Annual Report
2019
| Audinate Annual Report 2019 Global leader in digital media
networking, distributing top
quality digital audio and
video signals over computer
networks
Contents
FY19 financials
Chairman’s letter
CEO’s letter
Financial report 2019
2
4
5
9
11 Corporate directory
12 Directors’ report
29 Auditor’s independence declaration
30
Consolidated statement of profit or loss
and other comprehensive income
31 Consolidated statement of financial position
32 Consolidated statement of changes in equity
33 Consolidated statement of cash flows
34 Notes to the consolidated financial statements
61 Directors’ declaration
62
66 Shareholder information
Independent auditor’s report
1
Audinate Annual Report 2019 | Revenue
Operating cashflow
A$28.3m44% growth
A$3.6m
Increased from A$1.0m
EBITDA
Capital raised
A$2.8m
Increased from A$0.6m
A$24.0m
via placement & SPP
Growing network effect
Number of Dante-enabled products drives economic network effect
2,134
1,751
1,639
1,292
1,182
57%
CAGR in Dante
ecosystem of
products
874
973
681
553
348
223
2H14
1H15
2H15
1H16
2H16
1H17
2H17
1H18
2H18
1H19
2H19
Note: per financial half-year
2
| Audinate Annual Report 2019FY19 financials • 29% growth in Dante
units* shipped annually
• 22% increase in OEMs
shipping Dante product
• 2,134 Dante-enabled
products on the market
• 3 video & software
products launched
* Chips, cards, modules & software
3
Audinate Annual Report 2019 | 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 2019 (FY19). It was another very good year
for Audinate as the business exceeded its financial goals and
delivered on strategic product initiatives which are important in
continuing to build our platform for future growth.
The Group also implemented a staff equity plan during the year
to provide access to equity, in the form of shares or performance
rights, to all employees. We see this as critical in promoting a
genuine sense of ownership and strong alignment between staff
and shareholders. These initiatives contributed to a significant
boost to our employee engagement score during the year.
In FY19 we made our first step into the video market, with the
launch of our Dante AV products at the InfoComm tradeshow in
June 2019. I was fortunate enough to be at the tradeshow and
witness first-hand the level of interest and excitement from our
customers about the potential for Dante AV. Critically, this more
than doubles the total addressable market of our existing audio
networking business. Securing design wins for these products in
FY20 is a key objective to build a pipeline for additional revenue
growth in FY21 and beyond.
During the year we also went through a process to re-evaluate
our vision and values. This was an invaluable exercise for
the Group that re-affirmed our current strategic direction but
also led to a broader articulation of what we are about as an
organisation. As Audinate continues to grow, it is important
to preserve the elements of the culture that have made us
successful and codify the expectations of everyone who works
here. Our new vision statement “Audinate: Pioneering the future
of AV” encapsulates both the innovative heritage of the business
and the aspiration that continues to drive us every day.
Lee Ellison has recently retired as CEO and Director after nearly
eleven years with the company and it is therefore timely to
reflect on Audinate’s achievements under his leadership. When
Lee joined Audinate, it was a fledgling Australian technology
company with high aspirations but only a handful of customers.
Today we have more than 450 customers, over 2,100 Dante
enabled products on the market, and a global presence in seven
countries. Lee has done an outstanding job in achieving all this
and building a strong team to continue to propel the business
into its next phase of growth. We wish him well in his retirement
and thank him for the many years of dedication, drive, and
enthusiasm he has given to Audinate.
We are also in the fortunate position of having Aidan Williams,
co-founder and previously Chief Technology Officer, to succeed
Lee as our next Chief Executive Officer. As co-founder, Aidan
has been responsible for driving the Dante product vision and
strategy from the very inception of the business to what it is
today. The Board went through a rigorous process to consider
successors, which validated our view that our internal candidate
was the best choice for our next CEO. Whilst much has been
achieved so far in Audinate’s history, we are still relatively early in
our journey to transform the AV industry, and I am confident that
Aidan is the right person to lead us through this next chapter. I
am also reassured by the presence of a strong and experienced
leadership team that he inherited from Lee and which will be a
critical component of our ongoing success.
In June and July of 2019 the company raised $24m of
additional capital. I would like to thank all the institutional and
retail shareholders who participated in the private placement
and associated share purchase plan. We were genuinely
overwhelmed by the level of interest in the capital raise and
humbled by this support. Audinate will continue to judiciously
deploy this capital to enable the software transformation of the
AV industry.
On behalf of the Board of Directors of Audinate, we also wish
to express our sincere thanks to all the employees at Audinate.
Your passion, drive and teamwork are an essential part of our
great results in FY19 and critical to our ongoing success.
DAVID KRALL
Chairman
4
| Audinate Annual Report 2019Chairman’s letter FY19 was another exciting year for Audinate as the consistent,
reliable execution of our long-term strategy resulted in us
achieving all of the financial and operational goals we set for
the business at the beginning of the year. The AV industry is
still relatively early in its conversion from analogue to digital
networking and we are pleased with our ongoing delivery of a
broader suite of products and services to enable and accelerate
this transformation.
Financial results
The company delivered 33.6% US$ revenue growth from
US$15.2 million in FY18 to US$20.3 million in the current year.
The strengthening of the USD, the currency in which we bill our
customers, meant that revenue in Australian dollars increased
44.1% to $28.3 million.
Dollar amounts referenced from this point onwards are
exclusively Australian dollars.
The strong growth in revenue underpinned a 249% increase in
EBITDA to $2.8 million as the operating leverage in our business
model was evident from the amount of growth in gross profit
that flowed through to earnings.
Similarly, operating cashflows grew strongly to $3.6 million in
FY19 compared to $1.0 million in the prior year.
Ongoing growth in the gross margin of our core audio
networking business continues to be used to fund new product
initiatives, which is evident in our research and development
spend growing to $6.7 million in FY19. The majority of this
spend related to Dante AV and new software products, which
are explained in greater detail later in this report.
Audinate strengthened its balance sheet with the successful
completion of an over-subscribed institutional placement of $20
million on 6 June 2019. A further $4 million was raised via an
associated share purchase plan which completed on 10 July
2019. We are grateful for this significant show of support from
our shareholders and excited about the ability this provides us to
accelerate our product roadmap and growth initiatives.
Operational results
The revenue of our core audio networking business has three
main drivers and we delivered good improvement across all the
relevant metrics in FY19.
Our research shows that one of the biggest obstacles to the
adoption of our Dante technology is training. In response we
developed an extensive suite of Dante certification courses that
are available to professionals in the AV industry to take face-to-
face or online. We launched these training courses about three
years ago and have trained more than 60,000 people on the
benefits Dante and digital audio networking by the end of FY19.
Our research also shows that post training most professionals
buy more Dante enabled products, which in turn stimulates
Original Equipment Manufacturers’ (‘OEM’) production and
purchases of our technology in physical or software form.
5
Audinate Annual Report 2019 |CEO’s report Another critical revenue driver relates to our penetration within
existing OEM customers and it is generally the case that the
more Dante enabled products they have the more revenue we
make. During FY19 the total number of Dante enabled products
grew 30% to 2,134 products, which is more than six times
greater than our nearest competitor. Even more pleasing was that
the average number of products per OEM is now approaching
8 products, up from just over 7 products a year ago.
The number of Dante enabled products is a measure of the
size of the Dante ecosystem and the larger this ecosystem
becomes the stronger the economic network effect. For OEMs
the Dante ecosystem becomes more attractive based on the
growth in the number of other products they can connect to.
Whilst for end-users the ecosystem is more attractive based
not just on the number of Dante enabled products, but also
based on the breadth of products available and the multitude
of brand choices.
The other significant revenue driver for the business is
the number of OEMs adopting Dante. During the year the
number of OEMs with Dante enabled products available grew
22% to 270 customers at the end of FY19. There are a further
170 OEM customers currently in the process of developing their
first Dante enabled products and we would typically expect
most of these customers to come to market with products
over the next two years.
Product developments
During FY19, Audinate also made its entry into the video market
with the release of its Dante AV module and the introduction
of the Dante AV Product Design Suite in June 2019. The AV
module sales model is similar to our existing audio networking
business which means that design wins with OEMs over the
course of FY20 are important to build a pipeline of Dante
enabled products available for shipping by FY21 and beyond.
The Dante AV Product Design Suite is a product for our OEM
customers and represents a complete, ready to manufacture
product design. We expect to deliver this product to our OEMs
by December 2019. It is envisaged this will shorten time to
market for Dante AV products and provide a more economical
alternative to internal product development for some OEMs.
At the InfoComm tradeshow in June 2019 Audinate released
two new software products. One of these products was the
Dante Application Library™ (DAL) which allows software
developers to seamlessly integrate Dante functionality directly
into their PC & Mac applications. Zoom Video Communications
Inc, a leader in video-first unified communications, has teamed
up with Audinate to integrate the Dante Application Library
into its Zoom Room application for video meetings. Zoom was
announced as the initial customer for DAL and commercial
launch of the new enhancement is anticipated to be in late 2019.
6
CEO’s report continued| Audinate Annual Report 2019 This product is strategically important for Audinate as it
represents a way to connect a rapidly growing number of
software applications with in-room sound reinforcement,
such as Dante enabled speakers and microphones.
The other product released was the Dante Embedded
Platform™(DEP). DEP enables manufacturers to implement
Dante in software running on Linux for Intel and ARM
processors. QSC is the first DEP customer to deploy the
product within the Q-SYS line of digital signal processors and
is expected to be rolled out by the end of calendar year 2019.
This product is also strategically important for the Group as
it enables customers to add Dante support to third party
AV products already in the field and the potential for system
integrators and end-users to add new features and more
Dante channels to products, as their systems grow and change.
Software based implementations also allow OEM customers
to save on their overall COGs component of adding Dante to
their products whilst still providing similar gross profit dollars
to Audinate.
Other matters
In August 2019 we moved into our new Sydney Head Office
in Surry Hills after we outgrew our old premises in Ultimo. We
expect that the new purpose-built fit-out will support our agile
and flexible work practices through the next phase of growth.
More broadly Audinate has significantly extended its global
footprint with expansion to Germany, China and Japan since
June 2018. Having dedicated employees in these key markets
is important to drive the adoption of Dante in a way which is
localised to the customs and practices of each of these different
countries. In FY20 we will also be focused upon delivering Dante
in different languages to help further penetrate non-English
speaking markets.
Outlook
We anticipate that USD revenue growth will continue in a range
consistent with long-term historic performance. Economic
conditions and US tariffs may impact the near-term results,
but this will not impact on the Company’s focus to grow
long-term shareholder value. Audinate is well placed to drive
innovation throughout the AV industry. Our business is well
capitalised and has the foundations in place to accelerate our
product development and support the software transition of the
AV industry.
LEE ELLISON
Chief Executive Officer
AIDAN WILLIAMS
Chief Executive Officer
7
Audinate Annual Report 2019 | Thank you from retiring CEO
I am grateful to have been given the opportunity to guide Audinate over the last 11 years. We started with only a few customers,
and now Audinate has become the de-facto standard for audio networking for the Professional AV industry. It has been a
privilege to work alongside such a dedicated and exceptional team at Audinate.
Upon my retirement, Aidan Williams, our co-founder and successor as CEO, takes over the helm. Aidan has been leading the
company’s strategic development over the years and together we have expanded and strengthened the executive leadership
team. I am comforted in my decision to enter retirement knowing that Audinate is in a very good place to continue to achieve our
vision to Pioneer the Future of AV.
I would like to thank our shareholders for your continuing support, and above all for your trust in Audinate.
LEE ELLISON
Chief Executive Officer
8
CEO’s report continued| Audinate Annual Report 2019 9
Audinate Annual Report 2019 |Financial report 2019 Contents
11 Corporate directory
12 Directors’ report
29 Auditor’s independence declaration
30 Consolidated statement of profit or loss and other comprehensive income
31 Consolidated statement of financial position
32 Consolidated statement of changes in equity
33 Consolidated statement of cash flows
34 Notes to the consolidated financial statements
61 Directors’ declaration
62
66 Shareholder information
Independent auditor’s report to the members of Audinate Group Limited
10
| Audinate Annual Report 2019Contents Audinate Group Limited
Corporate directory
30 June 2019
Directors
David Krall
Lee Ellison
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
Company secretary
Rob Goss
Notice of annual general meeting
The details of the annual general meeting of Audinate Group Limited are:
Rydges Sydney Central
28 Albion Street
Surry Hills NSW 2010
11 a.m. on Thursday 24 October 2019
Registered office
Share register
Auditor
Solicitors
Level 7
64 Kippax Street
Surry Hills NSW 2010
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 directors and management are committed to conducting the business of Audinate
Group Limited in an ethical manner and in accordance with the highest standards of
corporate governance. Audinate Group Limited has adopted and has substantially
complied with the ASX Corporate Governance Principles and Recommendations
(Third Edition) ('Recommendations') to the extent appropriate to the size and nature
of its operations.
The Corporate Governance Statement, which sets out the corporate governance
practices that were in operation during the financial year and identifies and explains
any Recommendations that have not been followed, which is approved at the same
time as the Annual Report can be found at:
https://www.audinate.com/company/governance
2
11
Audinate Annual Report 2019 |Corporate directory
Audinate Group Limited
Directors' report
30 June 2019
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 2019.
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 high-quality digital audio and video 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
For the year ended 30 June 2019, the Group reported an increase in revenue of 44.1% to $28.3 million from $19.7 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 33.6% to US$20.3 million in 2019 from US$15.2 million in the prior year.
The directors consider Earnings Before Interest, Tax, Depreciation and Amortisation ('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 after income tax expense for the year
Interest revenue
Other (income)/expense
Income tax benefit
Depreciation and amortisation
EBITDA
Consolidated
2019
$'000
2018
$'000
662
(192)
(104)
(20)
2,419
2,765
2,544
(227)
70
(3,280)
1,452
559
The Group has grown the number of OEM customers shipping Dante enabled products to 270 OEMs at 30 June 2019, up
from 222 at 30 June 2018. 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 or cards or royalties. Dante enabled OEM
products available for sale increased to 2,134 products, up 30% from 1,639 at the end of June 2018. Sales units of the
volume of chips, modules and cards, shipped in 2019 increased to 352,000, a 41.9% increase over the prior year. Audinate
revenue from software includes royalties, consumer software and Dante Domain Manager.
Operating expenses, which consist of employee benefit expenses, marketing expenses and administration and other
operating expenses increased by approximately 30.0% to $18.3 million in 2019 from $14.1 million in the prior year. This
increase was primarily due to additional headcount and the impact of two years of staff equity grant expense in the current
year. EBITDA was $2.8 million in 2019 compared to $0.6m in 2018.
In the prior year the Group entered into a tax consolidated group and the impact of this decision was recorded as an
income tax benefit amounting to approximately $2.4 million.
12
3
| Audinate Annual Report 2019Directors’ report30 June 2019
Audinate Group Limited
Directors' report
30 June 2019
The Group recorded a profit after tax of $0.7 million for the year ended 30 June 2019 compared to $2.5 million for the prior
year, which included the one-off $2.4m non-cash tax impact described above.
Significant changes in the state of affairs
The Group completed a $20 million institutional placement on 5 June 2019 and the use of these proceeds is covered in this
report under 'Likely developments and expected results of operations'.
As previously announced, Lee Ellison will retire as CEO and director of the Group on 13 September 2019 and be replaced
in both roles by co-founder Aidan Williams.
There were no other significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
The Group completed a Share Purchase Plan on 10 July 2019 which raised $4,000,003 of cash and resulted in the issue of
571,429 ordinary shares on this date.
No other matter or circumstance has arisen since 30 June 2019 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:
●
●
continue to grow the OEMs adopting Dante;
increase the adoption of Dante across a customer’s product portfolio to expand the ecosystem of available Dante
enabled products;
drive other market participants’ adoption of Dante by working with consultants, integrators, and customers to create a
“network effect” as the adoption of Dante in partner products expands; and
deliver new products and services to both OEMs and end-users.
●
●
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 on the sale of Dante AV products for incorporation into OEM’s video
products. The first step in this process is getting product designs agreed with OEM's for them to adopt Dante AV
technology and bring them to market.
The proceeds from the capital raise completed at the end of FY 2019 will allow the Group to:
●
●
●
●
expand global sales penetration;
accelerate recent product initiatives;
develop the next generation Dante platform; and
provide additional balance sheet strength and flexibility to support growth.
This additional capital positions Audinate well to pursue new opportunities from the video market and to support the
growing demand for software based Dante implementations for both audio and video products.
Environmental regulation
The Group is not directly subject to any significant environmental regulation under Australian Commonwealth or State law.
4
13
Audinate Annual Report 2019 |
Audinate Group Limited
Directors' report
30 June 2019
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 Roku
Inc. 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); Director of Universal Audio; and, Chairman of WeVideo Inc.
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 the 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:
2,368,410 performance rights over ordinary shares
Interests in rights:
14
5
| Audinate Annual Report 2019Directors’ report30 June 2019
Audinate Group Limited
Directors' report
30 June 2019
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., Echoview Pty Ltd., Nitro Software Pty Ltd,
Akatana 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 industries for Schroders, Nomura Securities, KPMG and
ANZ McCaughan.
None
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Member of the Remuneration and Nomination Committee and Audit and Risk
Management Committee
184,429 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 currently the Chairman and Chief Executive Officer of Windlab Limited, a
wind energy company. Previously Roger was also a partner at Innovation Capital, a
venture capital firm in Sydney, one of the early investors in the Group. 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
71,156 ordinary shares
None
None
6
15
Audinate Annual Report 2019 |
Audinate Group Limited
Directors' report
30 June 2019
Name:
Title:
Qualifications:
Experience and expertise:
Alison Ledger
Non-Executive Director
Alison has a Master of Business Administration from Harvard University and a
Bachelor of Arts degree in Economics from Boston College. She is a graduate and
member of the Australian Institute of Company Directors.
Alison is a company director with significant experience in banking, consulting and
corporate P&L roles. She is currently a Non-Executive Director of private equity
owned Latitude Financial Services, its subsidiary Hallmark Insurance and ASX listed
Countplus. As a Partner with Mckinsey & Company, Alison advised leading global
and Australian financial institutions on strategy, performance improvement and
organisational change. While Executive General Manager, Product, Pricing and
eBusinesses at Insurance Australia Group (IAG), Alison led the digital transformation
of the direct insurance business.
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
1,500 ordinary shares
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, investor relations and human
resources. He 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.
16
7
| Audinate Annual Report 2019Directors’ report30 June 2019
Audinate Group Limited
Directors' report
30 June 2019
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') held during the year ended 30 June 2019, 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
14
14
13
12
14
12
14
14
14
14
14
14
2
-
2
-
2
-
2
-
2
-
2
-
-
-
2
2
-
2
-
-
2
2
-
2
Held: represents the number of meetings held during the time the director held office.
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 ('KMP') 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:
●
●
●
●
●
●
●
Philosophy and governance
Remuneration framework and structure
Remuneration details
Executive KMP contract details
Share-based compensation
Additional information
Additional disclosures relating to key management personnel
Philosophy and governance
Remuneration philosophy
The Company's objective is to provide the maximum benefit to the shareholders while ensuring the long-term sustainability
of the business. To achieve this the Company must attract, motivate and retain highly skilled directors and executives, and
remunerate them fairly and appropriately. The Board of Directors ('the Board') has adopted a remuneration framework
based on the following principles:
●
●
●
●
Competitiveness and reasonableness;
Linkage between executive rewards and shareholder value;
Establishment of appropriately demanding performance hurdles for variable executive rewards; and
Transparency.
In accordance with best practice corporate governance, the structure of Non-Executive Director and executive
remuneration is separate and distinct.
Remuneration governance
The Board has overall responsibility for the Group’s remuneration principles, practices, strategy and approach to ensure
they support the Company’s business strategy and are appropriate for a listed Company given the size and nature of
Audinate’s business.
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. This Committee currently comprises three independent non-executive directors and the CEO and other
directors attend at the invitation of the Committee Chair.
8
17
Audinate Annual Report 2019 |
Audinate Group Limited
Directors' report
30 June 2019
The Remuneration and Nomination Committee establishes, amends and reviews the compensation and equity incentive
plans with respect to the Executive Leadership Team ('ELT') and employees of the Group including determining individual
elements of the total compensation of the Chief Executive Officer, and other members of the ELT.
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 'Independent advice' below).
A summary of the annual remuneration review process for the executive leadership team is set out below.
Independent advice
During the 2019 financial year the Group, through the Remuneration and Nomination Committee, engaged AON Hewitt for
independent advice. The work performed included an external benchmark of executive and non-executive director
remuneration and advice on the structure of the long-term incentive plan for the ELT and staff equity plans. AON Hewitt
was paid $40,000 for these services.
Voting and feedback from Annual General Meeting ('AGM')
At the AGM more than 99% of the votes received supported the adoption of the remuneration report for the year ended 30
June 2018. The Company did not receive any specific feedback at the AGM regarding remuneration practices.
Remuneration framework and structure
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:
18
9
| Audinate Annual Report 2019Directors’ report30 June 2019
Audinate Group Limited
Directors' report
30 June 2019
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
Chair of Remuneration and Nomination Committee
*
** Chair of Audit and Risk Committee
Non-executive directors also receive an additional $15,000 per annum for chairing a Board committee.
Summary of executive remuneration structure
Total fixed remuneration ('TFR')
TFR includes base salary and superannuation contributions and may include, at the discretion of the Board, other benefits
such as health insurance for US based employees. TFR is determined with reference to available market data, the scope
of an individual’s role and the qualifications and experience of the individual, as well as geographic location. TFR is
reviewed annually to account for market movements and individual performance outcomes. See further details in the
section headed Executive KMP contract details within the Remuneration Report.
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 may be entitled to receive a percentage of their fixed remuneration as an annual cash bonus;
payment of an annual cash bonus is based on (i) overall company-wide achievement of corporate financial goals, and
(ii) individual performance targets and objectives;
corporate financial goals set annually and may include measures such as revenue, EBITDA, gross profit margin and
growth targets, or other targets as considered appropriate and set by the Board; and
a minimum threshold is set for the payout on the achievement of corporate financial goals and the maximum payout
amount is capped at 150% in the event of outperformance.
●
●
10
19
Audinate Annual Report 2019 |
Audinate Group Limited
Directors' report
30 June 2019
In FY19 the STI for all KMP and the ELT was 70% weighted to the achievement of corporate financial goals and 30% to
individual key performance objectives. The corporate financial goals for FY19 were targets for USD revenue, USD gross
margin and operating costs. In the current year the payout for the achievement of corporate financial goals was 103% of
the target amount.
Long-term incentive plan ('LTI Plan')
The LTI Plan is designed to assist in the reward, retention and motivation of the ELT and other key employees
('participants'). Under the rules of the LTI Plan, the Board has the discretion to offer awards 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;
awards may be in the form of options to acquire shares; performance rights to acquire shares; and/or shares,
including those acquired under a limited recourse loan funded arrangement;
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 certain circumstances, impose a clawback, including the cancellation of unvested performance
rights and forfeiture of shares allocated upon vesting of options or performance rights (e.g. in the event of fraud,
dishonesty or serious breach of duty);
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.
●
●
●
●
●
●
●
●
LTI grants – allocation methodology
During the current financial year, the Group issued performance rights to the ELT under the LTI Plan rules outlined
above. The Remuneration and Nomination Committee used external benchmarking to determine a base allocation to each
member of the leadership team in keeping with the Group’s remuneration philosophy. The number of performance rights to
be issued is calculated by dividing the target LTI amount by the 30-day volume weighted share price prior to the annual
general meeting. The accounting valuation of performance rights is lower due to the inclusion of performance hurdles.
This approach resulted in an LTI grant to the CEO of 100% of his TFR. The Board, based on the input of the Remuneration
and Nomination Committee and CEO, may vary the allocation to an individual member of the ELT based on the following
factors:
●
●
●
●
●
●
Additional recognition for recent out performance by an individual;
Succession considerations around an individual assuming greater responsibilities in future years;
Strategic importance of tasks and responsibilities assumed by an individual;
Relative weighting of other elements of compensation, including commission plans;
Retention purposes for key roles; and
Non-compliance with the Group’s values, Code of Conduct and other relevant employee policies.
In the current year the application of this approach resulted in LTI grants to the ELT of between 25% to 75% of their TFR,
except for the CEO as noted above.
20
11
| Audinate Annual Report 2019Directors’ report30 June 2019
Audinate Group Limited
Directors' report
30 June 2019
None of the employment contracts of the KMP, or the ELT more broadly, contain any future contractual commitments
about a specified level of participation in the LTI Plan and the Board retains complete discretion to determine the
appropriate level of LTI grants in future periods, within the construct of the LTI Plan rules summarised above.
LTI grants - vesting conditions
The performance rights will vest over a period of three years subject to the satisfaction of both:
1) a service based vesting condition; and
the relevant performance hurdle.
2)
The vesting condition for the performance rights is that the individual must remain an Employee (as defined in the Plan
Rules) up to and including the vesting dates for the performance rights. The performance rights vest at 30 June 2021
subject to satisfaction of the vesting conditions below.
The performance metric for the performance rights is aligned to the Company’s share price growth as compared to the
ASX Emerging Companies Index. The ASX Emerging Companies Index has been selected as it represents the market
performance of alternative small and mid-cap companies that Audinate shareholders may invest in.
The percentage of performance rights that vest will be as follows:
The Company's Total Shareholder Return performance
compared to the ASX Emerging Companies Index
Percentage of performance rights to vest
<50th percentile
≥50th percentile to 74th percentile
≥75th percentile
No vesting
Pro-rata straight line vesting between 50% and 99%
100% vesting
In the event that the Company achieves a negative Total Shareholder Return ('TSR') that is better than the ASX Emerging
Companies Index TSR the percentage of performance rights to vest is capped at 50%.
Other equity grants
The Group recognises the importance of all employees having an equity interest in the ongoing performance of Audinate
and during FY19 extended the LTI Plan to other key employees outside of the ELT. Based on the successful achievement
of the company financial objectives in FY19 the Group will issue performance rights which will vest in two equal tranches
over 12 and 24 months, providing that the staff member remains an employee at the time of vesting. The Group has made
a provision for the awarding of performance rights in FY19 that will be issued post the release of the financial statements.
Other employees will receive a grant of $1,000 of shares based on the successful achievement of company financial
objectives in FY19, receiving an acceptable performance appraisal, and remaining in employment at the date of issue, post
the release of the FY19 financial statements.
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. TSR is the key performance
metric for the LTI plan.
Remuneration details
Amounts of remuneration
Details of the remuneration of key management personnel of the Group are set out in this section.
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
12
21
Audinate Annual Report 2019 |
Audinate Group Limited
Directors' report
30 June 2019
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
$
2019
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
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
Total
$
120,000
65,000
65,000
80,000
80,000
-
-
-
-
-
146,710
834,045
Total
$
120,000
65,000
65,000
80,000
80,000
-
-
-
-
-
58,684
633,905
120,000
59,361
41,000
73,059
73,059
-
-
-
-
-
-
-
-
-
-
-
5,639
24,000
6,941
6,941
449,194
218,013
20,128
-
-
-
-
-
-
-
282,666
235,437
1,333,776
75,398
68,870
362,281
-
-
20,128
20,531
20,531
84,583
3,328
4,806
8,134
54,471
88,687
289,868
436,394
418,331
2,098,770
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
$
120,000
59,831
59,360
73,060
73,079
-
-
-
-
-
-
-
-
-
-
-
5,169
5,640
6,940
6,921
365,802
191,449
17,970
-
-
-
-
-
-
-
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
117,368
342,300
333,657
1,719,862
22
13
| Audinate Annual Report 2019Directors’ report30 June 2019
Audinate Group Limited
Directors' report
30 June 2019
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
2019
2018
At risk - STI
2019
2018
At risk - LTI
2019
2018
56%
61%
26%
30%
18%
9%
70%
62%
75%
71%
17%
16%
19%
18%
13%
22%
6%
11%
Non-executive directors did not receive share options or other performance linked incentives during the year ended 30
June 2019 and 30 June 2018.
Executive KMP contract details
Remuneration and other terms of employment for KMP are formalised in services agreement and the key details of these
agreements are summarised below:
Component
Approach for CEO
Approach for Executive KMP
Total Fixed Remuneration:
US$300,000 plus health insurance
$270,000 - $300,000
Contract Duration:
Ongoing
Ongoing
Target STI % of TFR:
50%
25%
Target LTI % of TFR:
100%
50%
Notice period by individual/company:
6 months
3 months
Restraint:
Post termination subject to non-
competition and non-solicitation of
customers within USA and Australia for
6 months
Post termination subject to non-
competition and non-solicitation of
customers within USA, Australia and UK
for 12 months
In the event that there is any component of the CEO’s termination arrangements that requires shareholder approval, this
will be proposed at the Annual General Meeting to be held on 24 October 2019.
All other members of the executive leadership team 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.
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 2019.
14
23
Audinate Annual Report 2019 |
Audinate Group Limited
Directors' report
30 June 2019
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
Vesting date and
exercisable date
30/06/2017
30/06/2017
Expiry date
17/10/2019
23/08/2022
Fair value
per option
Exercise price at grant date
$0.0620
$0.2600
$0.022
$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 2019.
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
Lee Ellison
Rob Goss
Rob Goss
Aidan Williams
Aidan Williams
Number of
rights
granted
Grant date
Expiry date
267,811 30/06/2017
1,995,000 02/08/2017
105,599 26/03/2019
89,270 30/06/2017
42,857 26/03/2019
178,541 30/06/2017
57,857 26/03/2019
30/06/2022
15/09/2019
31/08/2021
30/06/2022
31/08/2021
30/06/2022
30/06/2021
Share price
hurdle for
vesting
Fair value
per right
at grant date
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
$0.810
$0.810
$2.181
$0.810
$2.181
$0.810
$2.181
The performance rights issued on 30 June 2017 vest in three tranches after the release of the annual results in 2020, 2021
and 2022. All other grants vest as a single tranche.
Apart from the performance rights granted to Lee Ellison on 2 August 2017 all other 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 2019.
Additional information
The earnings of the Group for the five years to 30 June 2019 are summarised below:
2015*
$'000
2016*
$'000
2017**
$'000
2018
$'000
2019
$'000
Sales revenue
EBITDA
Profit/(loss) after income tax
8,035
26
516
11,903
(64)
54
15,063
784
(20,443)
19,653
559
2,544
28,313
2,765
662
*
**
Relates to the Group prior to the restructure that occurred at the time of the IPO at 30 June 2017.
EBITDA in the 2017 financial year is calculated excluding the one-off impacts of IPO expenses and the change in fair
value of redeemable preference shares.
24
15
| Audinate Annual Report 2019Directors’ report30 June 2019
Audinate Group Limited
Directors' report
30 June 2019
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
Share price at financial year end ($)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
2018
2019
3.92
4.19
3.95
7.99
1.08
1.02
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**
Alison Ledger
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
67,356
-
122,951
605,228
1,811,405
3,106,639
-
-
-
-
-
-
-
-
-
-
-
-
3,800
1,500
-
-
99,502
104,802
-
-
(20,492)
-
-
-
(400,820)
-
(421,312)
Balance at
the end of
the year
293,958
820
184,429
71,156
1,500
122,951
204,408
1,910,907
2,790,129
*
**
10,602,602 ordinary shares held by entities associated with John Dyson were disposed of during the year ended 30
June 2019.
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*
Aidan Williams
Balance at
the start of
the year
186,042
320,000
104,000
610,042
Granted
Exercised
Expired/
forfeited/
other**
Balance at
the end of
the year
-
-
-
-
-
-
(99,502)
(99,502)
-
-
(4,498)
(4,498)
186,042
320,000
-
506,042
Held indirectly
*
** Other includes the impact of cashless exercise
All of the outstanding options at 30 June 2019 were fully vested and exercisable.
16
25
Audinate Annual Report 2019 |
Audinate Group Limited
Directors' report
30 June 2019
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
Performance rights over ordinary shares
Lee Ellison
Rob Goss
Aidan Williams
Balance at
the start of
the year
2,262,811
89,270
178,541
2,530,622
Granted
105,599
42,857
57,857
206,313
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
2,368,410
132,127
236,398
2,736,935
Balance at
the end of
the year
Vested
Unvested
1,995,000
-
-
1,995,000
373,410
132,127
236,398
741,935
2,368,410
132,127
236,398
2,736,935
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
2019 was $91,237 (2018: $90,738), inclusive of a loan outstanding to Aidan Williams of $40,650 (2018: $38,731).
This concludes the remuneration report, which has been audited.
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
Expiry date
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
$0.0620
$0.0620
$0.0620
$0.0620
$0.0620
$0.2600
$0.2600
$0.2600
370,042
10,000
10,000
10,000
260,000
135,000
372,800
40,000
1,207,842
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
26/03/2019
26
Expiry date
30/06/2022
15/09/2019
30/06/2022
31/08/2022
17
Exercise
price
Number
under rights
$0.0000
$0.0000
$0.0000
$0.0000
1,020,804
1,995,000
34,566
487,557
3,537,927
| Audinate Annual Report 2019Directors’ report30 June 2019
Audinate Group Limited
Directors' report
30 June 2019
*
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.
Shares issued on the exercise of options
The following ordinary shares of Audinate Group Limited were issued during the year ended 30 June 2019 and up to the
date of this report on the exercise of options granted:
Date options exercised
21/09/2018
21/09/2018
02/11/2018
19/11/2018
25/02/2019
06/03/2019
13/03/2019
13/03/2019
14/03/2019
25/03/2019
25/03/2019
05/04/2019
05/04/2019
17/05/2019
17/05/2019
07/06/2019
21/06/2019
21/06/2019
Exercise
price
Number of
shares issued
$0.0360
$0.0620
$0.0620
$0.0360
$0.0620
$0.2600
$0.2600
$0.0620
$0.0620
$0.0620
$0.2600
$0.0620
$0.2600
$0.2600
$0.0620
$0.2600
$0.0620
$0.2600
10,000
100,000
50,000
20,000
50,000
8,000
8,000
20,000
10,000
12,000
8,000
10,000
99,502
15,000
38,000
8,000
20,000
16,000
502,502
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 2019 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. 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.
18
27
Audinate Annual Report 2019 |
Audinate Group Limited
Directors' report
30 June 2019
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.
Non-audit services
There were no non-audit services provided during the financial year by the auditor.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
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
23 August 2019
Sydney
28
19
| Audinate Annual Report 2019Directors’ report30 June 2019
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
23 August 2019
The Board of Directors
Audinate Group Limited
Level 7
64-76 Kippax Street
Surry Hills NSW
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 2019, I declare that to the best of my knowledge and belief, there have been no contraventions
of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Helen Hamilton-James
Partner
Chartered Accountant
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network
20
29
Audinate Annual Report 2019 |
Audinate Group Limited
Consolidated statement of profit or loss and other comprehensive income
Audinate Group Limited
For the year ended 30 June 2019
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2019
Consolidated
Revenue
Sales
Revenue
Cost of goods sold
Sales
Gross margin
Cost of goods sold
Gross margin
Expenses
Employee expenses
Expenses
Marketing expenses
Employee expenses
Administration and other operating expenses
Marketing expenses
Depreciation and amortisation
Administration and other operating expenses
Total expenses
Depreciation and amortisation
Total expenses
Operating profit/(loss)
Operating profit/(loss)
Other income
Other income
Profit before income tax benefit
Profit before income tax benefit
Income tax benefit
Income tax benefit
Profit after income tax benefit for the year attributable to the owners of
Audinate Group Limited
Profit after income tax benefit for the year attributable to the owners of
Audinate Group Limited
Other comprehensive income
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of
Audinate Group Limited
Total comprehensive income for the year attributable to the owners of
Audinate Group Limited
Basic earnings per share
Diluted earnings per share
Basic earnings per share
Diluted earnings per share
Note
Note
5
5
6
6
6
6
7
7
8
8
9
9
9
9
2019
$'000
2019
$'000
Consolidated
2018
$'000
2018
$'000
28,313
(7,250)
28,313
21,063
(7,250)
21,063
(12,288)
(2,631)
(12,288)
(3,379)
(2,631)
(2,419)
(3,379)
(20,717)
(2,419)
(20,717)
346
346
296
296
642
642
20
20
662
662
(41)
(41)
(41)
(41)
621
19,653
(5,011)
19,653
14,642
(5,011)
14,642
(9,073)
(2,338)
(9,073)
(2,672)
(2,338)
(1,452)
(2,672)
(15,535)
(1,452)
(15,535)
(893)
(893)
157
157
(736)
(736)
3,280
3,280
2,544
2,544
(16)
(16)
(16)
(16)
2,528
621
Cents
2,528
Cents
Cents
1.08
1.02
1.08
1.02
Cents
4.19
3.95
4.19
3.95
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
21
accompanying notes
21
30
| Audinate Annual Report 2019Consolidated statement of profit or loss and other comprehensive incomefor the year ended 30 June 2019
Audinate Group Limited
Consolidated statement of financial position
As at 30 June 2019
Audinate Group Limited
Consolidated statement of financial position
As at 30 June 2019
Assets
Note
Consolidated
2019
$'000
Consolidated
2018
$'000
Note
2019
$'000
2018
$'000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Current assets
Current tax asset
Cash and cash equivalents
Inventories
Trade and other receivables
Other assets
Current tax asset
Total current assets
Inventories
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Intangibles
Non-current assets
Deferred tax
Property, plant and equipment
Total non-current assets
Intangibles
Deferred tax
Total non-current assets
Total assets
Liabilities
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities/unearned revenue
Current liabilities
Income tax payable
Trade and other payables
Employee benefits
Contract liabilities/unearned revenue
Provisions
Income tax payable
Total current liabilities
Employee benefits
Provisions
Non-current liabilities
Total current liabilities
Employee benefits
Total non-current liabilities
Non-current liabilities
Employee benefits
Total liabilities
Total non-current liabilities
Net assets
Total liabilities
Equity
Net assets
Contributed capital
Reserves
Accumulated losses
Equity
Contributed capital
Reserves
Total equity
Accumulated losses
Total equity
10
11
8
12
13
10
11
8
12
13
14
15
8
14
15
8
16
17
8
16
17
8
18
19
18
19
30,069
2,872
-
30,069
1,803
2,872
812
-
35,556
1,803
812
35,556
1,013
7,691
2,278
1,013
10,982
7,691
2,278
46,538
10,982
13,631
1,819
1,344
13,631
1,225
1,819
276
1,344
18,295
1,225
276
18,295
691
3,879
1,874
691
6,444
3,879
1,874
24,739
6,444
46,538
24,739
2,413
308
19
2,413
2,474
308
47
19
5,261
2,474
47
5,261
133
133
133
5,394
133
41,144
5,394
2,164
134
23
2,164
1,663
134
73
23
4,057
1,663
73
4,057
309
309
309
4,366
309
20,373
4,366
41,144
83,143
775
(42,774)
83,143
775
41,144
(42,774)
20,373
63,288
521
(43,436)
63,288
521
20,373
(43,436)
41,144
20,373
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
22
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
22
31
Audinate Annual Report 2019 |Consolidated statement of financial positionas at 30 June 2019
Audinate Group Limited
Consolidated statement of changes in equity
For the year ended 30 June 2019
Audinate Group Limited
Consolidated statement of changes in equity
For the year ended 30 June 2019
Consolidated
Balance at 1 July 2017
Consolidated
Profit after income tax benefit for the year
Balance at 1 July 2017
Other comprehensive income for the year, net of tax
Profit after income tax benefit for the year
Total comprehensive income for the year
Other comprehensive income for the year, net of tax
Transactions with owners in their capacity as owners:
Total comprehensive income for the year
Share-based payments (note 19)
Issue of shares on exercise of options
Transactions with owners in their capacity as owners:
Share issue costs
Share-based payments (note 19)
Issue of shares on exercise of options
Balance at 30 June 2018
Share issue costs
Balance at 30 June 2018
Consolidated
Balance at 1 July 2018
Consolidated
Profit after income tax benefit for the year
Balance at 1 July 2018
Other comprehensive income for the year, net of tax
Profit after income tax benefit for the year
Total comprehensive income for the year
Other comprehensive income for the year, net of tax
Transactions with owners in their capacity as owners:
Total comprehensive income for the year
Share-based payments (note 19)
Issue of shares on exercise of options
Transactions with owners in their capacity as owners:
Issue of shares
Share-based payments (note 19)
Transfer from option reserve
Issue of shares on exercise of options
Share issue costs, net of tax
Issue of shares
Transfer from option reserve
Balance at 30 June 2019
Share issue costs, net of tax
Balance at 30 June 2019
Contributed
capital
$'000
Contributed
capital
63,260
$'000
-
63,260
-
-
-
-
-
-
45
(17)
-
45
63,288
(17)
63,288
Contributed
capital
$'000
Contributed
capital
63,288
$'000
-
63,288
-
-
-
-
-
-
36
20,000
-
391
36
(572)
20,000
391
83,143
(572)
83,143
Reserves
$'000
Reserves
$'000
302
Accumulated
losses
$'000
Accumulated
losses
(45,980)
$'000
Total equity
$'000
Total equity
17,582
$'000
-
302
(16)
-
(16)
(16)
(16)
235
-
-
235
-
521
-
521
Reserves
$'000
Reserves
$'000
521
2,544
(45,980)
-
2,544
2,544
-
2,544
-
-
-
-
-
(43,436)
-
(43,436)
Accumulated
losses
$'000
Accumulated
losses
(43,436)
$'000
-
521
(41)
-
(41)
(41)
(41)
686
-
-
686
(391)
-
-
-
(391)
775
-
662
(43,436)
-
662
662
-
662
-
-
-
-
-
-
-
-
-
(42,774)
-
2,544
17,582
(16)
2,544
2,528
(16)
2,528
235
45
(17)
235
45
20,373
(17)
20,373
Total equity
$'000
Total equity
20,373
$'000
662
20,373
(41)
662
621
(41)
621
686
36
20,000
686
-
36
(572)
20,000
-
41,144
(572)
775
(42,774)
41,144
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
23
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
23
32
| Audinate Annual Report 2019Consolidated statement of changes in equityfor the year ended 30 June 2019
Audinate Group Limited
Consolidated statement of cash flows
For the year ended 30 June 2019
Audinate Group Limited
Consolidated statement of cash flows
For the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Cash flows from operating activities
Interest received
Receipts from customers (inclusive of GST)
Research and development incentive received
Payments to suppliers and employees (inclusive of GST)
Income taxes paid
Interest received
Research and development incentive received
Net cash from operating activities
Income taxes paid
Cash flows from investing activities
Net cash from operating activities
Payments for property, plant and equipment
Payments for intangibles
Cash flows from investing activities
Research and development incentive received
Payments for property, plant and equipment
Payments for intangibles
Net cash used in investing activities
Research and development incentive received
Cash flows from financing activities
Net cash used in investing activities
Proceeds from issue of shares
Payments to selling shareholders
Cash flows from financing activities
Share issue transaction costs
Proceeds from issue of shares
Payments to selling shareholders
Net cash from/(used in) financing activities
Share issue transaction costs
Net increase/(decrease) in cash and cash equivalents
Net cash from/(used in) financing activities
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
Note
Note
29
29
10
10
Consolidated
2019
$'000
2018
$'000
Consolidated
2019
$'000
27,747
(25,510)
205
27,747
1,327
(25,510)
(153)
205
1,327
3,616
(153)
2018
$'000
19,679
(19,165)
251
19,679
334
(19,165)
(62)
251
334
1,037
(62)
3,616
(669)
(5,782)
-
(669)
(5,782)
(6,451)
-
(6,451)
20,036
-
(789)
20,036
-
19,247
(789)
16,412
19,247
13,631
26
16,412
13,631
30,069
26
1,037
(627)
(3,029)
680
(627)
(3,029)
(2,976)
680
(2,976)
4,086
(7,030)
(115)
4,086
(7,030)
(3,059)
(115)
(4,998)
(3,059)
18,694
(65)
(4,998)
18,694
13,631
(65)
30,069
13,631
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
24
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
24
33
Audinate Annual Report 2019 |Consolidated statement of cash flowsfor the year ended 30 June 2019
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
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 7, 64 Kippax Street
Surry Hills NSW 2010
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 22 August 2019. 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.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The following Accounting Standards and Interpretations are most relevant to the Group:
AASB 9 Financial Instruments
The Group has adopted AASB 9 from 1 July 2018. The standard introduced 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 that are solely
principal and interest. A debt investment shall be measured at fair value through other comprehensive income if it is held
within a business model whose objective is to both hold assets in order to collect contractual cash flows which arise on
specified dates that are solely principal and interest as well as selling the asset on the basis of its fair value. All other
financial assets are 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 or contingent
consideration recognised in a business combination) in other comprehensive income ('OCI'). Despite these requirements, a
financial asset may be irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or
eliminate, an accounting mismatch. For financial liabilities designated at fair value through profit or loss, 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 use an 'expected
credit loss' ('ECL') model to recognise an allowance. Impairment is measured using 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. For receivables, a simplified approach to measuring expected credit losses using a lifetime expected
loss allowance is available.
AASB 9 changes the classification of complex financial instruments, calculation of impairment losses in financial assets,
and hedge accounting. Audinate has no complex financial instruments and does not apply hedge accounting. As a result
these changes have not materially impacted Audinate.
The calculation of impairment losses impacts the way Audinate calculates the bad debts provision, now termed as the
allowance for expected credit losses. The Group applies the AASB 9 simplified approach to measure expected credit
losses which uses a lifetime expected loss allowance for all trade receivables.
34
25
| Audinate Annual Report 2019Notes to the consolidated financial statementsfor the year ended 30 June 2019
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
To measure the expected credit losses, trade receivables are grouped based on shared credit risk characteristics and the
days past due.
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there are no
reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the
Group.
The Group has applied the exception under AASB 9 to not restate comparatives as the credit loss allowance under AASB
139 and AASB 9 did not result in material changes to the amounts previously reported.
AASB 15 Revenue from Contracts with Customers
The Group has adopted AASB 15 from 1 July 2018. The standard provides a single comprehensive model for revenue
recognition. The core principle of the standard is that an entity shall recognise revenue to depict the transfer of promised
goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. The standard introduced a new contract-based revenue recognition model with a
measurement approach that is based on an allocation of the transaction price. This is described further in the accounting
policies below. Credit risk is presented separately as an expense rather than adjusted against revenue. Contracts with
customers are 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. Customer
acquisition costs and costs to fulfil a contract can, subject to certain criteria, be capitalised as an asset and amortised over
the contract period.
The Group has applied the modified retrospective approach under AASB 15 with the cumulative effect of initially applying
the standard recognised in opening retained earnings. The cumulative effect of initially applying the standard was $nil, as
the timing of revenue recognition has not changed for the Group’s contracts that were in progress at 1 July 2018.
Audinate designs, develops and delivers technology solutions for the digital audio and visual industry globally.
From these activities, Audinate generates the following streams of revenue:
●
●
●
●
Chips, cards and modules (including adapters);
Software and licence fees;
Support and maintenance; and
Royalties.
Each of the above services delivered to customers are considered separate performance obligations, even though for
practical expedience they may be governed by a single legal contract with the customer.
Under AASB 15, revenue recognition for each of the above is as follows:
Revenue Stream
Performance obligations
Timing of recognition
Chips, cards and modules (including
adapters)
Goods dispatched from warehouse.
Software and licence fees
Provision of access to software and
activation code.
Support and maintenance
As defined in contract.
Recognised at point of dispatch from
warehouse, when control is transferred
to the customer on basis of ex-works
terms.
Revenue from software is recognised at
point of sale and access to software is
granted.
Revenue is recognised over time as
stipulated by terms in contract.
Royalties
Provision of financial information from
OEM partners.
At point in time when OEM partners
report on sales to end users.
26
35
Audinate Annual Report 2019 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Revenue from providing support and maintenance is recognised in the accounting period in which the services are
rendered. For fixed-price contracts, revenue is recognised based on the actual service provided to the end of the reporting
period. This is determined based on contract terms and period of agreement.
Some contracts include multiple deliverables, such as software licences and maintenance. In these cases, the transaction
price is split according to performance obligations described above.
In fixed-price contracts, the customer pays the fixed amount based on an agreed payment schedule. If the services
rendered by the Group exceed the payment, a contract asset (previously referred to as "unbilled income") is recognised. If
the payments exceed the services rendered, a contract liability (previously referred to as "unearned revenue") is
recognised.
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.
Basis of preparation
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 30.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Audinate Group Limited as
at 30 June 2019 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.
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.
36
27
| Audinate Annual Report 2019Notes to the consolidated financial statementsfor the year ended 30 June 2019
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
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 the entity’s functional currency 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.
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 prior 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 resulted in a deferred tax asset being
recognised.
28
37
Audinate Annual Report 2019 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
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.
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 allowance for expected credit losses. Trade receivables are generally due for settlement within
30 days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
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.
38
29
| Audinate Annual Report 2019Notes to the consolidated financial statementsfor the year ended 30 June 2019
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
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. 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.
Intellectual property
Significant costs associated with the intellectual property are deferred and amortised on a straight-line basis over the
period of their expected benefit, being their finite life of three years.
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.
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.
30
39
Audinate Annual Report 2019 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
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.
Contract liabilities/unearned revenue
Contract liabilities represent the Group's obligation to transfer goods or services to a customer and are recognised when a
customer pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration
(whichever is earlier) before the Group has transferred the goods or services to the customer.
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 the Monte
Carlo simulation method 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.
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.
40
31
| Audinate Annual Report 2019Notes to the consolidated financial statementsfor the year ended 30 June 2019
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
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.
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.
32
41
Audinate Annual Report 2019 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
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.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
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 2019. 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 16 Leases
AASB 16 Leases ('AASB 16') provides a comprehensive model for the identification of lease arrangements and their
treatment in the financial statements for both lessors and lessees. AASB 16 will supersede the AASB 117 Leases ('AASB
117') current lease guidance and related Interpretations when it becomes effective for accounting periods beginning on or
after 1 January 2019. The date of initial application of AASB 16 for the Group will be 1 July 2019.
The Group has chosen the modified retrospective approach of AASB 16. Consequently, the Group will not restate the
comparative information.
AASB 16 distinguishes between leases and service contracts on the basis of whether the use of an identified asset is
controlled by the customer. Control is considered to exist if the customer has the right to obtain substantially all of the
economic benefits from the use of an identified asset and the right to direct the use of that asset.
AASB 16 will change how the Group accounts for leases previously classified as operating leases, which were off-balance
sheet. On initial application of AASB 16 the Group will:
●
Recognise right of use assets and lease liabilities in the statement of financial position, initially measured at the
present value of the future lease payments;
Recognise depreciation of right-of-use assets and interest on lease liabilities in the statement of profit or loss;
Separate the total amount of cash paid into a principal portion (presented within financing activities) and interest
(presented within operating activities) in the cash flow statement.
●
●
Lease incentives (e.g. rent-free period) will be recognised as part of the measurement of the right-of-use assets and lease
liabilities whereas under AASB 117 they resulted in the recognition of a lease liability incentive, amortised as a reduction of
rental expenses on a straight-line basis.
Under AASB 16, right-of-use assets will be tested for impairment in accordance with AASB 136 Impairment of Assets. This
will replace the previous requirement to recognise a provision for onerous lease contracts.
For short-term leases (lease term of 12 months or less) and leases of low-value, the Group will opt to recognise a lease
expense on a straight-line basis as permitted by AASB 16.
As at 30 June 2019, the Group has operating lease commitments of $3,767,000 (note 25).
A preliminary assessment indicates that the Group will recognise a right-of-use asset of $3,404,000 and a corresponding
lease liability of $3,673,000 after derecognising liabilities of $272,000 in respect of all these leases. The impact on profit or
loss in first year is expected to decrease other expenses by $715,000, to increase depreciation by $682,000 and to
increase interest expense by $125,000.
42
33
| Audinate Annual Report 2019Notes to the consolidated financial statementsfor the year ended 30 June 2019
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
All lease payments on operating leases are presented as part of cash flows from operating activities. The impact of the
changes AASB 16 would be to increase the net cash generated by operating activities by $984,000 and to decrease the
net cash arising from financing activities by the same amount.
New Conceptual Framework for Financial Reporting
A revised Conceptual Framework for Financial Reporting has been issued by the AASB and is applicable for annual
reporting periods beginning on or after 1 January 2020. This release impacts for-profit private sector entities that have
public accountability that are required by legislation to comply with Australian Accounting Standards and other for-profit
entities that voluntarily elect to apply the Conceptual Framework. Phase 2 of the framework is yet to be released which will
impact for-profit private sector entities. The application of new definition and recognition criteria as well as new guidance on
measurement will result in amendments to several accounting standards. The issue of AASB 2019-1 Amendments to
Australian Accounting Standards – References to the Conceptual Framework, also applicable from 1 January 2020,
includes such amendments. Where the Group has relied on the conceptual framework in determining its accounting
policies for transactions, events or conditions that are not otherwise dealt with under Australian Accounting Standards, the
Group may need to revisit such policies.
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 the Monte Carlo simulation method
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.
34
43
Audinate Annual Report 2019 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
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 41% (2018: 50%) of the Group’s revenue during the year ended 30 June 2019 and of
that amount the largest customer represents approximately 13% (2018: 15%) of the Group’s revenue.
Geographical information
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 based on the location of the customer: a) Americas 39%
(2018: 40%); b) Asia 33% (2018: 24%); and c) Europe and Middle East 28% (2018: 36%). Occasionally the international
offices may generate some revenue related to marketing activities.
Australia
United Kingdom
Hong Kong
United States of America
Sales to external
customers*
Geographical non-current
assets
2019
$'000
2018
$'000
2019
$'000
2018
$'000
28,292
-
-
21
19,566
-
-
87
10,306
26
4
646
28,313
19,653
10,982
6,300
17
1
126
6,444
* Sales to external customers is based on the domicile of the entity recording the sale.
Note 5. Revenue
Sales
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Chips, cards and modules (including adapters)
Software revenue (including licence fees and royalties)
Other revenue (including support and maintenance)
Consolidated
2019
$'000
2018
$'000
28,313
19,653
Consolidated
2019
$'000
24,031
3,779
503
28,313
Timing of revenue recognition
Revenue from goods and services is recognised at a point in time or over a period of time as described in note 2.
44
35
| Audinate Annual Report 2019Notes to the consolidated financial statementsfor the year ended 30 June 2019
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 6. Expenses
Profit 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
2019
$'000
2018
$'000
344
2,075
2,419
130
1,322
1,452
450
364
9,287
676
686
1,639
12,288
7,191
508
235
1,139
9,073
*
Comparative information for employee benefit expenses has been increased by $235,000 with a corresponding
decrease in administration and other operating expenses to agree with the current year presentation. There was no
effect on profit, assets, liabilities or equity.
Note 7. Other income
Net foreign exchange gain/(loss)
Interest revenue
Consolidated
2019
$'000
2018
$'000
104
192
296
(70)
227
157
36
45
Audinate Annual Report 2019 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 8. 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 benefit
Current tax
Under provision prior year
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 benefit
Numerical reconciliation of income tax benefit and tax at the statutory rate
Profit before income tax benefit
Tax at the statutory tax rate of 27.5%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Amortisation of development costs (pre 30 June 2017)
Expenditure claimed for research and development incentive
Other non-assessable items
Research and development incentive benefit
Non-deductible expenses
Under provision prior year
Difference in overseas tax rates
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 benefit
Deferred tax asset
Net deferred tax asset comprises temporary differences attributable to:
Carried forward tax losses
Provisions
Blackhole expenditure
Intangible assets
Trade and other payables
Property, plant and equipment
Other
Deferred tax asset
46
37
Consolidated
2019
$'000
2018
$'000
(1,004)
36
948
-
-
-
-
(1,300)
-
473
(105)
(2,443)
(118)
213
(20)
(3,280)
642
177
339
1,832
-
(2,564)
193
(23)
36
(33)
-
-
-
(20)
(736)
(202)
111
557
(122)
(1,344)
68
(932)
-
-
(2,443)
(118)
213
(3,280)
Consolidated
2019
$'000
2018
$'000
1,153
777
347
(202)
115
59
29
2,278
-
414
259
1,159
86
(38)
(6)
1,874
| Audinate Annual Report 2019Notes to the consolidated financial statementsfor the year ended 30 June 2019
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 8. Income tax (continued)
Current tax asset
Current tax asset
Consolidated
2019
$'000
2018
$'000
-
1,344
Current tax asset represents an estimate of the amount receivable from the Australian Tax Office inclusive of the research
and development incentive. As the Group's turn over exceeded $20 million in the 2019 financial year it is no longer eligible
to receive this benefit in cash, instead the equivalent expenditure is included within the carried forward tax losses in the
reconciliation of the deferred tax asset as set out above.
Income tax payable
Income tax payable
Note 9. Earnings per share
Consolidated
2019
$'000
2018
$'000
19
23
Consolidated
2019
$'000
2018
$'000
Profit after income tax attributable to the owners of Audinate Group Limited
662
2,544
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
61,439,782
60,758,728
1,174,297
1,995,000
1,627,891
1,995,000
Weighted average number of ordinary shares used in calculating diluted earnings per share
64,609,079
64,381,619
Basic earnings per share
Diluted earnings per share
Cents
Cents
1.08
1.02
4.19
3.95
The prior period basic earnings per share and diluted earnings per share have been retrospectively adjusted for the bonus
element of the 2019 Institutional Placement.
Note 10. Current assets - cash and cash equivalents
Cash at bank
Cash on deposit
Consolidated
2019
$'000
2018
$'000
4,315
25,754
1,810
11,821
30,069
13,631
38
47
Audinate Annual Report 2019 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 11. Current assets - trade and other receivables
Trade receivables
Less: Allowance for expected credit losses
Other receivables
Consolidated
2019
$'000
2018
$'000
2,647
(2)
2,645
227
1,738
-
1,738
81
2,872
1,819
Allowance for expected credit losses
The Group has recognised a loss of $2,000 in respect of the expected credit losses for the year ended 30 June 2019 (30
June 2018: none).
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Consolidated
Not overdue
Note 12. Current assets - inventories
Raw materials - at cost
Finished goods - at cost
Note 13. Current assets - other assets
Prepayments
Deposits
Expected
credit loss
rate
2019
%
Carrying
amount
2019
$'000
Allowance
for expected
credit losses
2019
$'000
0.066%
2,647
2
Consolidated
2019
$'000
2018
$'000
238
1,565
1,803
364
861
1,225
Consolidated
2019
$'000
2018
$'000
594
218
812
170
106
276
48
39
| Audinate Annual Report 2019Notes to the consolidated financial statementsfor the year ended 30 June 2019
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 14. 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
2019
$'000
2018
$'000
482
(206)
276
83
(45)
38
1,409
(710)
699
1,013
192
(88)
104
77
(22)
55
1,039
(507)
532
691
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 2017
Additions
Depreciation expense
Balance at 30 June 2018
Additions
Depreciation expense
Balance at 30 June 2019
Note 15. Non-current assets - intangibles
Development costs
Less: Accumulated amortisation
Intellectual property
Less: Accumulated amortisation
Software - at cost
Less: Accumulated amortisation
Leasehold
improvements
$'000
Furniture and Computer and
fittings
$'000
equipment
$'000
Total
$'000
121
16
(33)
104
290
(118)
276
49
9
(3)
55
6
(23)
38
196
430
(94)
532
370
(203)
699
366
455
(130)
691
666
(344)
1,013
Consolidated
2019
$'000
2018
$'000
11,956
(5,093)
6,863
6,686
(3,172)
3,514
335
(158)
177
713
(62)
651
260
(66)
194
171
-
171
7,691
3,879
40
49
Audinate Annual Report 2019 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 15. Non-current assets - intangibles (continued)
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 2017
Additions
Amortisation expense
Balance at 30 June 2018
Additions
Amortisation expense
Balance at 30 June 2019
Development
costs
$'000
Intellectual
property
$'000
Software
$'000
Total
$'000
1,903
2,923
(1,312)
3,514
5,270
(1,921)
6,863
98
106
(10)
194
75
(92)
177
-
171
-
171
542
(62)
651
2,001
3,200
(1,322)
3,879
5,887
(2,075)
7,691
Note 16. Current liabilities - trade and other payables
Trade payables
Accrued expenses
Other payables
Refer to note 21 for further information on financial instruments.
Note 17. Current liabilities - contract liabilities/unearned revenue
Consolidated
2019
$'000
2018
$'000
1,122
726
565
2,413
1,201
404
559
2,164
Consolidated
2019
$'000
2018
$'000
Contract liabilities (30 June 2018: Unearned revenue)
308
134
Reconciliation
Reconciliation of the written down values at the beginning and end of the current financial year is set out below:
Opening balance
Transfer from unearned revenue on 1 July 2018
Billings in advance
Transfer to revenue - included in the opening balance
Transfer to revenue - relating to current period
Closing balance
50
41
Consolidated
2019
$'000
-
134
1,152
(134)
(844)
308
| Audinate Annual Report 2019Notes to the consolidated financial statementsfor the year ended 30 June 2019
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 17. Current liabilities - contract liabilities/unearned revenue (continued)
Unsatisfied performance obligations
The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of
the reporting period was $308,000 as at 30 June 2019 and is expected to be recognised as revenue in future periods as
follows:
Within 6 months
6 to 12 months
Note 18. Equity - contributed capital
Fully paid ordinary shares
Consolidated
2019
$'000
204
104
308
Consolidated
2019
Shares
2018
Shares
2019
$'000
2018
$'000
Ordinary shares - fully paid
64,296,003
60,936,358
83,143
63,288
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 2018 financial statements.
42
51
Audinate Annual Report 2019 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 18. Equity - contributed capital (continued)
Movements in ordinary share capital
Details
Date
Shares
Issue price
$'000
1 July 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
30 June 2018
Balance
Issue of shares in the Company - exercise of options 21 September 2018
Issue of shares in the Company - exercise of options 21 September 2018
Issue of shares in the Company - exercise of options 2 November 2018
Issue of shares in the Company - exercise of options 19 November 2018
Issue of shares in the Company - exercise of options 25 February 2019
Issue of shares in the Company - exercise of options 6 March 2019
Issue of shares in the Company - exercise of options 13 March 2019
Issue of shares in the Company - exercise of options 13 March 2019
Issue of shares in the Company - exercise of options 14 March 2019
Issue of shares in the Company - exercise of options 25 March 2019
Issue of shares in the Company - exercise of options 25 March 2019
Issue of shares in the Company - exercise of options 5 April 2019
Issue of shares in the Company - exercise of options 5 April 2019
Issue of shares in the Company - exercise of options 17 May 2019
Issue of shares in the Company - exercise of options 17 May 2019
Issue of shares in the Company - exercise of options 7 June 2019
Issue of shares in the Company
13 June 2019
Issue of shares in the Company - exercise of options 21 June 2019
Issue of shares in the Company - exercise of options 21 June 2019
Share issue costs, net of tax
Transfer to share-based payments reserve
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
-
60,936,358
10,000
100,000
50,000
20,000
50,000
8,000
8,000
20,000
10,000
12,000
8,000
10,000
99,502
15,000
38,000
8,000
2,857,143
20,000
16,000
-
-
$0.2600
$0.0620
$0.2600
$0.0620
$0.0620
$0.2600
$0.0620
$0.2600
$0.0620
$0.2600
$0.0620
$0.0620
$0.2600
$0.2600
$0.0360
$0.2600
-
$0.0360
$0.0620
$0.0620
$0.0360
$0.0620
$0.2600
$0.2600
$0.0620
$0.0620
$0.0620
$0.2600
$0.0620
$0.2600
$0.2600
$0.0620
$0.2600
$7.0000
$0.0620
$0.2600
-
-
Balance
30 June 2019
64,296,003
The table above includes shares issued to employees under a cashless exercise election.
63,260
6
8
6
1
1
2
1
1
1
12
2
1
2
1
-
-
(17)
63,288
-
6
3
1
3
2
2
1
1
1
2
1
-
4
2
2
20,000
1
4
(572)
391
83,143
52
43
| Audinate Annual Report 2019Notes to the consolidated financial statementsfor the year ended 30 June 2019 Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 19. Equity - reserves
Foreign currency reserve
Share-based payments reserve
Consolidated
2019
$'000
2018
$'000
(146)
921
775
(105)
626
521
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 2017
Foreign currency translation
Share-based payments
Balance at 30 June 2018
Foreign currency translation
Share-based payments
Transfer to equity for vested options
Balance at 30 June 2019
Note 20. Equity - dividends
Foreign
currency
$'000
Share-based
payments
$'000
Total
$'000
(89)
(16)
-
(105)
(41)
-
-
(146)
391
-
235
626
-
686
(391)
921
302
(16)
235
521
(41)
686
(391)
775
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 21. 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 its 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.
44
53
Audinate Annual Report 2019 |
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 21. Financial instruments (continued)
Market risk
The Group's US dollar denominated sales, on which the risk of foreign exchange movement, was partially offset against
exchange rate movement of US dollar denominated for purchases which is set below:
US dollar denominated - sales
US dollar denominated - purchases
Consolidated
2019
$'000
2018
$'000
20,251
(11,714)
15,231
(8,500)
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.
As at the reporting date, the Group had the following variable rate cash and cash equivalents:
Consolidated
Cash at bank
Cash on deposit
Net exposure to cash flow interest rate risk
2019
2018
Weighted
average
interest rate
%
-
1.59%
Weighted
average
interest rate
%
-
1.90%
Balance
$'000
4,315
25,754
30,069
Balance
$'000
1,810
11,821
13,631
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.
The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables
through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered
representative across all customers of the Group based on recent sales experience, historical collection rates and forward-
looking information that is available.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include
the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual
payments for a period greater than 1 year.
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.
54
45
| Audinate Annual Report 2019Notes to the consolidated financial statementsfor the year ended 30 June 2019
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 21. Financial instruments (continued)
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 - 2019
Non-interest bearing
Trade payables
Accrued expenses
Other payables
Total non-derivatives
Consolidated - 2018
Non-interest bearing
Trade payables
Accrued expenses
Other payables
Total non-derivatives
Weighted
average
interest rate 1 year or less
%
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years Over 5 years
$'000
$'000
Remaining
contractual
maturities
$'000
-
-
-
1,122
726
565
2,413
-
-
-
-
-
-
-
-
-
-
-
-
1,122
726
565
2,413
Weighted
average
interest rate 1 year or less
%
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years Over 5 years
$'000
$'000
Remaining
contractual
maturities
$'000
-
-
-
1,201
404
559
2,164
-
-
-
-
-
-
-
-
-
-
-
-
1,201
404
559
2,164
The cash flows in the maturity analysis above are not expected to occur earlier than contractually disclosed above.
Note 22. 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 23. 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
Note 24. Contingent liabilities
The Group had no contingent liabilities at 30 June 2019 and 30 June 2018.
Consolidated
2019
$
2018
$
115,990
100,000
46
55
Audinate Annual Report 2019 | Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 25. Commitments
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Property, plant and equipment
Intangible assets
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
Consolidated
2019
$'000
2018
$'000
492
450
719
2,984
64
3,767
-
-
385
742
-
1,127
Property, plant and equipment capital commitments represent outstanding fit-out costs for the new Head office.
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 26. 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 27. Related party transactions
Parent entity
Audinate Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 28.
Consolidated
2019
$
2018
$
1,724,319
84,583
289,868
1,537,944
64,550
117,368
2,098,770
1,719,862
Key management personnel
Disclosures relating to key management personnel are set out in note 26 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.
56
47
| Audinate Annual Report 2019Notes to the consolidated financial statementsfor the year ended 30 June 2019 Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 27. Related party transactions (continued)
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 2019 was $91,237
(2018: $90,738), inclusive of a loan outstanding to Aidan Williams of $40,650 (2018: $38,731).
There were no other loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 28. 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 29. Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax benefit for the year
Adjustments for:
Depreciation and amortisation
Share-based payments
Net unrealised foreign exchange gain
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase in inventories
Increase in deferred tax assets
Decrease/(increase) in current tax asset
Increase in other operating assets
Increase/(decrease) in trade and other payables
Decrease in income tax payable
Increase/(decrease) in other operating liabilities
Ownership interest
2018
2019
%
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Consolidated
2019
$'000
2018
$'000
662
2,544
2,419
686
(29)
(1,063)
(578)
(187)
1,344
(722)
117
(4)
971
1,452
235
-
211
(458)
(1,874)
(442)
(30)
(434)
-
(167)
Net cash from operating activities
3,616
1,037
48
57
Audinate Annual Report 2019 | Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 30. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Net assets
Equity
Contributed capital
Reserves
Accumulated losses
Total equity
Parent
2019
$'000
2018
$'000
(1,303)
(1,303)
1,344
1,344
Parent
2019
$'000
2018
$'000
29,668
15,370
91,111
73,976
419
419
2,757
2,757
90,692
71,219
91,424
921
(1,653)
71,569
-
(350)
90,692
71,219
The contributed capital of the parent entity differs from the contributed capital of the Group, as Audinate Group Limited’s
acquisition of Audinate Pty Limited was accounted for on the basis that the transaction was a form of capital reconstruction
and group reorganisation, rather than a business combination.
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 2019 and 30 June 2018.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 30 June 2018.
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.
58
49
| Audinate Annual Report 2019Notes to the consolidated financial statementsfor the year ended 30 June 2019 Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 31. Share-based payments
Options
Under the legacy Employee Share Option Plan ('ESOP'), the Company’s Board of Directors ('Board'), or a committee of the
Board, granted 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
legacy ESOP was 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. The legacy ESOP has been superseded by the LTI plan which is explained in
the remuneration report.
Set out below are summaries of options granted under the plan:
2019
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
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
Balance at
the start of
the year
$0.0360
$0.0620
$0.0620
$0.0620
$0.0620
$0.0620
$0.2600
$0.2600
$0.2600
30,000
448,042
10,000
10,000
42,000
460,000
158,000
508,800
48,000
1,714,842
Granted
Exercised
Expired/
forfeited/
other*
Balance at
the end of
the year
-
-
-
-
-
-
-
-
-
-
(30,000)
(78,000)
-
-
(32,000)
(200,000)
(23,000)
(131,502)
(8,000)
(502,502)
-
-
-
-
-
-
-
(4,498)
-
(4,498)
-
370,042
10,000
10,000
10,000
260,000
135,000
372,800
40,000
1,207,842
*
Other includes the impact of cashless exercise
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
$0.0360
$0.0620
$0.0620
$0.0620
$0.0620
$0.0620
$0.2600
$0.2600
$0.2600
$0.2600
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
1,207,842 options were exercisable at the end of the financial year (2018: 1,714,842).
The weighted average share price of the Company during the financial year was $5.47 (2018: $2.95).
50
59
Audinate Annual Report 2019 | Audinate Group Limited
Notes to the consolidated financial statements
30 June 2019
Note 31. Share-based payments (continued)
Share Rights
Set out below are summaries of performance rights granted:
2019
Grant date
Expiry date
30/06/2017
02/08/2017
29/06/2018
26/03/2019
30/06/2022
15/09/2019
30/06/2022
31/08/2022
2018
Exercise
price
Balance at
the start of
the year
Granted
Exercised
$0.0000
$0.0000
$0.0000
$0.0000
1,038,509
1,995,000
34,566
-
3,068,075
-
-
-
487,557
487,557
Grant date
Expiry date
30/06/2017
02/08/2017
29/06/2018
30/06/2022
15/09/2019
30/06/2022
Exercise
price
$0.0000
$0.0000
$0.0000
Balance at
the start of
the year
Granted
Exercised
1,038,509
-
-
1,038,509
-
1,995,000
34,566
2,029,566
Expired/
forfeited/
lapsed/other
Balance at
the end of
the year
(17,705)
-
-
-
(17,705)
1,020,804
1,995,000
34,566
487,557
3,537,927
Expired/
forfeited/
lapsed/other
Balance at
the end of
the year
-
-
-
-
1,038,509
1,995,000
34,566
3,068,075
-
-
-
-
-
-
-
-
-
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 1
year (2018: 3 years).
The performance rights issued on 26 March 2019 were externally valued based on a share price of $3.54, an exercise
price of zero, volatility of 20%-30%, a risk-free interest rate of 2.06% and probability weighting reflecting the probability of
meeting the vesting conditions. The fair value of the share rights based on these inputs is $2.1813.
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 32. Events after the reporting period
The Group completed a Share Purchase Plan on 10 July 2019 which raised $4,000,003 of cash and resulted in the issue of
571,429 ordinary shares on this date.
No other matter or circumstance has arisen since 30 June 2019 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.
60
51
| Audinate Annual Report 2019Notes to the consolidated financial statementsfor the year ended 30 June 2019
Audinate Group Limited
Directors' declaration
30 June 2019
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
2019 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
23 August 2019
Sydney
52
61
Audinate Annual Report 2019 |Directors’ declarationfor the year ended 30 June 2019
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Grosvenor Place
Sydney, NSW, 2000
225 George Street
Australia
Sydney, NSW, 2000
Australia
Phone: +61 2 9322 7000
www.deloitte.com.au
Phone: +61 2 9322 7000
www.deloitte.com.au
Independent Auditor’s Report to the members of
Independent Auditor’s Report to the members of
Audinate Group Limited
Audinate Group Limited
Report on the Audit of the Financial Report
Report on the Audit of the Financial Report
Opinion
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 2019, the consolidated
We have audited the financial report of Audinate Group Limited (the “Company”) and its subsidiaries (the
statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity
“Group”) which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated
and the consolidated statement of cash flows for the year then ended, and notes to the financial statements,
statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity
including a summary of significant accounting policies and other explanatory information, and the directors’
and the consolidated statement of cash flows for the year then ended, and notes to the financial statements,
declaration.
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:
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 2019 and of its financial
performance for the year then ended; and
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial
performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
(i)
(ii)
(ii)
Basis for Opinion
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
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
of our report. We are independent of the Group in accordance with the auditor independence requirements of
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section
the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
of our report. We are independent of the Group in accordance with the auditor independence requirements of
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
Code.
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
We confirm that the independence declaration required by the Corporations Act 2001, which has been given
auditor’s report.
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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network
53
53
62
| Audinate Annual Report 2019Independent auditor’s report
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.
Key Audit Matter
Deferred tax assets and recoverability
As at 30 June 2019 the Group has recognised Deferred
tax assets to the value of $2.278 million as disclosed
in Note 8. Of this amount, $1.153 million relates to
carried forward tax losses arising from the 2019 R&D
claim.
Judgement is required in determining the amount of
the claim and the recoverability of these losses is also
dependent upon a number of factors including,
whether there will be sufficient taxable profits in
future periods to support recognition.
How the scope of our audit responded to the
Key Audit Matter
Our audit procedures included, but were not limited
to:
•
•
•
•
•
•
for
future
taxable profit
Comparing forecasts to Board approved
business plans;
Assessing historical forecasting accuracy by
comparing actual performance to budgets;
Testing on a sample basis, management’s
model
for
mathematical 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.
Engaging the use of our Deloitte Tax and
R&D specialists experts to assist with:
-
-
Reviewing of the tax calculation;
Reviewing the basis and validity of the
claim.
Capitalisation and carrying value of development costs
We also assessed the appropriateness of the
disclosures in Note 8 to the financial statements.
As at 30 June 2019, the group has capitalised
development costs
totalling $6.863 million as
disclosed in Note 15.
The group capitalises internal and external costs that
are directly attributable to the development of
intangible assets.
As disclosed in Note 3, significant judgement is
involved
for
capitalisation of such costs has been met, particularly
in determining:
in assessing whether the criteria
•
•
The appropriateness of the costs that can be
capitalised and whether these costs were
directly attributable to relevant products
developed; and
The extent
these capitalised
development costs will generate sufficient
economic benefit to support their carrying
values.
to which
Our audit procedures included, but were not limited
to:
•
•
•
•
to
for
the
develop
products
recording and
Discussing
for which
development costs have been capitalised
with management
an
understanding of the nature and feasibility
of the products at 30 June 2019,
Assessing the key controls in place over the
process
identifying
qualifying costs to be capitalised,
Assessing the appropriateness of costs
capitalised, on a sample basis, by agreeing
and
the material
engineers’ hours
to external
invoices and internal timesheets and payroll
records, and
Evaluating
the appropriateness of the
carrying
capitalised
the
value
of
development costs by major product, with
reference
forecast
to historical and
cashflow, and analysis of sale trends.
overheads
incurred
costs,
We also assessed the appropriateness of the
disclosures in Note 15 to the financial statements.
54
63
Audinate Annual Report 2019 |
Key Audit Matters
Other Information
Key audit matters are those matters that, in our professional judgement, were of most significance in our
The directors are responsible for the other information. The other information comprises the information
audit of the financial report for the current period. These matters were addressed in the context of our audit
included in the Directors’ Report and ASX Additional Information, which we obtained prior to the date of this
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
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.
opinion on these matters.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.
How the scope of our audit responded to the
Key Audit Matter
Key Audit Matter
•
Deferred tax assets and recoverability
Judgement is required in determining the amount of
the claim and the recoverability of these losses is also
dependent upon a number of factors including,
whether there will be sufficient taxable profits in
future periods to support recognition.
As at 30 June 2019 the Group has recognised Deferred
tax assets to the value of $2.278 million as disclosed
in Note 8. Of this amount, $1.153 million relates to
carried forward tax losses arising from the 2019 R&D
claim.
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
Our audit procedures included, but were not limited
have performed on the other information that we obtained prior to the date of this auditor’s report, we
to:
conclude that there is a material misstatement of this other information, we are required to report that fact.
Comparing forecasts to Board approved
We have nothing to report in this regard.
business plans;
Assessing historical forecasting accuracy by
When we read the annual report, if we conclude that there is a material misstatement therein, we are required
comparing actual performance to budgets;
to communicate the matter to the directors and use our professional judgement to determine the appropriate
Testing on a sample basis, management’s
action.
model
for
mathematical accuracy;
Evaluating the recoverability of deferred tax
assets;
The directors of the Company are responsible for the preparation of the financial report that gives a true and
Recalculating deferred tax asset balances
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
which comprise a combination of timing
internal control as the directors determine is necessary to enable the preparation of the financial report that
differences between tax and accounting
gives a true and fair view and is free from material misstatement, whether due to fraud or error.
values.
Engaging the use of our Deloitte Tax and
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue
R&D specialists experts to assist with:
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
Reviewing of the tax calculation;
-
basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no
Reviewing the basis and validity of the
-
realistic alternative but to do so.
claim.
Responsibilities of the Directors for the Financial Report
•
taxable profit
future
for
•
•
•
•
Auditor’s Responsibilities for the Audit of the Financial Report
We also assessed the appropriateness of the
disclosures in Note 8 to the financial statements.
•
•
the
products
Capitalisation and carrying value of development costs
As at 30 June 2019, the group has capitalised
development costs
totalling $6.863 million as
disclosed in Note 15.
The group capitalises internal and external costs that
are directly attributable to the development of
intangible assets.
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.
Our audit procedures included, but were not limited
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
to:
they could reasonably be expected to influence the economic decisions of users taken on the basis of this
for which
Discussing
financial report.
development costs have been capitalised
an
with management
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
understanding of the nature and feasibility
and maintain professional scepticism throughout the audit. We also:
of the products at 30 June 2019,
Assessing the key controls in place over the
process
identifying
qualifying costs to be capitalised,
Assessing the appropriateness of costs
capitalised, on a sample basis, by agreeing
and
the material
engineers’ hours
to external
invoices and internal timesheets and payroll
records, and
the appropriateness of the
Evaluating
carrying
capitalised
the
value
of
development costs by major product, with
reference
forecast
to historical and
cashflow, and analysis of sale trends.
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.
The appropriateness of the costs that can be
capitalised and whether these costs were
directly attributable to relevant products
developed; and
The extent
these capitalised
development costs will generate sufficient
economic benefit to support their carrying
values.
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.
As disclosed in Note 3, significant judgement is
involved
for
capitalisation of such costs has been met, particularly
in determining:
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
in assessing whether the criteria
recording and
overheads
to which
incurred
develop
costs,
for
to
•
•
•
•
•
•
•
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
We also assessed the appropriateness of the
conditions that may cast significant doubt on the Group ability to continue as a going concern. If we
disclosures in Note 15 to the financial statements.
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.
•
64
55
54
| Audinate Annual Report 2019Independent auditor’s report
•
Key Audit Matters
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.
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
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
business activities within the Group to express an opinion on the financial report. We are responsible
opinion on these matters.
for the direction, supervision and performance of the Group’s audit. We remain solely responsible for
our audit opinion.
Key Audit Matter
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.
Deferred tax assets and recoverability
How the scope of our audit responded to the
Key Audit Matter
•
•
•
Our audit procedures included, but were not limited
to:
As at 30 June 2019 the Group has recognised Deferred
tax assets to the value of $2.278 million as disclosed
in Note 8. Of this amount, $1.153 million relates to
carried forward tax losses arising from the 2019 R&D
claim.
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.
Judgement is required in determining the amount of
the claim and the recoverability of these losses is also
dependent upon a number of factors including,
whether there will be sufficient taxable profits in
future periods to support recognition.
Comparing forecasts to Board approved
business plans;
Assessing historical forecasting accuracy by
From the matters communicated with the directors, we determine those matters that were of most significance
comparing actual performance to budgets;
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
Testing on a sample basis, management’s
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
model
for
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
mathematical accuracy;
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
Evaluating the recoverability of deferred tax
benefits of such communication.
assets;
Recalculating deferred tax asset balances
which comprise a combination of timing
differences between tax and accounting
values.
Engaging the use of our Deloitte Tax and
R&D specialists experts to assist with:
-
-
We have audited the Remuneration Report included on pages 17 to 26 of the Directors’ Report for the
year ended 30 June 2019.
Report on the Remuneration Report
Opinion on the Remuneration Report
taxable profit
future
Reviewing of the tax calculation;
Reviewing the basis and validity of the
claim.
In our opinion, the Remuneration Report of Audinate Group Limited, for the year ended 30 June 2019, complies
with section 300A of the Corporations Act 2001.
for
•
•
•
We also assessed the appropriateness of the
disclosures in Note 8 to the financial statements.
Responsibilities
Capitalisation and carrying value of development costs
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
Our audit procedures included, but were not limited
the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
to:
As at 30 June 2019, the group has capitalised
development costs
totalling $6.863 million as
disclosed in Note 15.
The group capitalises internal and external costs that
are directly attributable to the development of
intangible assets.
DELOITTE TOUCHE TOHMATSU
As disclosed in Note 3, significant judgement is
involved
for
capitalisation of such costs has been met, particularly
in determining:
in assessing whether the criteria
•
The appropriateness of the costs that can be
capitalised and whether these costs were
directly attributable to relevant products
Helen Hamilton-James
developed; and
Partner
•
The extent
these capitalised
Chartered Accountants
development costs will generate sufficient
Sydney, 23 August 2019
economic benefit to support their carrying
values.
to which
•
•
•
•
to
for
the
develop
products
recording and
for which
Discussing
development costs have been capitalised
with management
an
understanding of the nature and feasibility
of the products at 30 June 2019,
Assessing the key controls in place over the
process
identifying
qualifying costs to be capitalised,
Assessing the appropriateness of costs
capitalised, on a sample basis, by agreeing
and
the material
engineers’ hours
to external
invoices and internal timesheets and payroll
records, and
the appropriateness of the
Evaluating
carrying
capitalised
the
value
of
development costs by major product, with
reference
forecast
to historical and
cashflow, and analysis of sale trends.
overheads
incurred
costs,
We also assessed the appropriateness of the
disclosures in Note 15 to the financial statements.
56
54
65
Audinate Annual Report 2019 |
SHAREHOLDER INFORMATION AS AT 26 AUGUST 2019
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
Smallco Investment Manager Limited
Date of
Notice
Number of
Securities
10/07/2017
6,289,308
31/08/2018
5,675,902
%
10.57
9.31
Number of security holders and securities on issue
Audinate Group Limited has issued the following securities:
a. 64,917,226 fully paid ordinary shares held by 7,731 shareholders;
b. 1,157,842 unlisted options held by 25 option holders; and
c. 3,537,927 unlisted performance rights held by 27 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 quoted security holders
Fully Paid Ordinary shares
Holders
Shares
3,684
1,732,330
2,983
6,856,959
621
412
4,477,094
8,375,442
31
43,475,401
%
2.67
10.56
6.90
12.90
66.97
7,731
64,917,226
100.00
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
66
| Audinate Annual Report 2019Shareholder information Unmarketable parcel of shares
The number of shareholders holding less than a marketable parcel of ordinary shares is 143 based on Audinate Group Limited’s
closing share price of $6.85 on 26 August 2019.
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 Pty Limited
HSBC Custody Nominees (Australia) Limited*
3.
Yamaha Corporation
4
5
6
7
8
9
National Nominees Limited
Citicorp Nominees Pty Limited
Mr Aiden Michael Williams
Mr David John Myers
Geetha Varuni Witana
HSBC Custody Nominees (Australia) Limited - A/C 2
10 Mirrabooka Investments Limited
11 Neweconomy Com Au Nominees Pty Limited <900 Account>
12 BNP Paribas Nominees Pty Ltd
13 RJWX3 Family Superannuation Managers Pty Ltd
14 CS Fourth Nominees Pty Limited
15 BNP Paribas NOMS Pty Ltd
16 UBS Nominees Pty Ltd
17 Mr Chris Ware
18
ITR Investments Pty Limited
19 Mr David Krall
20 Bond Street Custodians Limited
Total
Total on Register
No. of shares
13,423,565
7,398,544
6,289,308
3,252,761
2,111,325
1,910,087
990,000
934,882
544,372
533,199
528,895
443,058
411,980
385,238
366,938
360,586
347,061
340,083
293,958
233,353
%
20.68
11.40
9.69
5.01
3.25
2.94
1.53
1.44
0.84
0.82
0.81
0.68
0.63
0.59
0.57
0.56
0.53
0.52
0.45
0.36
41,099,193
60.57
64,917,226
100.00
* This holding includes 520,671 shares beneficially held by Mr Richard White. Mr White is also a director of RJWX3 Family
Superannuation Managers Pty Ltd and beneficiary of the RJWX3 Family Superannuation Fund (which holds 411,980 Audinate
shares). The holdings combined equate to 932,651 shares which represents 1.44% of the Company’s issued capital.
67
Audinate Annual Report 2019 | Restricted securities and securities subject to voluntary escrow
There are no restricted securities or shares under voluntary escrow.
Unquoted securities
There are 1,157,842 unquoted options with varying exercise prices and expiry dates held by 25 options holders. All options are held
under the Company’s employee incentive scheme.
There are 3,537,927 unquoted Performance Rights held by 27 performance right holders. All Performance Rights are held under the
Company’s employee incentive scheme.
On market buy-back
There is no current on market buy-back.
68
| Audinate Annual Report 2019Shareholder information 69
Audinate Annual Report 2019 | www.audinate.com