01/2023
Fair value
per option
Exercise price at grant date
$0.062
$0.260
$0.260
$0.260
$0.022
$0.090
$0.090
$0.090
Options granted carry no dividend or voting rights. The options set out in the table above represent options granted in
exchange for options in Audinate Group Limited as part of the restructure which took place at the date of the IPO on 30
June 2017.
There were no options over ordinary shares granted to or vested by directors and other key management personnel as part
of compensation during the year ended 30 June 2018.
Performance rights
The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of the executive
director and other key management personnel in this financial year or future reporting years are as follows:
Name
Lee Ellison
Lee Ellison
Rob Goss
Aidan Williams
Number of
rights
granted
Grant date
Expiry date
267,811 30/06/2017
1,995,000 02/08/2017
89,270 30/06/2017
178,541 30/06/2017
30/06/2022
15/09/2019
30/06/2022
30/06/2022
Share price
hurdle for
vesting
Fair value
per right
at grant date
$0.000
$0.000
$0.000
$0.000
$0.810
$0.810
$0.810
$0.810
Apart from the performance rights expiring in 2019, the remaining performance rights vest in three tranches after the
release of the annual results in 2020, 2021 and 2022.
Performance rights commence vesting upon achieving total shareholder return equal to the 50th percentile of the ASX
Emerging Companies Index and vest fully at the 75th percentile.
Performance rights granted carry no dividend or voting rights and no rights vested during the year ended 30 June 2018.
Additional information
The earnings of the Group for the five years to 30 June 2018 are summarised below:
2014*
$
2015*
$
2016*
$
2017**
$
2018
$
Sales revenue
EBITDA
Profit after income tax
6,519,830
(816,516)
(101,710)
8,035,464
25,944
516,383
11,903,452
(64,362)
54,451
15,062,845
783,540
(20,443,388)
19,653,493
558,933
2,544,339
*
**
Relates to the Group prior to the restructure that occurred at the time of the IPO at 30 June 2017.
EBITDA in the 2017 financial year is calculated excluding the one-off impacts of IPO expenses and the change in fair
value of redeemable preference shares.
14
21
Audinate Annual Report 2018 |
Audinate Group Limited
Directors' report
30 June 2018
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
Share price at financial year end ($)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
2017
2018
1.53
(573.55)
(573.55)
3.92
4.20
3.96
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each director and other members of key
management personnel of the Group, including their personally related parties, is set out below:
Ordinary shares
David Krall
Lee Ellison
John Dyson*
Roger Price**
Tim Finlayson**
Rob Goss**
Aidan Williams
Balance at
the start of
the year
Received
as part of
remuneration
Additions
Disposals/
other
293,958
820
204,921
49,181
122,951
820
1,714,364
2,387,015
-
-
-
-
-
-
-
-
-
-
-
18,175
-
604,408
97,041
719,624
-
-
-
-
-
-
-
-
Balance at
the end of
the year
293,958
820
204,921
67,356
122,951
605,228
1,811,405
3,106,639
*
**
Entities associated with John Dyson hold 10,602,602 ordinary shares as at 30 June 2018.
Includes indirect holdings
Option holding
The number of options over ordinary shares in the Company held during the financial year by each director and other
members of key management personnel of the Group, including their personally related parties, is set out below:
Options over ordinary shares
David Krall
Lee Ellison*
Rob Goss*
Aidan Williams
Balance at
the start of
the year
186,042
320,000
690,000
204,000
1,400,042
Granted
Exercised
Expired/
forfeited/
other**
Balance at
the end of
the year
-
-
-
-
-
-
-
(604,408)
(97,041)
(701,449)
-
-
(85,592)
(2,959)
(88,551)
186,042
320,000
-
104,000
610,042
Held indirectly
*
** Other includes the impact of cashless exercise
All of these options were fully vested and exercisable at 30 June 2018. However they are all subject to escrow provisions
as described in the prospectus.
15
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Directors’ report30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Directors' report
30 June 2018
Performance rights holding
The number of performance rights over ordinary shares in the Company held during the financial year by each director and
other members of key management personnel of the Group, including their personally related parties, is set out below:
Performance rights over ordinary shares
Lee Ellison
Rob Goss
Aidan Williams
Balance at
the start of
the year
Granted
Vested
Expired/
forfeited/
other
Balance at
the end of
the year
267,811
89,270
178,541
535,622
1,995,000
-
-
1,995,000
-
-
-
-
-
-
-
-
2,262,811
89,270
178,541
2,530,622
No performance rights over ordinary shares had vested at 30 June 2018.
This concludes the remuneration report, which has been audited.
Loans to directors and executives
Prior to the IPO, Audinate Pty Limited offered option-holders an interest bearing, non-recourse loan in order to fund the
exercise price of options for shares in Audinate Pty Limited. As a part of the restructure described in the prospectus these
shares were then exchanged for shares in Audinate Group Limited. The total value of the loans outstanding at 30 June
2018 was $90,738 (2017: $117,953), inclusive of a loan outstanding to Aidan Williams of $38,731 (2017: $36,613).
Shares under option
Unissued ordinary shares of Audinate Group Limited under option at the date of this report are as follows:
Grant date
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
Expiry date
23/11/2018
17/10/2019
09/12/2019
09/01/2020
21/08/2020
09/12/2020
11/06/2022
23/08/2022
31/01/2023
Exercise
price
Number
under option
$0.036
$0.062
$0.062
$0.062
$0.062
$0.062
$0.260
$0.260
$0.260
30,000
448,042
10,000
10,000
42,000
460,000
158,000
508,800
48,000
1,714,842
Shares under performance rights
Unissued ordinary shares of Audinate Group Limited under performance rights* at the date of this report are as follows:
Grant date
30/06/2017
02/08/2017
29/06/2018
Expiry date
30/06/2022
15/09/2019
30/06/2022
Exercise
price
Number
under rights
$0.000
$0.000
$0.000
1,038,509
1,995,000
34,566
3,068,075
*
ASX restricted quoted performance rights
No person entitled to exercise the performance rights had or has any right by virtue of the performance right to participate
in any share issue of the Company or of any other body corporate.
16
23
Audinate Annual Report 2018 |
Audinate Group Limited
Directors' report
30 June 2018
Shares issued on the exercise of options
The following ordinary shares of Audinate Group Limited were issued during the year ended 30 June 2018 and up to the
date of this report on the exercise of options granted:
Date options exercised
31/08/2017
31/08/2017
23/10/2017
23/10/2017
17/11/2017
01/02/2018
01/02/2018
21/02/2018
21/02/2018
23/03/2018
23/03/2018
23/04/2018
04/05/2018
21/05/2018
12/06/2018
25/06/2018
Exercise
price
Number of
shares issued
$0.260
$0.062
$0.260
$0.062
$0.062
$0.260
$0.062
$0.260
$0.062
$0.260
$0.062
$0.062
$0.260
$0.260
$0.036
$0.260
813,209
402,567
24,000
10,000
19,734
7,290
9,788
4,000
20,000
45,896
29,412
10,000
8,000
3,652
5,943
9,354
1,422,845
Shares issued on the exercise of performance rights
There were no ordinary shares of Audinate Group Limited issued on the exercise of performance rights during the year
ended 30 June 2018 and up to the date of this report.
Indemnity and insurance of officers
During the financial year, the Company had a policy in place in respect of directors’ and officers’ liability and legal
expenses insurance contracts, for current directors, including senior executives, employees and officers and for former
directors, officers and employees of the Company for a period of 12 months and directors, senior executives, secretaries
and employees of its Group, excluding actions brought in a court in the United States of America or Canada. The policy
prohibits disclosure of the premiums paid.
The policy covers:
● costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and
whatever their outcome; and
● other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty
or improper use of information or position to gain a personal advantage.
The Company has also entered into a Deed of Access ('Deed') and Indemnity with all past and present directors, which
provides an indemnity to the directors for legal costs and any liability arising from negligence of the director, to the extent
permitted by law. In addition, the Deed allows the Company to advance a director an interest free loan equal to any legal
costs which, in the Company’s opinion, are not permitted to be indemnified under the law. Any such advance is repayable
by the director at the conclusion of the proceedings.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the
Company or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court for leave to bring proceedings on behalf of the Company, or to intervene in any
proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or
part of those proceedings.
17
24
Directors’ report30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Directors' report
30 June 2018
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 21 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 21 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company,
acting as advocate for the Company or jointly sharing economic risks and rewards.
●
Officers of the Company who are former partners of Deloitte Touche Tohmatsu
There are no officers of the Company who are former partners of Deloitte Touche Tohmatsu.
Auditor's independence declaration
A copy of the auditor's independence declaration is set out on the following page.
Auditor
Deloitte Touche Tohmatsu continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors.
On behalf of the directors
___________________________
David Krall
Chairman
27 August 2018
Sydney
18
25
Audinate Annual Report 2018 | Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney, NSW, 2000
Australia
Phone: +61 2 9322 7000
www.deloitte.com.au
27 August 2018
The Board of Directors
Audinate Group Limited
Level 1, Suite 2
458 – 468 Wattle Street
Ultimo, NSW 2007
Dear Board Members
Audinate Group Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Audinate Group Limited.
As lead audit partner for the audit of the financial statements of Audinate Group Limited for the financial
year ended 30 June 2018, I declare that to the best of my knowledge and belief, there have been no
contraventions of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Joshua Tanchel
Partner
Chartered Accountant
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
19
26
Auditor’s independence declaration| Audinate Annual Report 2018
Audinate Group Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2018
Revenue
Sales
Cost of goods sold
Gross margin
Expenses
Employee expenses
Marketing expenses
Administration and other operating expenses
Depreciation and amortisation
Initial public offering expenses
Conversion of redeemable preference shares
Finance costs
Total expenses
Operating loss
Other income
Loss before income tax (expense)/benefit
Income tax (expense)/benefit
Profit/(loss) after income tax (expense)/benefit for the year attributable to the
owners of Audinate Group Limited
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of
Audinate Group Limited
Basic earnings per share
Diluted earnings per share
Consolidated
Note
2018
$
2017
$
19,653,493
(5,011,451)
14,642,042
15,062,845
(3,802,226)
11,260,619
(8,838,047)
(2,337,707)
(2,907,355)
(1,451,757)
-
-
-
(15,534,866)
(7,289,702)
(1,603,253)
(1,584,124)
(1,088,987)
(1,694,328)
(18,547,790)
(400)
(31,808,584)
(892,824)
(20,547,965)
157,257
152,551
(735,567)
(20,395,414)
3,279,906
(47,974)
2,544,339
(20,443,388)
(16,162)
(103,955)
(16,162)
(103,955)
2,528,177
(20,547,343)
Cents
Cents
4.20
3.96
(573.55)
(573.55)
5
5
6
7
8
8
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
20
27
Consolidated statement of profit or loss and other comprehensive incomefor the year ended 30 June 2018Audinate Annual Report 2018 |
Audinate Group Limited
Consolidated statement of financial position
As at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Receivable from issue of shares
Current tax asset
Inventories
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Intangibles
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Payable to selling shareholders
Income tax payable
Employee benefits
Provisions
Unearned revenue
Total current liabilities
Non-current liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed capital
Reserves
Accumulated losses
Total equity
Consolidated
Note
2018
$
2017
$
9
10
7
11
12
13
14
7
15
7
13,631,026
1,819,323
-
1,344,029
1,224,814
276,247
18,295,439
18,694,193
2,030,127
4,062,354
901,936
767,015
246,346
26,701,971
691,011
3,879,196
1,874,195
6,444,402
365,447
2,000,750
-
2,366,197
24,739,841
29,068,168
2,165,151
-
22,742
1,662,980
72,633
133,689
4,057,195
2,557,814
7,029,899
34,216
1,359,954
33,285
163,705
11,178,873
308,836
308,836
304,818
304,818
4,366,031
11,483,691
20,373,810
17,584,477
16
17
63,287,617
521,535
(43,435,342)
63,261,592
302,566
(45,979,681)
20,373,810
17,584,477
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
21
28
Consolidated statement of financial positionas at 30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Consolidated statement of changes in equity
For the year ended 30 June 2018
Consolidated
Balance at 1 July 2016
Contributed
capital
$
Reserves
$
Accumulated
losses
$
Total equity
$
29,392
243,672
(25,536,293)
(25,263,229)
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
-
-
-
-
(103,955)
(20,443,388)
-
(20,443,388)
(103,955)
(103,955)
(20,443,388)
(20,547,343)
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 16)
Share-based payments (note 29)
Issue of shares on exercise of options in Audinate Pty Limited
Issue of shares as employee share gift
63,035,050
-
138,126
59,024
-
162,849
-
-
-
-
-
-
63,035,050
162,849
138,126
59,024
Balance at 30 June 2017
63,261,592
302,566
(45,979,681)
17,584,477
Consolidated
Balance at 1 July 2017
Profit after income tax benefit for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Share-based payments (note 29)
Issue of shares on exercise of options
Share issue costs
Contributed
capital
$
Reserves
$
Accumulated
losses
$
Total equity
$
63,261,592
302,566
(45,979,681)
17,584,477
-
-
-
-
(16,162)
2,544,339
-
2,544,339
(16,162)
(16,162)
2,544,339
2,528,177
-
43,512
(17,487)
235,131
-
-
-
-
-
235,131
43,512
(17,487)
Balance at 30 June 2018
63,287,617
521,535
(43,435,342)
20,373,810
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
22
29
Consolidated statement of changes in equityfor the year ended 30 June 2018Audinate Annual Report 2018 |
Audinate Group Limited
Consolidated statement of cash flows
For the year ended 30 June 2018
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest and other finance costs paid
Research and development incentive received for research activities
Income taxes paid
Consolidated
Note
2018
$
2017
$
19,678,955
(19,166,193)
251,490
-
334,210
(62,066)
15,079,335
(14,407,491)
51,541
(1,562)
598,975
(80,440)
Net cash from operating activities
27
1,036,396
1,240,358
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Research and development incentive received for development activities
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Payments to selling shareholders
Share issue transaction costs
Net cash from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
(627,030)
(3,028,735)
680,000
(138,903)
(2,307,518)
580,955
(2,975,765)
(1,865,466)
4,086,341
(7,029,899)
(115,204)
16,987,866
-
(777,000)
(3,058,762)
16,210,866
(4,998,131)
18,694,193
(65,036)
15,585,758
3,108,435
-
Cash and cash equivalents at the end of the financial year
9
13,631,026
18,694,193
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
23
30
Consolidated statement of cash flowsfor the year ended 30 June 2018| Audinate Annual Report 2018
Notes to the consolidated financial statements
for the year ended 30 June 2018
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 1. General information
The financial statements cover Audinate Group Limited ('Company' or 'parent entity') as a consolidated entity consisting of
Audinate Group Limited and the entities it controlled (collectively referred to as the 'Group') at the end of, or during, the
year. The financial statements are presented in Australian dollars, which is Audinate Group Limited's functional and
presentation currency.
Audinate Group Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Level 1, 458 Wattle Street
Ultimo NSW 2007
A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is
not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 24 August 2018. The
directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new and amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The adoption of these
Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of
the Group.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB'), as appropriate for for-profit oriented entities.
These financial statements also comply with International Financial Reporting Standards ('IFRS') as issued by the
International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in note 3.
Parent entity information
These financial statements present the results of the Group only. Supplementary information about the parent entity is
disclosed in note 28.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Audinate Group Limited as
at 30 June 2018 and the results of all subsidiaries for the year then ended.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that control ceases.
24
31
Audinate Annual Report 2018 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity
attributable to the parent.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-
controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group
recognises the fair value of the consideration received and the fair value of any investment retained together with any gain
or loss in profit or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same
basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the
allocation of resources to operating segments and assessing their performance.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Audinate Group Limited's functional and presentation
currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the
reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average
exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange
differences are recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed.
Revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the Group and the revenue can be reliably
measured. Revenue is measured at the fair value of the consideration received or receivable.
Sales revenue
Sales revenue includes sale of goods and licence fee revenue.
Sale of goods revenue is recognised at the point of sale, when the risks and rewards are transferred to the customer and
there is a valid sales contract. Amounts disclosed as revenue are net of sales returns and trade discounts.
Revenue from licence fees, on software sales, is recognised on the transferring of significant risk and rewards of the
software which normally occurs when the customer has access to the software.
Unearned revenue represents amounts received from customers in advance of the services to be provided. Typically this
relates to discreet maintenance contracts or the maintenance element of a bundled customer contract. They are
recognised as unearned revenue in the statement of financial position and transferred to profit or loss when the support
and maintenance services have been provided.
25
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Notes to the consolidated financial statementsfor the year ended 30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Government grants including research and development incentives
Government grants and the research and development incentives are recognised when there is reasonable assurance that
the entity will comply with the conditions attaching to them and the grants will be received. Government grants are
recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related
costs for which the grants are intended to compensate.
In the prior year the incentive receivable was apportioned between other income and the development asset based on the
split of expenditure in the claim, in accordance with the requirements of AASB 120 'Accounting for Government Grants and
Disclosure of Government Assistance'. Upon entering into a tax consolidated group Audinate recognised the incentive
through profit or loss as an income tax benefit in accordance with AASB 112 'Income Taxes'.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset
to the net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted,
except for:
●
when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting
nor taxable profits; or
when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and
the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the
foreseeable future.
●
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for
the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
During the financial year, Audinate Group Limited (the 'head entity') and its wholly-owned Australian subsidiaries formed an
income tax consolidated group under the tax consolidation regime, which has resulted in a deferred tax asset being
recognised.
The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred
tax amounts. The tax consolidated group has applied the 'separate taxpayer within group' approach in determining the
appropriate amount of taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax
consolidated group.
26
33
Audinate Annual Report 2018 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the
intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a
contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months
after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle
a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is
objective evidence that the Group will not be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation and default or delinquency in payments (more than 90 days overdue) are considered indicators that the
trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying
amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows
relating to short-term receivables are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
Inventories
Raw materials and finished goods are stated at the lower of cost and net realisable value on a 'weighted average cost'
basis. Cost comprises of direct materials and delivery costs, direct labour, import duties and other taxes, an appropriate
proportion of variable and fixed overhead expenditure based on normal operating capacity, and, where applicable,
transfers from cash flow hedging reserves in equity. Costs of purchased inventory are determined after deducting rebates
and discounts received or receivable.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale.
Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
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Notes to the consolidated financial statementsfor the year ended 30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment
over their expected useful lives as follows:
Leasehold improvements
Furniture and fittings
Computer and engineering equipment
Lease term
4 - 10 years
1 - 10 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets
and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the
risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively
retains substantially all such risks and benefits.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line
basis over the term of the lease.
Intangible assets
Intangible assets are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently
measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation
and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are
measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method of
amortisation and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of
consumption or useful life are accounted for prospectively by changing the amortisation method or period.
Research and development
Research costs are expensed in the period in which they are incurred. Development costs are capitalised when it is
probable that the project will be a success considering its commercial and technical feasibility; the Group is able to use or
sell the asset; the Group has sufficient resources; and intent to complete the development and its costs can be measured
reliably. Capitalised development costs are amortised, commencing from the time the asset's development reaches the
condition necessary for it to be capable of operating in the manner intended by management. Amortisation is calculated on
a straight-line basis over the period of their expected benefit, being their finite useful life of three years.
Other intellectual property with an indefinite useful life
Significant costs associated with intellectual property are deferred and not amortised. Intellectual property has an indefinite
life and is tested for impairment annually. The assessment of indefinite life is reviewed annually to determine whether the
indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective
basis.
Software
Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their
expected benefit, being their finite life of 3-5 years.
Impairment of non-financial assets
Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount.
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35
Audinate Annual Report 2018 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and
which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The
amounts are unsecured and are usually paid within 30 days of recognition.
Redeemable preference shares
Preference shares which are redeemable at the option of the noteholder are classified as a liability in the statement of
financial position. Due to the operability of the anti-dilution clauses in the preference shareholder agreements, the
preference shares are considered to include a derivative liability. As such the preference shares are considered to
represent a liability with an equity conversion option derivative with the entire instrument being accounted for at fair value
through profit or loss.
Provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is
probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value
of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the
provision resulting from the passage of time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be
settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities
are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at the present value of expected future payments to be made in respect of services provided by employees up to
the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures
and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality
corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined
contribution plans are recognised as an employee related cost in profit or loss when they are due.
Share-based payments
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for
the rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is determined using either the
Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact
of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield
and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether
the Group receives the services that entitle the employees to receive payment. No account is taken of any other vesting
conditions.
29
36
Notes to the consolidated financial statementsfor the year ended 30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already
recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions
are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are
satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair
value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a
cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting
period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and
new award is treated as if they were a modification.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the
fair value is based on 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; and assumes that the transaction will take place either: in the
principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data is
available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and
transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair
value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either
not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge
and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an
analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison,
where applicable, with external sources of data.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Audinate Group Limited, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
30
37
Audinate Annual Report 2018 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2018. The Group's
assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group,
are set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all
previous versions of AASB 9 and completes the project to replace AASB 139 'Financial Instruments: Recognition and
Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall
be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect
contractual cash flows, which arise on specified dates and solely principal and interest. All other financial instrument assets
are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on
initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive
income ('OCI'). For financial liabilities, the standard requires the portion of the change in fair value that relates to the
entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge
accounting requirements are intended to more closely align the accounting treatment with the risk management activities of
the entity. New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance.
Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument has increased
significantly since initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional
new disclosures. The Group will adopt this standard from 1 July 2018. It is not expected to significantly impact the financial
statements on the basis that the main financial assets recognised represent cash and cash equivalent and trade
receivables that do not carry a significant financing component and involve a single cash flow representing the repayment
of principal, which in the case of trade receivables is the transaction price. Both asset classes will continue to be measured
at face value. Other financial asset classes are not material to the Group. Financial liabilities of the Group are not impacted
as the Group does not carry them at fair value. and the impact of its adoption will be minimal.
31
38
Notes to the consolidated financial statementsfor the year ended 30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a
single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or
implied) to be identified, together with the separate performance obligations within the contract; determine the transaction
price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate
performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation
approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied.
Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance
obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is
satisfied when the service has been provided, typically for promises to transfer services to customers. For performance
obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue
should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity's
statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship
between the entity's performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required
to enable users to understand the contracts with customers; the significant judgements made in applying the guidance to
those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The Group will
adopt this standard from 1 July 2018. It is not expected to significantly impact the financial statements on the basis that
most of the Group's revenue is recognised at the time of transfer of goods and services to customer which represents the
satisfaction of the primary performance obligation. Revenue related to maintenance performance obligations is already
deferred and amortised over the service period.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB
117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions,
a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of the
unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12
months or less and leases of low-value assets (such as personal computers and small office furniture) where an
accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit
or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or
dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the
leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance
costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when
compared to lease expenses under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit
or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into
both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting,
the standard does not substantially change how a lessor accounts for leases. Had the standard been adopted from 1 July
2017, and using the transitional rules available, the Group would have recognised a lease liability, being the present value
of the lease commitments as disclosed in note 23 discounted using the Group’s incremental borrowing rate, with a
corresponding increase in property, plant and equipment. However, the Group will adopt this standard from 1 July 2019
and the actual impact will depend on the operating lease assets held by the Group as at 1 July 2019 and the transitional
elections made at that time.
IASB revised Conceptual Framework for Financial Reporting
The revised Conceptual Framework has been issued by the International Accounting Standards Board ('IASB'), but the
Australian equivalent has yet to be published. The revised framework is applicable for annual reporting periods beginning
on or after 1 January 2020 and the application of the new definition and recognition criteria may result in future
amendments to several accounting standards. Furthermore, entities who rely on the conceptual framework in determining
their accounting policies for transactions, events or conditions that are not otherwise dealt with under Australian Accounting
Standards may need to revisit such policies. The Group will apply the revised conceptual framework from 1 July 2020 and
is yet to assess its impact.
Other amending accounting standards
Other amending accounting standards issued are not considered to have a significant impact on the financial statements of
the Group as their amendments provide either clarification of existing accounting treatment or editorial amendments.
32
39
Audinate Annual Report 2018 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates
and assumptions on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will
seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-
Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting
estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts
of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.
Income tax
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in
determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary
course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax
audit issues based on the Group's current understanding of the tax law. Where the final tax outcome of these matters is
different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in
which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Useful life of capitalised development costs
The Group regularly considers the useful life of development costs, which is currently estimated to be three years. In
determining the appropriate useful life for these assets a range of factors are taken into account including the specific
nature of the asset created, risk of technical obsolescence, business performance and market conditions. To the extent
that there is a change to the useful life of these assets (not related to impairment) the amortisation charge is changed
prospectively.
Note 4. Operating segments
Identification of reportable operating segments
The Group operates in one segment, based on the internal reports that are reviewed and used by the Board of Directors
(who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the
allocation of resources.
As a result, the operating segment information is as disclosed in the statements and notes to the financial statements
throughout the report.
Major customers
Most of the Group’s major customers are multinational companies that Audinate may transact with in multiple countries.
Due to the corporate structure of the Group this revenue is accounted for by Audinate Pty Limited in Australia. The top ten
customers represent approximately 50% (2017: 52%) of the Group’s revenue during the year ended 30 June 2018 and of
that amount the largest customer represents approximately 15% (2017: 23%) of the Group’s revenue.
33
40
Notes to the consolidated financial statementsfor the year ended 30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 4. Operating segments (continued)
Geographical information
Australia
United Kingdom
Hong Kong
United States of America
Sales to external customers
Geographical non-current
assets
2018
$
2017
$
2018
$
2017
$
19,566,426
-
-
87,067
14,939,667
-
-
123,178
6,299,814
17,267
1,016
126,305
2,275,099
12,098
1,671
77,329
19,653,493
15,062,845
6,444,402
2,366,197
The majority of the Group's revenue is generated from sales contracts between Audinate Pty Limited and a range of
international companies. The geographic split of this revenue is: a) Americas 40% (2017: 38%); b) Asia 24% (2017: 33%);
and c) Europe and Middle East 36% (2017:29%). Occasionally the international offices may generate some revenue
related to marketing activities.
Note 5. Expenses
Loss before income tax includes the following specific expenses:
Depreciation and amortisation
Depreciation of property, plant and equipment
Amortisation of intangibles
Total depreciation and amortisation
Rental expense relating to operating leases
Minimum lease payments
Employee benefit expenses
Salaries and wages
Superannuation
Share-based payments
Other costs
Total employee benefit expenses
Consolidated
2018
$
2017
$
130,229
1,321,528
103,326
985,661
1,451,757
1,088,987
364,157
366,287
7,190,559
508,201
235,131
904,156
6,162,134
428,203
67,443
631,922
8,838,047
7,289,702
34
41
Audinate Annual Report 2018 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 6. Other income
Net foreign exchange loss
Research and development incentive
Interest revenue
Consolidated
2018
$
2017
$
(70,028)
-
227,285
(219,972)
320,982
51,541
157,257
152,551
For the year ended 30 June 2018 the research and development incentive was accounted for as an income tax benefit as
explained in note 2 under the section headed 'Government grants including research and development incentives'.
Note 7. Income tax
The Group incurs an income tax expense in its overseas subsidiaries relating to the net taxable profit generated on
services provided to the Group.
Income tax expense/(benefit)
Current tax
Deferred tax - origination and reversal of temporary differences
Prior period adjustment
Adjustment recognised on tax consolidation
Adjustment recognised on tax consolidation - impact of change of tax rate
Adjustment recognised on tax consolidation - impact of change of tax rate on DTA
Aggregate income tax expense/(benefit)
Numerical reconciliation of income tax expense/(benefit) and tax at the statutory rate
Loss before income tax (expense)/benefit
Tax at the statutory tax rate of 27.5% (2017: 30%)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Conversion of redeemable preference shares
Amortisation of development costs (pre 30 June 2017)
Expenditure claimed for research and development incentive
Other non-assessable items
Utilisation of prior period losses
Reduction in current period research and development incentive
Non-deductible expenses
Research and development incentive benefit
Adjustment recognised on tax consolidation
Adjustment recognised on tax consolidation - impact of change of tax rate
Adjustment recognised on tax consolidation - impact of change of tax rate on DTA
Income tax expense/(benefit)
Consolidated
2018
$
2017
$
(1,300,121)
473,310
(105,590)
(2,443,181)
(117,733)
213,409
47,974
-
-
-
-
-
(3,279,906)
47,974
(735,567)
(20,395,414)
(202,281)
(6,118,624)
-
111,416
556,670
(122,653)
-
-
68,476
(1,344,029)
(932,401)
(2,443,181)
(117,733)
213,409
5,564,337
-
993,063
526,265
(376,373)
(540,694)
-
-
47,974
-
-
-
(3,279,906)
47,974
35
42
Notes to the consolidated financial statementsfor the year ended 30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 7. Income tax (continued)
Deferred tax asset
Net deferred tax asset comprises temporary differences attributable to:
Intangible assets
Employee liabilities
Blackhole expenditure
Accrued expenses
Other
Provisions
Prepayments
Depreciation - ACA adjustment
Development costs
Deferred tax asset
Consolidated
2018
$
2017
$
1,693,897
395,233
258,966
73,724
27,283
19,187
(1,467)
(38,135)
(554,493)
1,874,195
-
-
-
-
-
-
-
-
-
-
During the year, Audinate Group Limited (the 'head entity') and its wholly-owned Australian subsidiaries formed an income
tax consolidated group under the tax consolidation regime, which has resulted in a deferred tax asset being recognised.
Current tax asset
Current tax asset
Consolidated
2018
$
2017
$
1,344,029
901,936
Current tax asset represents an estimate of the amount receivable from the Australian Tax Office inclusive of the research
and development incentive.
Income tax payable
Income tax payable
Note 8. Earnings per share
Consolidated
2018
$
2017
$
22,742
34,216
Consolidated
2018
$
2017
$
Profit/(loss) after income tax attributable to the owners of Audinate Group Limited
2,544,339
(20,443,388)
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
Performance rights
Number
Number
60,598,965
3,564,389
1,627,891
1,995,000
-
-
Weighted average number of ordinary shares used in calculating diluted earnings per share
64,221,856
3,564,389
36
43
Audinate Annual Report 2018 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 8. Earnings per share (continued)
Basic earnings per share
Diluted earnings per share
Cents
Cents
4.20
3.96
(573.55)
(573.55)
At 30 June 2018, there were no (2017: 3,265,042) options over ordinary shares excluded from the calculation of the
weighted average number of ordinary shares used in calculating diluted earnings per share due to being anti-dilutive.
Note 9. Current assets - cash and cash equivalents
Cash at bank
Cash on deposit
Note 10. Current assets - trade and other receivables
Trade receivables
Other receivables
Consolidated
2018
$
2017
$
1,810,453
11,820,573
17,138,351
1,555,842
13,631,026
18,694,193
Consolidated
2018
$
2017
$
1,738,464
80,859
1,717,594
312,533
1,819,323
2,030,127
Past due but not impaired
Customers with balances past due but without provision for impairment of receivables amount to $34,464 as at 30 June
2018 ($16,320 as at 30 June 2017).
The Group did not consider a credit risk on the aggregate balances after reviewing the credit terms of customers based on
recent collection practices.
The ageing of the past due but not impaired receivables are as follows:
Consolidated
2018
$
2017
$
34,464
16,320
Consolidated
2018
$
2017
$
364,181
860,633
345,456
421,559
1,224,814
767,015
3 to 6 months overdue
Note 11. Current assets - inventories
Raw materials - at cost
Finished goods - at cost
37
44
Notes to the consolidated financial statementsfor the year ended 30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 12. Current assets - other assets
Prepayments
Deposits
Note 13. Non-current assets - property, plant and equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Furniture and fittings - at cost
Less: Accumulated depreciation
Computer and equipment - at cost
Less: Accumulated depreciation
Consolidated
2018
$
2017
$
170,448
105,799
140,940
105,406
276,247
246,346
Consolidated
2018
$
2017
$
192,291
(87,645)
104,646
76,864
(22,351)
54,513
175,711
(55,118)
120,593
67,385
(18,402)
48,983
1,039,273
(507,421)
531,852
607,872
(412,001)
195,871
691,011
365,447
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2016
Additions
Depreciation expense
Balance at 30 June 2017
Additions
Depreciation expense
Balance at 30 June 2018
Leasehold
improvements
$
Furniture and Computer and
fittings
$
equipment
$
Total
$
105,687
40,065
(25,159)
120,593
16,580
(32,527)
15,950
35,882
(2,849)
48,983
9,377
(3,847)
201,909
69,280
(75,318)
195,871
429,836
(93,855)
323,546
145,227
(103,326)
365,447
455,793
(130,229)
104,646
54,513
531,852
691,011
38
45
Audinate Annual Report 2018 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 14. Non-current assets - intangibles
Development costs
Less: Accumulated amortisation
Intellectual property
Less: Accumulated amortisation
Software - at cost
Consolidated
2018
$
2017
$
6,685,734
(3,171,819)
3,513,915
3,762,932
(1,860,206)
1,902,726
259,917
(65,875)
194,042
171,239
116,860
(18,836)
98,024
-
3,879,196
2,000,750
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2016
Additions*
Amortisation expense
Balance at 30 June 2017
Additions
Amortisation expense
Balance at 30 June 2018
Development
costs
$
Intellectual
property
$
Software
$
Total
$
1,265,022
1,604,529
(966,825)
1,902,726
2,922,802
(1,311,613)
3,846
113,014
(18,836)
98,024
105,933
(9,915)
-
-
-
1,268,868
1,717,543
(985,661)
-
171,239
-
2,000,750
3,199,974
(1,321,528)
3,513,915
194,042
171,239
3,879,196
*
Net of research and development incentive received for development activities.
Note 15. Current liabilities - trade and other payables
Trade payables
Accrued expenses
Other payables
Refer to note 19 for further information on financial instruments.
Consolidated
2018
$
2017
$
1,201,252
403,815
560,084
734,529
1,561,711
261,574
2,165,151
2,557,814
39
46
Notes to the consolidated financial statementsfor the year ended 30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 16. Equity - contributed capital
Fully paid ordinary shares
Consolidated
2018
Shares
2017
Shares
2018
$
2017
$
Ordinary shares - fully paid
60,936,358
59,513,513
63,287,617
63,261,592
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the
Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce
the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
The capital risk management policy remains unchanged from the 30 June 2017 financial statements.
40
47
Audinate Annual Report 2018 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 16. Equity - contributed capital (continued)
Movements in ordinary share capital
Details
Date
Shares
Issue price
$
1,549,303
5,000
$0.072
7,083
$0.124
29,392
360
878
45,000
$0.072
3,240
1,856,221
$0.072
133,648
3,462,607
$0.000
-
41,064,509
48,380
11,475,410
-
59,513,513
813,209
402,567
24,000
10,000
19,734
7,290
9,788
4,000
20,000
45,896
29,412
10,000
8,000
3,652
5,943
9,354
-
$1.220
$1.220
$1.220
$0.000
50,098,701
59,024
14,000,000
(1,063,651)
$0.260
$0.062
$0.260
$0.062
$0.062
$0.260
$0.062
$0.260
$0.062
$0.260
$0.062
$0.062
$0.260
$0.260
$0.036
$0.260
$0.000
63,261,592
5,824
7,805
6,240
620
620
1,895
607
1,040
1,240
11,933
1,824
620
2,080
950
214
-
(17,487)
63,287,617
Consolidated
2018
$
2017
$
(104,906)
626,441
(88,744)
391,310
521,535
302,566
29 November 2016
29 November 2016
01 July 2016
Balance
Issue of shares in Audinate Pty Ltd - exercise of
options
Issue of shares in Audinate Pty Ltd - exercise of
options
Issue of shares in Audinate Pty Ltd - exercise of
options
Issue of shares in Audinate Pty Ltd - exercise of
options
Conversion of shares on group reorganisation - two
shares in the Company for each existing share in
Audinate Pty Ltd
Issue of shares in the Company - conversion of
30 June 2017
convertible redeemable preference shares
Issue of shares in the Company - employee gift offer 30 June 2017
Issue of shares in the Company - IPO
30 June 2017
Share issue costs
30 June 2017
11 May 2017
2 June 2017
30 June 2017
Balance
Issue of shares in the Company - exercise of options 31 August 2017
Issue of shares in the Company - exercise of options 31 August 2017
Issue of shares in the Company - exercise of options 23 October 2017
Issue of shares in the Company - exercise of options 23 October 2017
Issue of shares in the Company - exercise of options 17 November 2017
Issue of shares in the Company - exercise of options 1 February 2018
Issue of shares in the Company - exercise of options 1 February 2018
Issue of shares in the Company - exercise of options 21 February 2018
Issue of shares in the Company - exercise of options 21 February 2018
Issue of shares in the Company - exercise of options 23 March 2018
Issue of shares in the Company - exercise of options 23 March 2018
Issue of shares in the Company - exercise of options 23 April 2018
Issue of shares in the Company - exercise of options 4 May 2018
Issue of shares in the Company - exercise of options 21 May 2018
Issue of shares in the Company - exercise of options 12 June 2018
Issue of shares in the Company - exercise of options 25 June 2018
Share issue costs
Balance
30 June 2018
60,936,358
The table above includes shares issued to employees under a cashless exercise election.
Note 17. Equity - reserves
Foreign currency reserve
Share-based payments reserve
41
48
Notes to the consolidated financial statementsfor the year ended 30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 17. Equity - reserves (continued)
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign
operations to Australian dollars.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their
remuneration, and other parties as part of their compensation for services.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2016
Foreign currency translation
Share-based payments
Balance at 30 June 2017
Foreign currency translation
Share-based payments
Balance at 30 June 2018
Note 18. Equity - dividends
Foreign
currency
$
Share-based
payments
$
15,211
(103,955)
-
(88,744)
(16,162)
-
228,461
-
162,849
391,310
-
235,131
Total
$
243,672
(103,955)
162,849
302,566
(16,162)
235,131
(104,906)
626,441
521,535
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 19. Financial instruments
Financial risk management objectives
The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and
interest rate risk), credit risk and liquidity risk. The Group's overall risk management program seeks to minimise potential
adverse effects on the financial performance of the Group.
The Group's policy is not to trade in or use financial instruments to hedge it's risks.
Risk management is carried out by the Board of Directors ('the Board'). The Board uses different methods to measure
different types of risks to which the Group is exposed. These methods include ageing analysis for credit risk and sensitivity
analysis in the case of interest rate risk.
Market risk
Foreign currency risk
The Group's US dollar denominated sales for the year ended 30 June 2018 was approximately US$15.2 million (2017:
US$11.2 million) on which the risk of foreign exchange movement was partially offset against exchange rate movement of
US dollar denominated for purchases of approximately US$8.5 million (2017: US$7.2 million).
Interest rate risk
At the reporting date, the Group had no variable rate borrowings. Cash at bank earns interest at floating rates based on
daily bank deposit rates.
42
49
Audinate Annual Report 2018 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 19. Financial instruments (continued)
As at the reporting date, the Group had the following variable rate cash and cash equivalents:
Consolidated
Cash at bank
Cash on deposit
2018
2017
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$
Balance
$
-
1.90%
1,810,453
11,820,573
-
2.50%
17,138,351
1,555,842
Net exposure to cash flow interest rate risk
13,631,026
18,694,193
No sensitivity analysis has been performed for the exposure to interest rate risk on the Group's bank balance as the
exposure is not significant.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group.
The Group trades only with recognised and creditworthy independent third parties. The Group has a strict code of credit,
including obtaining agency credit information, confirming references and setting appropriate credit limits. The Group
monitors the receivables on an ongoing basis and its exposure to bad debts is not significant.
There is no significant concentration of credit risk as the Group’s trade receivables are spread over a number of diversified
customers. The Group does not hold any collateral or other credit enhancements over these balances.
The Group's bank balance are deposited with creditworthy banks with no recent history of default.
The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any
provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial
statements.
Liquidity risk
Prudent liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash
equivalents) to be able to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual and forecast
cash flows and matching the maturity profiles of financial assets and liabilities.
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
financial liabilities are required to be paid.
Consolidated - 2018
Non-interest bearing
Trade payables
Other payables
Accrued expenses
Total non-derivatives
Weighted
average
interest rate 1 year or less
%
$
Between 1
and 2 years
$
Between 2
and 5 years Over 5 years
$
$
Remaining
contractual
maturities
$
-
-
-
1,201,252
560,084
403,815
2,165,151
-
-
-
-
-
-
-
-
-
-
-
-
1,201,252
560,084
403,815
2,165,151
43
50
Notes to the consolidated financial statementsfor the year ended 30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 19. Financial instruments (continued)
Consolidated - 2017
Non-interest bearing
Trade payables
Other payables
Accrued expenses
Payable to selling shareholders
Total non-derivatives
Weighted
average
interest rate 1 year or less
%
$
Between 1
and 2 years
$
Between 2
and 5 years Over 5 years
$
$
Remaining
contractual
maturities
$
-
-
-
-
734,529
261,574
1,561,711
7,029,899
9,587,713
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
734,529
261,574
1,561,711
7,029,899
9,587,713
The cash flows in the maturity analysis above are not expected to occur earlier than contractually disclosed above.
Note 20. Fair value measurement
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair
values due to their short-term nature.
Note 21. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by Deloitte Touche Tohmatsu, the
auditor of the Company:
Audit services - Deloitte Touche Tohmatsu
Audit or review of the financial statements
Other services - Deloitte Touche Tohmatsu
Investigating accountant services
Additional accounting and tax advice
Note 22. Contingent liabilities
The Group had no contingent liabilities at 30 June 2018 and 30 June 2017.
Consolidated
2018
$
2017
$
100,000
100,000
-
-
-
235,000
120,000
355,000
100,000
455,000
44
51
Audinate Annual Report 2018 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 23. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2018
$
2017
$
385,314
742,098
368,539
1,126,145
1,127,412
1,494,684
Operating lease commitments includes contracted amounts for offices. The leases have various escalation clauses. On
renewal, the terms of the leases may be renegotiated. Refer to note 2 for details on the impact of AASB 16 'Leases' which
applies to the Group from 1 July 2019.
Note 24. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set out
below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Note 25. Related party transactions
Parent entity
Audinate Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 26.
Consolidated
2018
$
2017
$
1,537,944
64,550
117,368
1,058,746
29,926
84,341
1,719,862
1,173,013
Key management personnel
Disclosures relating to key management personnel are set out in note 24 and the remuneration report included in the
directors' report.
Transactions with related parties
There were no transactions with related parties during the current and previous financial year.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from related parties
As described in the directors' report, Audinate Pty Limited offered employees interest bearing, non-recourse loans in order
to fund the exercise of options prior to the IPO. The total value of the loans outstanding at 30 June 2018 was $90,738
(2017: $117,953), inclusive of a loan outstanding to Aidan Williams of $38,731 (2017: $36,613).
There were no other loans to or from related parties at the current and previous reporting date.
45
52
Notes to the consolidated financial statementsfor the year ended 30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 25. Related party transactions (continued)
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 26. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 2:
Name
Audinate Pty Limited
Audinate, Inc.
Audinate Limited
Audinate Limited
Audinate Holdings Limited
Principal place of business /
Country of incorporation
Australia
United States of America
United Kingdom
Hong Kong
Australia
Note 27. Reconciliation of profit/(loss) after income tax to net cash from operating activities
Ownership interest
2017
2018
%
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Consolidated
2018
$
2017
$
Profit/(loss) after income tax (expense)/benefit for the year
2,544,339
(20,443,388)
Adjustments for:
Depreciation and amortisation
Fair value on redeemable preference shares
Share-based payments
Employee gift shares
Change in operating assets and liabilities:
Decrease in trade and other receivables
Increase in inventories
Increase in deferred tax assets
Increase in current tax asset
Increase in other operating assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in other operating liabilities
Net cash from operating activities
Note 28. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(loss) after income tax
Total comprehensive income
46
1,451,757
-
235,131
-
1,088,987
18,547,790
162,849
59,024
210,804
(457,799)
(1,874,195)
(442,093)
(29,901)
(434,153)
(167,494)
51,490
(345,962)
-
(298,065)
(46,880)
1,393,838
1,070,675
1,036,396
1,240,358
Parent
2018
$
2017
$
1,344,029
(1,694,328)
1,344,029
(1,694,328)
53
Audinate Annual Report 2018 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 28. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed capital
Accumulated losses
Total equity
Parent
2018
$
2017
$
15,370,125
21,029,899
73,976,610
79,636,384
2,757,979
9,787,878
2,757,979
9,787,878
71,568,930
(350,299)
71,542,834
(1,694,328)
71,218,631
69,848,506
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2018 and 30 June 2017.
Parent entity information
The information presented for the current period is from 1 July 2017 to 30 June 2018 and the comparative information is
presented from the date of incorporation of the Company on 19 April 2017 to 30 June 2017.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2018 and 30 June 2017.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2018 and 30 June 2017.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the
following:
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an
indicator of an impairment of the investment.
Note 29. Share-based payments
Options
Under the Employee Share Option Plan ('ESOP'), the Company’s Board of Directors ('Board'), or a committee of the Board,
may grant incentive and non-qualified stock options to employees, officers, directors, consultants, independent contractors,
and advisors to the Company, or to any parent, subsidiary, or affiliate of the Company. The purpose of the ESOP is to
attract, retain, and motivate eligible persons whose present and potential contributions are important to the Group’s
success by offering them an opportunity to participate in the Company’s future performance through equity awards of stock
options and stock bonuses.
47
54
Notes to the consolidated financial statementsfor the year ended 30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 29. Share-based payments (continued)
Set out below are summaries of options granted under the plan:
2018
Start date
End date
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
23/11/2018
17/10/2019
09/12/2019
09/01/2020
21/08/2020
09/12/2020
11/06/2022
23/08/2022
31/01/2023
03/04/2023
Exercise
price
Balance at
the start of
the year
Granted
Exercised
$0.036
$0.062
$0.062
$0.062
$0.062
$0.062
$0.260
$0.260
$0.260
$0.260
36,000
913,042
40,000
10,000
58,000
460,000
188,000
740,000
770,000
50,000
-
3,265,042
-
-
-
-
-
-
-
-
-
-
-
-
(6,000)
(465,000)
(30,000)
-
(16,000)
-
(30,000)
(231,200)
(722,000)
(50,000)
127,355
(1,422,845)
Expired/
forfeited/
other*
Balance at
the end of
the year
-
-
-
-
-
-
-
-
-
-
(127,355)
(127,355)
30,000
448,042
10,000
10,000
42,000
460,000
158,000
508,800
48,000
-
-
1,714,842
*
Other includes the impact of cashless exercise
2017
Start date
End date
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
23/11/2018
17/10/2019
09/12/2019
09/01/2020
21/08/2020
09/12/2020
11/06/2022
23/08/2022
31/01/2023
03/04/2023
Exercise
price
Balance at
the start of
the year
Granted*
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
$0.036
$0.062
$0.062
$0.062
$0.062
$0.062
$0.260
$0.260
$0.260
$0.260
-
-
-
-
-
-
-
-
-
-
-
36,000
913,042
40,000
10,000
58,000
460,000
188,000
740,000
770,000
50,000
3,265,042
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,000
913,042
40,000
10,000
58,000
460,000
188,000
740,000
770,000
50,000
3,265,042
*
The options over shares in Audinate Pty Ltd were cancelled in exchange for options in the Company under the
restructure.
1,714,842 options were exercisable at the end of the financial year (2017: 3,265,042).
The weighted average share price during the financial year was $2.95 (2017: $1.50).
Share Rights
Set out below are summaries of performance rights granted:
2018
Grant date
Expiry date
30/06/2017
02/08/2017
29/06/2018
30/06/2022
15/09/2019
30/06/2022
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
$0.000
$0.000
$0.000
1,038,509
-
-
1,038,509
-
1,995,000
34,566
2,029,566
-
-
-
-
-
-
-
-
1,038,509
1,995,000
34,566
3,068,075
48
55
Audinate Annual Report 2018 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2018
Note 29. Share-based payments (continued)
2017
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
30/06/2017
30/06/2022
$0.000
-
-
1,038,509
1,038,509
-
-
-
-
1,038,509
1,038,509
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 3
years (2017: 4).
The performance rights issued on 29 June 2018 were valued based on a share price of $1.22, an exercise price of zero,
volatility of 51%, a risk-free interest rate of 2.63% and probability weighting reflecting the probability of meeting the vesting
conditions. The fair value of the share rights based on these inputs is $0.81.
Apart from the performance rights expiring in 2019, the remaining performance rights vest in three tranches after the
release of the annual results in 2020, 2021 and 2022.
Performance rights commence vesting upon achieving total shareholder return equal to the 50th percentile of the ASX
Emerging Companies Index and vest fully at the 75th percentile.
Note 30. Events after the reporting period
No matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect the
Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
49
56
Notes to the consolidated financial statementsfor the year ended 30 June 2018| Audinate Annual Report 2018
Audinate Group Limited
Directors' declaration
30 June 2018
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Accounting Standards and other mandatory professional
reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June
2018 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
On behalf of the directors
___________________________
David Krall
Chairman
27 August 2018
Sydney
50
57
Directors’ declarationfor the year ended 30 June 2018Audinate Annual Report 2018 |
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney, NSW, 2000
Australia
Phone: +61 2 9322 7000
www.deloitte.com.au
Independent Auditor’s Report to the members of
Audinate Group Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Audinate Group Limited (the “Company”) and its subsidiaries (the
“Group”) which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated
statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity
and the consolidated statement of cash flows for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies and other explanatory information, and the directors’
declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial
performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the
Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given
to the directors of the Company, would be in the same terms if given to the directors as at the time of this
auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial report for the current period. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
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Independent auditor’s report| Audinate Annual Report 2018
Key Audit Matter
Tax consolidation
As at 30 June 2018 the Group has recognised
Deferred tax assets to the value of $1.874 million
as disclosed in Note 7.
Significant judgement is required by management
due to:
•
A new tax consolidated group was formed on 1
July 2017. Upon joining the tax consolidated
group, for tax purpose, the value of the assets
held by Audinate Pty Ltd were reset and an
Allocable Cost Amount “ACA” calculation was
required; and
Assessment of the recoverability of the
significant
deferred
management
the
generating of future taxable income.
tax asset
judgement
regarding
requires
•
How the scope of our audit responded to the
Key Audit Matter
Our audit procedures included, but were not limited
to:
Understanding the process that management
undertakes to develop the forecast model and
evaluating whether the forecasts had been
appropriately adjusted
the differences
between accounting profits and taxable profits;
Comparing forecasts to Board approved business
for
plans;
Assessing historical forecasting accuracy by
comparing actual performance to budgets;
Testing on a sample basis management’s model
for mathematical
future taxable profit
for
accuracy;
Evaluating the recoverability of deferred tax
assets;
Recalculating deferred tax asset balances which
comprise a combination of timing differences
between tax and accounting values.
Reviewing management’s valuations of the reset
assets;
Reviewing management’s assessment
for
adoption of the relevant accounting standards;
Engaging the use of our Deloitte Tax and
Corporate Finance experts to assist with:
o Reviewing the ACA calculation;
o Reviewing of the tax calculation;
o Reviewing the external valuation supporting
the value of the software and patents;
We also assessed the appropriateness of the
disclosures in Note 7 to the financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Directors’ Report and ASX Additional Information, which we obtained prior to the date of this
auditor’s report, the other information also includes the annual report (but does not include the financial report
and our auditor’s report thereon) which is expected to be made available to us after that date.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we
have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
When we read the annual report, if we conclude that there is a material misstatement therein, we are required
to communicate the matter to the directors and use our professional judgement to determine the appropriate
action.
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Audinate Annual Report 2018 |
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial report or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are responsible
for the direction, supervision and performance of the Group’s audit. We remain solely responsible for
our audit opinion.
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Independent auditor’s report| Audinate Annual Report 2018
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included on pages 15 to 23 of the Directors’ Report for the
year ended 30 June 2018.
In our opinion, the Remuneration Report of Audinate Group Limited, for the year ended 30 June 2018, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on
the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
Joshua Tanchel
Partner
Chartered Accountants
Sydney, 27 August 2018
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61
Audinate Annual Report 2018 | SHAREHOLDER INFORMATION AS AT 14 SEPTEMBER 2018
Shareholder Information required by the Australian Securities Exchange Limited (ASX) Listing Rules and not disclosed elsewhere in
the Report is set out below.
Substantial shareholders
The number of securities held by substantial shareholders and their associates, as advised to the Company and ASX, are set
out below:
Name
Yamaha Corporation
Date of
Notice
Number of
Securities
%
10/07/2017
6,289,308
10.57
Smallco Investment Manager Limited
31/08/2018
5,675,902
Telstra Super Pty Ltd as trustee for Telstra Superannuation Scheme (Telstra Super)
22/06/2018
3,674,178
Australian Super Pty Ltd
06/03/2018
3,508,463
9.31
5.82
5.77
Number of security holders and securities on issue
Audinate Group Limited has issued the following securities:
a. 60,936,358 fully paid ordinary shares held by 2,929 shareholders;
b. 1,714,842 unlisted options held by 34 option holders; and
c. 3,068,075 unlisted performance rights held by 24 performance right holders.
Voting rights
The voting rights attached to ordinary shares are that on a show of hands, every member present, in person or proxy, has one vote
and upon a poll, each share shall have one vote for each share held.
Option holders and performance right holders do not have any voting rights on the options and rights held by them.
Distribution of security holders
Fully Paid Ordinary shares
Holders
Shares
1,130
644,315
1,179
2,957,857
349
233
2,674,738
5,998,351
34
44,719,651
%
1.13
5.19
4.69
10.53
78.46
2,925
56,994,912
100.00
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
62
Shareholder information| Audinate Annual Report 2018 Unmarketable parcel of shares
The number of shareholders holding less than a marketable parcel of ordinary shares is 43 based on Audinate Group Limited’s
closing share price of $3.70, on 14 September 2018.
Twenty largest shareholders of quoted equity securities
Details of the 20 largest shareholders of quoted securities by registered shareholding are:
No. Name
1
2
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
3.
Yamaha Corporation
4
5
6
7
8
9
National Nominees Limited
Citicorp Nominees Pty Limited
Aidan Michael Williams
UBS Nominees Pty Ltd
Geetha Varuni Witana
HSBC Custody Nominees (Australia) Limited - A/C 2
10 BNP Paribas Noms Pty Ltd
11 BCCR Minnamurra Pty Ltd
12 Mr Chris Ware
13
ITR Investments Pty Limited
14 Brispot Nominees Pty Ltd
15 CS Fourth Nominees Pty Limited
16 RJWX3 Family Superannuation Managers Pty Ltd
17 Washington H Soul Pattinson And Company Limited
18 Dunecove Pty Limited
19 CS Third Nominees Pty Limited
20
Fabemu No 2 Pty Ltd
Total
Total on Register
No. of shares
%
17,328,575
30.40
5,590,336
4,098,361
3,036,624
2,950,661
1,713,544
956,187
944,882
696,361
681,241
604,408
569,846
463,640
434,751
430,376
409,837
395,000
295,673
264,791
204,919
9.81
7.19
5.33
5.18
3.01
1.68
1.66
1.22
1.20
1.06
1.00
0.81
0.76
0.76
0.72
0.69
0.52
0.46
0.36
42,070,013
73.82
56,994,912
100.00
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Audinate Annual Report 2018 | Restricted securities and securities subject to voluntary escrow
There are currently 3,941,446 unquoted restricted ordinary shares.
Unquoted Securities
There are 1,726,108 unquoted options with varying exercise prices and expiry dates held by 34 options holders. All options are held
under the Company’s employee incentive scheme.
There are 3,068,075 unquoted Performance Rights held by 24 performance right holders. All Performance Rights are held under the
Company’s employee incentive scheme.
There are 3,941,446 unquoted restricted fully paid ordinary securities held by 4 holders. 2,190,947 restricted shares, representing
55.59% are held by Yamaha Corporation and 1,456,451 restricted shares, representing 36.95% are held by Mr David John Myers.
On market buy-back
There is no current on market buy-back.
Statement regarding use of cash and assets
During the period since being admitted on the official list of the ASX and 30 June 2018 Audinate Group Limited has used its cash
and assets readily convertible to cash that it had at the time of ASX admission in a way consistent with its business objectives set
out in the prospectus dated 13 June 2017.
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Shareholder information| Audinate Annual Report 2018 Audinate Annual Report 2018 | www.audinate.com