ANNUAL REPORT 2020
Contents
FY20 Financials
2
Chairman’s Letter
4
CEO’s Report
6
10 Directors’ Report
30 Auditor’s Independence Declaration
Consolidated Financial Statements
31
Audinate Group Limited ABN 56 618 616 916
35 Notes to the Consolidated Financial Statements
69 Directors’ Declaration
70
74 Shareholder Information
IBC Corporate Directory
Independent Auditor’s Report
Global leader
in audio
networking,
distributing high
quality digital
audio signals
over computer
networks
1
Audinate Annual Report 2020 | FY20 Financials
Revenue
A$30.3m
• 31% growth in Dante-
enabled products available
on the market
EBITDA
A$2.0m
Gross Margin
76.6%
Cash on hand
A$29.3m
• 8.2 times more products
than the nearest audio
networking competitor
• 21% increase in OEMs
shipping Dante-enabled
products
• 30% increase in software
revenue
• 57,000 people trained on
Dante this year
Growing network effect
Number of Dante-enabled products drives economic network effect
2,804
2,134
1,639
1,182
874
553
FY15
FY16
FY17
FY18
FY19
FY20
CAGR 38% in
number of
Dante-enabled
products
available in
the market
Note: per financial year
2
| Audinate Annual Report 2020 3
Audinate Annual Report 2020 | Dear Shareholders,
On behalf of the Directors, I am pleased to present the
Audinate Group Limited Annual Report for the Financial Year
ended 30 June 2020 (FY20). The business continues to make
good progress in achieving its medium-term objectives despite
a very challenging revenue environment in the second half of
the fiscal year.
The uptake of our new Dante products has been particularly
encouraging with the number of design wins across Dante
video, Dante Embedded Platform, Dante Application Library
and IP Core representing a strong market endorsement of
these products. Notably, the Dante Embedded Platform
introduces the ability of an end-user to add Dante to an
existing AV product in the field. This is a significant step for
the evolution of our business model and something that we
expect to aid the proliferation of our technology.
This product development requires new business infrastructure
to enable and support it. Accordingly, it is pleasing to see the
progress Audinate has made this year in terms of code protection
and in-field licensing and enablement. The fulfillment of these
capabilities is an essential strategic objective for the year ahead.
The establishment of a manufacturing line in Malaysia was
initiated to address the imposition of US tariffs on Chinese
imports. As it turned out, this provided critical business
continuity and enabled us to maintain supply, as many others
experienced disruption. The opening of our office in the
Philippines, in the midst of COVID-19, was another important
step in building out the business platform to support growth
and achieve operational efficiencies.
We have made important progress in the video market
this year, delivering our Dante AV Product Design Suite
to customers in April, securing a number of design wins,
facilitating a demo of the first Dante video camera by Bolin,
and launching the Authorised Implementer Program to enable
production of white-labelled Dante video products. The launch
of the first Dante video products by our customers will be
another key milestone we expect to achieve in the year ahead.
2020 has been a particularly tumultuous time for even the most
seasoned CEOs, let alone for one in his first year in the seat.
In that respect Aidan has done a fantastic job in responding
to a once in a generation environment and dealing with all the
operational and day-to-day challenges that have unexpectedly
emerged. The Board have all been impressed by the mature
and calm way he has managed to balance immediate tactical
demands with an ongoing focus on strategic imperatives.
We are also fortunate to have the level of depth, experience
and expertise within our Executive Leadership Team that have
made an invaluable contribution in supporting Aidan this year.
As a Board we have tried to balance the risks and concerns
which have arisen from the global uncertainty and dislocation
with the opportunities that emerge in challenging times. This is
an environment where caution and respect for capital is critical,
but it is also equally important to seize the breaks when they
emerge. This may be a seminal moment for the AV industry
and signal an acceleration in the conversion from traditional
analogue cabling to networked audio. Our conviction in the
strength of our technology, quality of our strategy, and size of
the nascent opportunities were key considerations in deciding
to raise more capital.
Subsequent to year-end Audinate completed a $40 million
equity raise in July and August of 2020. This was an important
step in restoring the Group’s growth capital, de-risking the
business from ongoing uncertainties and impacts of COVID-19,
and enhancing our ability to consider strategic acquisitions.
We retain a strong conviction in our business strategy to enable
a transformation of the AV industry and genuinely appreciate
the support of our institutional and retail shareholders in
backing this vision.
On behalf of the Board we would also like to recognise and
thank Aidan and the entire staff of Audinate for their persistence,
dedication, and teamwork in the extremely challenging and
demanding environment that we have experienced this year.
We remain confident that the milestones being achieved in the
near term will position Audinate and our stakeholders to benefit
from the inevitable economic recovery to come.
DAVID KRALL
Chairman
4
Chairman’s Letter| Audinate Annual Report 2020 “ We remain confident that the
milestones being achieved in the
near term will position Audinate
and our stakeholders to benefit
from the inevitable economic
recovery to come.”
5
Audinate Annual Report 2020 | In FY20 Audinate made good progress in delivering against
its medium-term objectives, albeit in a challenging revenue
environment due to the impact of COVID-19 in Q4.
Whilst dealing with the short-term impacts of COVID-19, the
business has focused upon longer term strategic priorities
and priming the pump for recovery. Today, the majority of
our revenue derives from supplying Dante audio networking
components to manufacturers of professional AV equipment
and is related to the volume of pro-AV equipment being sold.
However, Audinate does not directly influence demand for
pro-AV equipment. By way of analogy, Intel’s revenue increases
when Dell sells more laptops with one of their chips built inside,
however changes in pricing by Intel does not necessarily cause
more people to buy Dell laptops. Further, in many cases our
technology represents a small proportion of the bill of materials
cost for a product and price reductions for our technology are
not expected to markedly drive increased sales.
Therefore, our energies have been focused on how we can
increase the number of AV products using our technology and
stimulating demand for networked audio products generally by
increasing knowledge and awareness of Dante technology and
its associated benefits.
Importance of Design Wins
The first step in getting another Dante-enabled product to
market is convincing an Original Equipment Manufacturer
(OEM) to purchase a Dante implementation of some kind –
we term this a “design win”. A manufacturer designing their
first networked audio product, or an existing customer, may
purchase a different Dante implementation option to broaden
the application of Dante within their portfolio. Each design win
has a meaningful up-front fee to cover customer support costs
and signals commitment to the adoption of Dante.
Following a design win it typically takes 12-18 months for a
manufacturer to design a new Dante-enabled product and
make it available for shipping. Audinate receives orders for
Dante implementations in chip, module, or software royalty
form each time Dante-enabled products are manufactured.
A stream of regular repeat orders associated with
manufacturing runs is created for each new Dante-enabled
product. Successive Dante-enabled product designs are
usually completed more quickly as our penetration within
their product portfolio grows.
Around a year ago, we released a new software Dante
implementation called Dante Embedded Platform (DEP).
It is a flexible software implementation that scales from single
audio channel speakers & microphones to larger multi-channel
products like mixing consoles and signal processors. DEP
software can share a chip with software provided by the
manufacturer greatly reducing cost by eliminating additional
chips and circuitry needed to add Dante support to a product.
DEP enables Dante proliferation as it can be incorporated into
a manufacturer’s platform once and then deployed into a range
of products with widely varying channel counts. In comparison,
chip and module products require different electronic circuit
designs as the channel count varies incurring engineering
effort for each design variation.
Another strategically important aspect of software
implementations like DEP is the ability to add Dante to a
product already in the field. Furthermore, it is also possible
to upgrade products in the field beyond a base level of
Dante support included at manufacturing time. We are very
excited to see this vision fulfilled by Dante Embedded Platform
in a commercially successful product launched by QSC in
April 2020.
Importance of training
Whilst we are very pleased to have established Dante as
the de-facto standard in audio we are still very early in the
transition from analogue cabling to networking. As such
there are many industry professionals still running cables for
a living. Our certification training courses play an important
role in teaching them the basics of networking, familiarising
them with Dante and credentialing them for their customers.
The aim being to provide them with knowledge and confidence
to specify, install and use Dante.
There are three levels of certification and in many countries,
they count towards Continuing Professional Development
(CPD) points for industry professionals. Historically we have
delivered training at face to face events and via a learning
portal, but with the onset of COVID-19 we switched to
webinars. We have also added full time training resources
in the UK and Mexico to complement our two US based
resources and this has also enabled us to extend training
to nine different languages. As a result, in FY20 we held
82 webinars (FY19: 6) and trained about 57,000 people
on Dante, up 185% from the prior year.
6
CEO’s Report| Audinate Annual Report 2020 as headcount increased to 123, as well as $0.6 million of one-
off costs associated with retirement of the former CEO Lee
Ellison. The overall impact of these factors led to a decline in
EBITDA to approximately A$2.0 million (FY19: $2.8 million).
COVID-19 also necessitated a review of tax losses that
the Group had recorded as an asset on its balance sheet.
The Group retains access to these tax losses to apply against
taxable income in future periods and may re-recognise them
as an asset when greater certainty returns. This was the
main reason that Audinate recorded a net loss after tax of
A$4.1 million.
Equity Raise
The $40 million equity raise that the business completed in
July and August 2020 was an important step in replenishing
our growth capital, de-risking the business from any ongoing
impacts from COVID-19 and restoring our ability to consider
strategic M&A. We appreciate that our shareholders share our
conviction around the opportunity and long-term strategy for
Audinate.
Conclusion
Lastly, I would like to thank both the Board and all the staff at
Audinate for their support during my first year in the CEO role.
Despite the challenging environment I have thoroughly enjoyed
FY20 and am immensely satisfied with the progress we are
making in fulfilling the vision we have for Audinate. We have a
dedicated, energetic and creative team at Audinate, and I am
looking forward to the year ahead, making further progress in
fulfilling our vision to “Pioneer the Future of AV”.
AIDAN WILLIAMS
Chief Executive Officer
Operational results
We continued to see strong growth in the number of Dante
enabled products released by equipment manufacturers,
with 31% growth in the product catalogue to 2,804 products
at the end of FY20. Historically tradeshows have been an
important platform for the release of new products, so it is
particularly reassuring that the cancellation of tradeshows has
not adversely impacted new product releases. As a result, we
now have more than 8 times the number of products available
than our next nearest audio networking competitor (up from
6x 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. For end-users, the ecosystem is more attractive
based not just on the number of Dante enabled products, but
also due to the breadth of products available and the multitude
of brand choices.
Another important measure of the proliferation of the
technology is the number of OEMs adopting Dante and
releasing new products. During the year, the number of OEMs
with Dante enabled products increased 21% to 328. There are
design wins with a further 179 OEMs who are in the process
of designing and releasing their first product, representing a
pipeline for further growth.
Our Chairman has already spoken to some of the other
operational achievements during FY20 and I echo his
sentiments around Dante video and the building out of the
infrastructure needed to support the evolution of our business
model. Both areas will continue to be key objectives for further
progress during FY21.
Financial Results
Gross profit increased over FY20 by 10.1% to A$23.2 million,
due to an improved gross profit margin of 76.6% and a 7.1%
increase in revenue primarily due to USD/AUD exchange rate
benefits. In USD, revenue was US$20.4 million compared
to US$20.3 million in the prior year, reflecting the Q4 FY20
impact COVID-19.
As customers transition to new software-based Dante
implementations, Audinate expects to see margin
improvement. Accordingly, growth in gross profit dollars is
becoming a more significant measure of performance than
revenue growth alone.
Dollar amounts referenced from this point onwards are
exclusively Australian dollars.
Operating costs, which consist primarily of staff costs,
marketing expenses and administration & other operating
expenses, increased to $21.2 million. The increase was
primarily due to a $3.1 million increase in employee costs
7
Audinate Annual Report 2020 | Audinate Group Limited
ABN 56 618 616 916
Directors’ Report and
Financial Statements
– 30 June 2020
8
| Audinate Annual Report 2020
Contents
10 Directors’ Report
30 Auditor’s Independence Declaration
31
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
32 Consolidated Statement of Financial Position
33 Consolidated Statement of Changes In Equity
34 Consolidated Statement of Cash Flows
35 Notes to the Consolidated Financial Statements
69 Directors’ Declaration
70
74 Shareholder Information
IBC Corporate Directory
Independent Auditor’s Report to the Members of Audinate Group Limited
9
Audinate Annual Report 2020 |
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 2020.
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
Aidan Williams (Appointed on 16 September 2019)
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
Lee Ellison (Resigned on 13 September 2019)
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 2020, the Group reported an increase in revenue of 7.1% to $30.3 million from $28.3 million in the
prior year ended 30 June 2019. Gross margin grew 10.1% from $21.1 million for the prior year to $23.2 million for the year ended
30 June 2020. Gross margin percent also improved to 76.6% from 74.4% for the year due to favourable product mix of more
software sales relative to lower margin chip sales.
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.
Consolidated
2020
$’000
(4,138)
(320)
(503)
(11)
117
2,465
4,422
2,032
2019
$’000
662
(192)
–
(104)
–
(20)
2,419
2,765
(Loss)/profit after income tax (expense)/benefit for the year
Interest revenue
Grant income
Other income
Finance costs
Income tax expense/(benefit)
Depreciation and amortisation
EBITDA
10
Directors’ Report| Audinate Annual Report 2020 The Group has grown the number of OEM customers shipping Dante enabled products to 328 OEMs at 30 June 2020, up
21.5% from 270 at 30 June 2019. 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 2,804 products, up 31.4% from 2,134 at 30 June 2019. Whilst Audinate continued to experience
growth in key business metrics this did not fully translate into growth in revenue and units as the AV industry experienced
headwinds from global economic conditions, including the impact of COVID-19 and US tariffs on Chinese imports.
Operating expenses, which consist of employee benefit expenses, marketing expenses and administration and other operating
expenses increased by approximately 15.8% to $21.2 million in the year ended 30 June 2020 from $18.3 million in the prior year.
This increase was primarily due to $3.1 million increase in employee costs as the Group invested in additional headcount and
$0.6 million of costs incurred as a result of Lee Ellison’s (former CEO) retirement at the end of 2019. In response to the impacts of
COVID-19 the Group made 8 roles redundant in June 2020 at a one-off cost of $0.1 million recorded within employment costs.
EBITDA was $2.0 million in the year ended 30 June 2020 compared to $2.8 million in the prior year.
AASB 16 ‘Leases’ was applied for the year ended 30 June 2020 but not for the prior year. The table above therefore shows
EBITDA calculated under two different lease accounting policies applied for these respective years. Had the Group applied
AASB 16 in the prior year EBITDA would have been $3.4 million.
As a result of COVID-19 related stimulus initiatives the Group has received $434,000 in JobKeeper support payments, a
$50,000 cash flow boost from the Australian Government and a $19,000 small business grant from the UK Government. All of
these amounts were recorded in other income and are therefore excluded from the calculation of EBITDA.
In addition to these stimulus amounts, COVID-19 also necessitated a review of tax losses that the Group had recorded as
an asset on its balance sheet. Given the adverse impact on revenue in FY20 and the ongoing uncertainty in FY21 the Group
considered it prudent and appropriate to write-off tax losses of approximately $3.6 million at year end. These tax losses include
the benefit of research and development tax offsets, which the Group expects to continue to receive in future years. The Group
retains access to these tax losses to apply against taxable income in future periods and may re-recognise them as an asset when
greater certainty returns.
During FY20 there was a $2.0 million increase in depreciation and amortisation largely as a result of increased development
spending and the amortisation of the right of use assets due to the change in lease accounting standard. As a result of all these
items the Group recorded a net loss after tax $4.1 million compared to net profit after tax of $0.7 million in the prior year.
Significant changes in the state of affairs
During the second half of FY20 COVID 19 had a significant impact on the Group causing revenue to drop approximately 25%
(in USD terms) from Q3 to Q4. The main segments that Audinate’s products target have all been impacted to varying degrees:
from live sound being negatively impacted to higher education being favourably impacted by the transition to remote learning
models. This uncertainty is expected to continue into FY21 and was one of the reasons that prompted the Group to undertake
the equity raising.
Around 12 months ago, the Group completed a Share Purchase Plan (10 July 2019) which raised $4 million of cash and resulted
in the issue of 571,429 shares. A further equity raising was recently completed and is described in matters subsequent to the end
of the financial year.
Lee Ellison retired as CEO and director of the Company on 13 September 2019 and was 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 an institutional placement on 22 July 2020 which raised $28 million of cash and resulted in the issue of
5,436,894 ordinary shares on this date. In addition, a Share Purchase Plan was completed on 17 August 2020 which raised
$12 million of cash and resulted in the issue of 2,343,750 ordinary shares on this date.
No other matter or circumstance has arisen since 30 June 2020 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.
11
Audinate Annual Report 2020 | Likely developments and expected results of operations
The Group’s growth strategy is multi-faceted and seeks to:
l continue to grow the OEMs adopting Dante;
l increase the adoption of Dante across a customer’s product portfolio to expand the ecosystem of available Dante enabled
products;
l 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
l 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 continue to focus on the sale of Dante Video, Dante Embedded Platform and Dante
Application Library 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.
Proceeds from the Equity Raising completed subsequent to end of FY20 will be used to accelerate Audinate’s growth
opportunities, and strengthen its global leadership position in the AV-industry, while developing its video capabilities. Specifically,
the proceeds will be used to:
l increase investment in engineering, R&D capabilities and business infrastructure to extend Audinate’s market leading position in
the audio networking space;
l strengthen the Company’s balance sheet position in the uncertain COVID-19 period;
l accelerate investment in additional video and software products; and
l provide flexibility to pursue potential M&A opportunities that complement the Company’s medium-term objectives.
Environmental regulation
The Group is not directly subject to any significant environmental regulation under Australian Commonwealth or State law.
Information on Directors
Name:
Title:
Qualifications:
Experience and expertise:
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)
Other current directorships:
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:
Member of the Remuneration and Nomination Committee
Interests in shares:
400,000 ordinary shares
Interests in options:
80,000 options over ordinary shares
Interests in rights:
None
12
Directors’ Report| Audinate Annual Report 2020 Name:
Title:
Qualifications:
Experience and expertise:
Aidan Williams (Appointed on 16 September 2019)
Chief Executive Officer
Aidan has a BSc in Computer Science, and a BEng (Hons I) in Electrical Engineering, both
from the University of New South Wales (UNSW), Australia.
Aidan Williams is co-founder and CEO of Audinate. While at the National ICT Australia
(NICTA), he was the driving force behind the Digital Audio Networking project that developed
the fundamental audio networking technology behind Dante. Prior to joining NICTA, Aidan
was at Motorola Labs in Sydney where he worked on advanced networking technologies
including zero-configuration IP networking, IPv6, reliable multicast, mobile adhoc networking
and residential gateways. He is an inventor on more than twenty patents related to IP
networking. Before embarking on an R&D career; Aidan developed extensive skills in
networking, security, operating systems, and software development through several years
of hands-on experience managing large networks, mission-critical systems and network
security for a large university campus.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
None
Interests in shares:
1,910,907 ordinary shares
Interests in options:
None
Interests in rights:
276,512 performance rights over ordinary shares
Name:
Title:
Qualifications:
Experience and expertise:
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., Aktana Inc., Design Crowd Pty Ltd and Hearables 3D Pty Limited. John is
also a director at the Walter and Eliza Hall Institute of Medical Research. Formerly, John
was General Manager (Australia) of JAFCO Investment (Asia Pacific), a Singapore based
private equity manager. Prior to joining JAFCO, John worked in the investment banking and
stockbroking industries for Schroders, Nomura Securities, KPMG and ANZ McCaughan.
Other current directorships:
Director of Nitro Software Ltd (ASX: NTO)
Former directorships (last 3 years): None
Special responsibilities:
Member of the Remuneration and Nomination Committee and the Audit and Risk
Management Committee
Interests in shares:
184,429 ordinary shares
Interests in options:
Interests in rights:
None
None
13
Audinate Annual Report 2020 | Name:
Title:
Roger Price
Non-Executive Director
Qualifications:
Roger has an Engineering degree from the University of Technology, Sydney.
Experience and expertise:
Roger is currently the Chief Executive Officer of Windlab Limited, a wind energy company
(which was listed on the ASX until it was sold and delisted on 29 June 2020). 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.
Other current directorships:
None
Former directorships (last 3 years):
Formerly Executive Chairman of Windlab Limited (ASX: WND)
Special responsibilities:
Member of the Audit and Risk Management Committee
Interests in shares:
71,156 ordinary shares
Interests in options:
Interests in rights:
Name:
Title:
Qualifications:
Experience and expertise:
None
None
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.
Other current directorships:
Non-Executive Director of Countplus Limited (ASX: CUP)
Former directorships (last 3 years): None
Special responsibilities:
Chair of the Remuneration and Nomination Committee
Interests in shares:
4,000 ordinary shares
Interests in options:
Interests in rights:
None
None
14
Directors’ Report| Audinate Annual Report 2020 Name:
Title:
Qualifications:
Experience and expertise:
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. He is a graduate and member of the Australian
Institute of Company Directors.
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:
Chair of the Audit and Risk Management Committee
Interests in shares:
125,094 ordinary shares
Interests in options:
Interests in rights:
Name:
Title:
Qualifications:
Experience and expertise:
None
None
Lee Ellison (Resigned on 13 September 2019)
Former Chief Executive Officer
Lee has a Bachelor of Science degree from 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
Special responsibilities:
None
Interests in shares:
Not applicable as no longer a director
Interests in options:
Not applicable as no longer a director
Interests in rights:
Not applicable as no longer a director
‘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.
15
Audinate Annual Report 2020 | Company Secretary
Rob Goss is the Chief Financial Officer and Company Secretary, responsible for finance, risk management and investor relations.
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 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.
Meetings of Directors
The number of meetings of the Company’s Board of Directors (‘the Board’) held during the year ended 30 June 2020, and the
number of meetings attended by each director were:
David Krall
Aidan Williams
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
Lee Ellison
Full Board
Remuneration and
Nomination Committee
Audit and Risk
Management Committee
Attended
Held
Attended
Held
Attended
Held
13
11
12
13
12
13
2
13
11
13
13
13
13
2
1
–
1
–
1
–
–
1
–
1
–
1
–
–
–
–
2
2
–
2
–
–
–
2
2
–
2
–
Held: represents the number of meetings held during the time the director held office.
Note that during the year the transition of the CEO was dealt with by the Full Board under the stewardship of the Chair of the
Remuneration and Nomination Committee.
Remuneration Report (audited)
The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance with the
requirements of the Corporations Act 2001 and its Regulations.
Key management personnel (‘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:
l Remuneration philosophy and governance
l Remuneration framework and structure
l Remuneration details
l Executive KMP contract details
l Equity-based compensation
l Additional information
l Additional disclosures relating to KMP
16
Directors’ Report| Audinate Annual Report 2020 Remuneration 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:
l Competitiveness and reasonableness;
l Linkage between executive rewards and shareholder value;
l Establishment of appropriately demanding performance hurdles for variable executive rewards; and
l 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 is currently comprised of three independent non-executive directors and the CEO and other
directors attend at the invitation of the Committee Chair.
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.
CEO
Assess each ELT member’s
current year performance based
on actual outcomes relative
to agreed key performance
indicators, individual performance
and market conditions.
Generates recommendations
to the Remuneration and
Nomination Committee on STI
payments for the current year.
Provides appropriate
recommendations to the
Remuneration and Nomination
Committee of the amount of
fixed remuneration appropriate
STI targets and LTI grants for the
future measurement period.
Remuneration and
Nomination Committee
Assess the CEO’s
recommendations with respect
to the ELT and provides
recommendations to the Board.
Reviews the CEO’s current year
performance against agreed
key performance indicators,
formulating a recommendation to
the Board on the CEO’s STI for
the current year.
Provides recommendations to
the Board on the CEO’s and
ELT’s fixed remuneration and
appropriate STI and LTI targets
for the future measurement
period, considering all relevant
market and external factors.
Board
Reviews the Remuneration
and Nomination Committee
recommendations.
Approves current year
STI payments.
Approves the remuneration
and remuneration structure for the
future measurement period,
including STI targets, LTI grants
and targets.
17
Audinate Annual Report 2020 | Independent advice
During the 2020 financial year no independent advice was sought. During the 2019 financial year the Group engaged AON Hewitt
for independent advice. AON Hewitt was paid $40,000 for this service.
Voting and feedback from Annual General Meeting (‘AGM’)
At the AGM more than 96% of the votes received supported the adoption of the remuneration report for the year ended
30 June 2019. The Company understands that some shareholders expressed support for the waiving of service conditions
but not the waiving of market conditions in respect of the retirement benefits approved at the AGM for former CEO, Lee Ellison.
This feedback will be taken into account in future analogous situations. Refer to the section headed ‘Retirement benefits to
former CEO, Lee Ellison’.
Remuneration framework and structure
Non-executive director 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 Company’s Constitution at $750,000 per annum. Any increase to the aggregate
amount needs to be approved by shareholders. Directors will seek approval from time to time, as appropriate. This aggregate
annual sum does not include any special remuneration which the Board may grant to the directors for special exertions or
additional services performed by a director for or at the request of the Group, which may be in addition to or in substitution
of the director’s fees.
The Company has entered into an appointment letter with each of its non-executive directors. Non-executive fees, inclusive of
superannuation but exclusive of GST (where applicable), are currently as follows:
Name of Non-Executive Director
Fees per annum ($)
David Krall
John Dyson
Roger Price
Alison Ledger*
Tim Finlayson**
* Chair of Remuneration and Nomination Committee
** Chair of Audit and Risk Committee
150,000
75,000
75,000
75,000
75,000
Other than the Chairman, non-executive directors also receive an additional $15,000 per annum for chairing a Board committee
and $5,000 for being a member of a Board committee.
The Chairman’s monthly board fees are fixed to US dollars at the beginning of the year based on the prevailing USD exchange
rate at the time.
18
Directors’ Report| Audinate Annual Report 2020 Summary of executive remuneration structure
Objective
Component
Form
Assessment
Attract and retain
employees with the
skills and experience
associated with the role
Incentivise and reward
achievement of annual
key performance
objectives and business
outcomes
Align motivations with
shareholder interests
and creation of
long-term value
Total Fixed
Remuneration
Short-term
Incentive
Cash and
non-cash
benefits
Market data, individual
experience and
performance
Annual performance
based on financial and
non-financial targets
Long-term
Incentive
Performance
rights to shares
Total shareholder return
relative to market
index over 3 years
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:
l participants may be entitled to receive a percentage of their fixed remuneration as an annual cash bonus;
l 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;
l corporate financial goals are 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
l 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.
In FY20 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 FY20 were targets for USD revenue, USD gross margin % and
EBITDA. These corporate financial goals were not achieved due to the impact of COVID-19 and consequently no STI was paid.
19
Audinate Annual Report 2020 | 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:
l The LTI Plan is open to participants, as determined by the Board. Participation is voluntary;
l 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;
l 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;
l 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);
l Tthe 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;
l 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;
l 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;
l 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;
l 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
l 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 75% 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:
l Additional recognition for recent out performance by an individual;
l Succession considerations around an individual assuming greater responsibilities in future years;
l Strategic importance of tasks and responsibilities assumed by an individual;
l Relative weighting of other elements of compensation, including commission plans;
l Retention purposes for key roles; and
l 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.
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.
20
Directors’ Report| Audinate Annual Report 2020 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
2) the relevant performance hurdle.
The service based 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 issued in FY20 vest at
30 June 2022 subject to achieving the performance hurdle.
The performance metric for the performance rights is aligned to the Company’s share price growth as compared to the ASX 300
Index. The ASX 300 Index has been selected as it represents the market performance of alternative companies that Audinate
shareholders may invest in. Prior year grants are measured against the ASX Emerging Companies Index.
The percentage of performance rights that vest will be as follows:
The Company’s Total Shareholder Return
performance compared to the relevant index
Percentage of performance rights to vest
<50th percentile
No vesting
≥50th percentile to 75th percentile
Pro-rata straight line vesting between 50% and 100%
≥75th percentile
100% vesting
In the event that the Company achieves a negative Total Shareholder Return (‘TSR’) that is better than the relevant 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 issued 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. No performance right grants will be
made to other key employees, outside the ELT, in respect of FY20.
Other employees received 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. No share grants will be made in respect of FY20.
Retirement benefits to former CEO, Lee Ellison
On 29 May 2019, Lee Ellison gave notice of his resignation which took effect at the end of his notice period on 29 November 2019.
The Board recommended (and shareholders subsequently approved at the AGM) the accelerated vesting of all 373,410
of the unvested performance rights held by Lee Ellison at the time of his retirement. Lee was integral to building a very
successful business over 10 plus years of service with the Group, delivering excellent shareholder returns. He also worked very
co-operatively with the Board on succession planning, acting in the best interests of shareholders and the long-term success
and growth of the Company. It should be noted that the performance hurdles associated with the grant of these performance
rights, assuming the performance hurdles were tested as at the time of the AGM and based on trading prices on the ASX at
that time, had been significantly over-achieved.
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 TSR and earnings. TSR is the key performance metric for the LTI plan.
21
Audinate Annual Report 2020 | Remuneration details
Amounts of remuneration
Details of the remuneration of KMP of the Group are set out in this section.
The KMP of the Group consisted of the following directors of Audinate Group Limited:
l David Krall – Chairman and Non-Executive Director
l Aidan Williams – Chief Executive Officer (Appointed on 16 September 2019, Formerly Chief Technology Officer)
l John Dyson – Non-Executive Director
l Roger Price – Non-Executive Director
l Alison Ledger – Non-Executive Director
l Tim Finlayson – Non-Executive Director
l Lee Ellison – Former Chief Executive Officer (Resigned on 16 September 2019)
And the following persons:
l Rob Goss – Chief Financial Officer and Company Secretary
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-based
payments
2020
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long service
leave
$
Equity-
settled
$
Total
$
147,595
81,666
77,501
88,333
88,333
–
7,085
25,085
7,663
7,663
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
21,003
27,500
136,865
559,329
9,148
–
–
304,135
503,609
–
9,148
21,003
89,502
3,778
80,518
417,534
31,278
521,518
1,963,900
Non-Executive Directors:
David Krall
(Chairman)
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
147,595
74,581
52,416
80,670
80,670
Executive Directors:
Aidan Williams
Lee Ellison*
373,961
190,326
Other KMP:
Rob Goss
312,235
1,312,454
–
–
–
–
–
–
–
–
–
*
Includes remuneration from 1 July 2019 to date of his retirement.
22
Directors’ Report| Audinate Annual Report 2020 Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-based
payments
2019
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long service
leave
$
Equity-
settled
$
Non-Executive Directors:
David Krall
(Chairman)
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
Executive Directors:
120,000
59,361
41,000
73,059
73,059
–
–
–
–
–
–
–
–
–
–
–
5,639
24,000
6,941
6,941
Lee Ellison
449,194
218,013
20,128
–
–
–
–
–
–
–
Total
$
120,000
65,000
65,000
80,000
80,000
–
–
–
–
–
146,710
834,045
Other KMP:
Rob Goss
Aidan Williams
282,666
235,437
75,398
68,870
–
–
1,333,776
362,281
20,128
20,531
20,531
84,583
3,328
4,806
8,134
54,471
88,687
436,394
418,331
289,868
2,098,770
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Executive Directors:
Aidan Williams
Lee Ellison
Other KMP:
Rob Goss
Fixed remuneration
At risk – STI
At risk – LTI
2020
2019
2020
2019
2020
2019
76%
40%
62%
56%
81%
70%
–
–
–
16%
26%
24%
60%
22%
18%
17%
19%
13%
Non-executive directors did not receive share options or other performance linked incentives during the year ended 30 June 2020
and 30 June 2019.
23
Audinate Annual Report 2020 | 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:
Contract Duration:
Target STI % of TFR:
Target LTI % of TFR:
$400,000
Ongoing
50%
75%
Notice period by individual/company:
6 months
$320,000
Ongoing
25%
50%
3 months
Restraint:
Post termination subject to non-competition
and non-solicitation of customers within USA,
Australia and UK for 12 months
Post termination subject to non-competition
and non-solicitation of customers within USA,
Australia and UK for 12 months
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:
l Remuneration packages;
l Eligibility to participate in the STI and LTI Plans;
l Notice of termination of employment provisions, with the relevant notice period of up to 3 months; and
l For some of those executives, post-employment restrictions covering non-competition, non-solicitation of clients for a
maximum duration of up to 3 months.
KMP have no entitlement to termination payments in the event of removal for misconduct.
Equity-based compensation
Issue of shares
There were no shares issued to directors and other KMP as part of compensation during the year ended 30 June 2020.
Options
There were no options over ordinary shares granted to or vested by directors and other KMP as part of compensation during the
year ended 30 June 2020.
Performance rights
The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of the executive director
and other KMP in this financial year or future reporting years are as follows:
Name
Number of
rights granted
Grant date
Expiry date
Relevant Index
Share price
hurdle for
vesting
Fair value
per right at
grant date
Aidan Williams
178,541
30/06/2017
30/06/2022
ASX Emerging Companies
Aidan Williams
57,857
26/03/2019
31/08/2022
ASX Emerging Companies
Aidan Williams
40,114
30/06/2020
31/08/2022
ASX 300
Rob Goss
Rob Goss
Rob Goss
89,270
30/06/2017
30/06/2022
ASX Emerging Companies
42,857
26/03/2019
31/08/2022
ASX Emerging Companies
21,401
30/06/2020
31/08/2022
ASX 300
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
$0.780
$2.181
$4.370
$0.780
$2.181
$4.370
24
Directors’ Report| Audinate Annual Report 2020 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 after three years.
Performance rights commence vesting upon achieving total shareholder return equal to the 50th percentile of the relevant index
and vest fully at the 75th percentile.
Performance rights granted carry no dividend or voting rights. Other than the accelerated vesting of 373,410 performance rights,
related to the retirement of the former CEO Mr Lee Ellison, no other performance rights vested during the year.
Additional information
The earnings of the Group for the five years to 30 June 2020 are summarised below:
Sales revenue
EBITDA
Profit/(loss) after income tax
2016*
$’000
2017**
$’000
2018
$’000
2019
$’000
2020
$’000
11,903
15,063
19,653
28,313
30,317
(64)
54
784
(20,443)
559
2,544
2,765
662
2,032
(4,138)
* Relates to the Group prior to the restructure that occurred at the time of the IPO at 30 June 2017.
** EBITDA in the 2017 financial year is calculated excluding the one-off impacts of IPO expenses and the change in fair value of redeemable preference shares.
The factors that are considered to affect TSR are summarised below:
Share price at financial year end ($)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Additional disclosures relating to KMP
Shareholding
2018
2019
3.92
4.19
3.95
7.99
1.08
1.02
2020
5.40
(6.17)
(6.17)
The number of shares in the Company held during the financial year by each director and other members of KMP of the Group,
including their personally related parties, is set out below:
Balance at
the start of
the year
Received
as part of
remuneration
Additions
Disposals/
other
Balance at
the end of
the year
293,958
1,910,907
184,429
71,156
1,500
122,951
–
–
–
–
–
–
820
2,195,000
204,408
–
106,042
–
–
–
2,500
2,143
–
–
–
–
–
–
–
–
(2,195,820)
400,000
1,910,907
184,429
71,156
4,000
125,094
–
(101,100)
103,308
2,790,129
2,195,000
110,685
(2,296,920)
2,798,894
Ordinary shares
David Krall
Aidan Williams
John Dyson
Roger Price*
Alison Ledger
Tim Finlayson*
Lee Ellison**
Rob Goss*
Includes indirect holdings
*
** Lee held 820 ordinary shares at the date of resignation
25
Audinate Annual Report 2020 | Option holding
The number of options over ordinary shares in the Company held during the financial year by each director and other members of
KMP of the Group, including their personally related parties, is set out below:
Options over ordinary shares
David Krall
Lee Ellison*
Balance at
the start of
the year
186,042
320,000
506,042
Granted
Exercised
Other*
Balance at
the end of
the year
–
–
–
(106,042)
–
80,000
(200,000)
(120,000)
–
(306,042)
(120,000)
80,000
* 120,000 options over ordinary shares held indirectly at the date of resignation
All of the outstanding options at 30 June 2020 were fully vested and exercisable.
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 KMP of the Group, including their personally related parties, is set out below:
Performance rights over ordinary shares
Aidan Williams
Lee Ellison*
Rob Goss
Balance at
the start of
the year
Granted
Expired/
forfeited/
other
Balance at
the end of
the year
236,398
40,114
–
276,512
2,368,410
132,127
2,736,935
–
(2,368,410)
21,401
61,515
–
(2,368,410)
–
153,528
430,040
* During FY20 Lee Ellison exercised 1,995,000 performance rights and at the date of his retirement (29 November 2019) he held 373,410 performance rights which
had vested but had not been exercised.
Performance rights over ordinary shares
Aidan Williams
Rob Goss
Vested
Unvested
Balance at
the end of
the year
–
–
–
276,512
153,528
430,040
276,512
153,528
430,040
Subsequent to 30 June 2020 the first tranche of performance rights issued to Aidan Williams and Rob Goss on 30 June 2017
vested in full, amounting to 59,514 and 29,757 performance rights respectively.
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. These loans were fully repaid during the year ended 30 June 2020. The total
value of the loans outstanding at 30 June 2019 was $91,237, inclusive of a loan outstanding from Aidan Williams of $40,650.
This concludes the remuneration report, which has been audited.
26
Directors’ Report| Audinate Annual Report 2020 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
Expiry date Exercise price
Number
under option
09/12/2020
11/06/2022
23/08/2022
31/01/2023
$0.0620
$0.2600
$0.2600
$0.2600
130,000
105,000
248,800
24,000
507,800
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
30/06/2017
30/06/2017
29/06/2018
29/06/2018
29/06/2018
26/03/2019
16/10/2019
16/10/2019
30/06/2020
30/06/2020
30/06/2020
Vesting date
Exercise
price
Number
under rights
15/07/2020
15/07/2021
15/07/2022
15/07/2020
15/07/2021
15/07/2022
30/06/2022
31/08/2020
31/08/2021
30/06/2022
06/01/2022
06/01/2023
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
245,104
244,472
239,179
17,425
17,425
17,421
381,958
15,689
15,689
163,864
10,792
10,791
1,379,809
* 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.
27
Audinate Annual Report 2020 | Shares issued on the exercise of options
The following ordinary shares of Audinate Group Limited were issued during the year ended 30 June 2020 and up to the date of
this report on the exercise of options granted:
Date options exercised
Exercise
price
Number of
shares issued
19/07/2019
19/07/2019
19/07/2019
19/07/2019
19/08/2019
20/09/2019
03/10/2019
03/10/2019
08/11/2019
08/11/2019
22/11/2019
20/03/2020
17/04/2020
17/04/2020
05/06/2020
$0.0620
$0.0620
$0.2600
$0.2600
$0.2600
$0.0620
$0.0620
$0.2600
$0.0620
$0.2600
$0.2600
$0.0620
$0.0620
$0.2600
$0.2600
20,000
9,923
8,000
3,871
8,000
9,916
370,042
12,000
100,000
12,000
2,901
10,000
10,000
3,000
120,000
699,653
Shares issued on the exercise of performance rights
The following ordinary shares of Audinate Group Limited were issued during the year ended 30 June 2020 and up to the date of
this report on the exercise of performance rights granted:
Date performance rights converted to shares
16/09/2019
12/12/2019
12/12/2019
Exercise
price
Number of
shares issued
$0.0000
1,995,000
$0.0000
$0.0000
267,811
105,599
2,368,410
28
Directors’ Report| Audinate Annual Report 2020 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. The policy also covers directors, senior executives, secretaries and
employees of its Group. The policy prohibits disclosure of the premiums paid.
The policy covers:
l Costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever their
outcome; and
l Other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper
use of information or position to gain a personal advantage.
The Company has also entered into a Deed of Access (‘Deed’) and Indemnity with all past and present directors, which provides
an indemnity to the directors for legal costs and any liability arising from negligence of the director, to the extent permitted by
law. In addition, the Deed allows the Company to advance a director an interest free loan equal to any legal costs which, in the
Company’s opinion, are not permitted to be indemnified under the law. Any such advance is repayable by the director at the
conclusion of the proceedings.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or
any related entity.
Proceedings on behalf of the Company
No person has applied to the Court for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings
to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those
proceedings.
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
20 August 2020
Sydney
29
Audinate Annual Report 2020 | 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
20 August 2020
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 2020, 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
22
30
Auditor’s Independence Declaration| Audinate Annual Report 2020 Revenue
Sales
Cost of goods sold
Gross margin
Expenses
Employee expenses
Marketing expenses
Administration and other operating expenses
Depreciation and amortisation
Total expenses
Operating (loss)/profit
Finance costs
Other income
(Loss)/profit before income tax (expense)/benefit
Income tax (expense)/benefit
(Loss)/profit after income tax (expense)/benefit for the year attributable
to the owners of Audinate Group Limited
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of
Audinate Group Limited
Basic earnings per share
Diluted earnings per share
Consolidated
2020
$’000
2019
$’000
Note
5
6
6
6
7
8
9
9
30,317
28,313
(7,109)
(7,250)
23,208
21,063
(15,797)
(12,700)
(2,484)
(2,895)
(4,422)
(2,631)
(2,967)
(2,419)
(25,598)
(20,717)
(2,390)
(117)
834
(1,673)
(2,465)
346
–
296
642
20
(4,138)
662
1
1
(41)
(41)
(4,137)
621
Cents
Cents
(6.17)
(6.17)
1.08
1.02
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
31
Consolidated Statement of Profit or Loss and Other Comprehensive Incomefor the year ended 30 June 2020Audinate Annual Report 2020 | ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangibles
Deferred tax
Other assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Contract liabilities
Lease liability
Income tax payable
Employee benefits
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Lease liability
Employee benefits
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed capital
Reserves
Accumulated losses
Total equity
Consolidated
2020
$’000
2019
$’000
Note
10
11
12
13
14
15
16
8
17
18
19
8
20
21
29,286
30,069
1,849
1,645
993
2,872
1,803
812
33,773
35,556
1,455
2,481
12,050
100
444
16,530
50,303
3,034
512
585
258
1,013
–
7,691
2,278
–
10,982
46,538
2,413
308
–
19
1,600
2,474
–
108
47
–
6,097
5,261
2,003
124
112
2,239
8,336
41,967
87,526
1,353
–
133
–
133
5,394
41,144
83,143
775
(46,912)
(42,774)
41,967
41,144
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
32
Consolidated Statement of Financial Positionas at 30 June 2020| Audinate Annual Report 2020 Consolidated
Balance at 1 July 2018
Profit after income tax benefit for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Share-based payments (note 21)
Issue of shares on exercise of options
Issue of shares
Transfer from option reserve
Share issue costs, net of tax
Balance at 30 June 2019
Consolidated
Balance at 1 July 2019
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Share-based payments (note 21)
Issue of shares – share purchase plan
Issue of shares – exercise of options
Issue of shares – vesting of performance rights
Issue of shares – under long-term incentive plan
Share issue costs, net of tax
Balance at 30 June 2020
Contributed
capital
$’000
Reserves
$’000
Accumulated
losses
$’000
63,288
–
–
–
–
36
20,000
391
(572)
83,143
521
–
(41)
(41)
686
–
–
(391)
–
775
(43,436)
662
–
662
–
–
–
–
–
Total
equity
$’000
20,373
662
(41)
621
686
36
20,000
–
(572)
(42,774)
41,144
Contributed
capital
$’000
Reserves
$’000
Accumulated
losses
$’000
83,143
775
(42,774)
Total
equity
$’000
41,144
–
–
–
–
4,000
74
490
36
(217)
–
1
1
1,103
–
–
(490)
(36)
–
(4,138)
(4,138)
–
1
(4,138)
(4,137)
–
–
–
–
–
–
1,103
4,000
74
–
–
(217)
87,526
1,353
(46,912)
41,967
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
33
Consolidated Statement of Changes in Equityfor the year ended 30 June 2020Audinate Annual Report 2020 | Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest and other finance costs paid
Government grants received
Research and development incentive received
Income taxes refunded
Income taxes paid
Consolidated
2020
$’000
2019
$’000
Note
31,635
27,747
(27,258)
(25,510)
251
(117)
285
–
85
(46)
205
–
–
1,327
–
(153)
3,616
Net cash from operating activities
32
4,835
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Payments for long-term secured term deposits
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Repayment of lease liability
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
(914)
(669)
(7,392)
(5,782)
(444)
–
(8,750)
(6,451)
4,074
20,036
(299)
(642)
(789)
–
3,133
19,247
(782)
16,412
30,069
13,631
(1)
26
Cash and cash equivalents at the end of the financial year
10
29,286
30,069
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
34
Consolidated Statement of Cash Flowsfor the year ended 30 June 2020| Audinate Annual Report 2020 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
financial 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 19 August 2020. 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 16 Leases
The Group adopted AASB 16 ‘Leases’ from 1 July 2019. The standard replaces AASB 117 ‘Leases’ and for lessees eliminates
the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets, right-of-
use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating lease
expense recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an interest
expense on the recognised lease liabilities (included in finance costs). In the earlier periods of the lease, the expenses associated
with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings
Before Interest, Tax, Depreciation and Amortisation) results improve as the operating expense is now replaced by interest expense
and depreciation in profit or loss. For classification within the statement of cash flows, the interest portion is disclosed in operating
activities and the principal portion of the lease payments are separately disclosed in financing activities.
35
Notes to the Consolidated Financial StatementsAudinate Annual Report 2020 | Consolidated
1 July 2019
$’000
3,767
(20)
(3,429)
318
(554)
(33)
269
–
Consolidated
2020
$’000
2019
$’000
–
79
15
94
682
115
891
378
72
7
457
–
–
457
Impact of adoption
AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated.
There was no impact of adoption on opening accumulated losses as at 1 July 2019 as follows:
Operating lease commitments as at 1 July 2019 (AASB 117)
Operating lease commitments discount based on the weighted average incremental borrowing rate of 5% (AASB 16)
Operating lease commitments committed before 1 July 2019 but commenced after 1 July 2019
Right-of-use assets (AASB 16)
Lease liabilities – current (AASB 16)
Lease liabilities – non-current (AASB 16)
Accrual for lease change-over costs
Impact on opening accumulated losses as at 1 July 2019
Impact on profit or loss and cash flows
Amounts recognised in profit or loss in relation to leases
Administration and other operating expenses
Minimum lease payments (refer note 6)
Short-term lease payments (refer note 6)
Low-value assets lease payments (refer note 6)
Depreciation and amortisation
Depreciation of right-of-use assets (refer note 6)
Finance Costs
Interest expense on lease liabilities (refer note 6)
36
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 Amounts recognised in the statement of cash flows in relation to leases
Cash flows from operating activities
Payments to suppliers and employees
Interest and other finance costs paid
Cash flows from financing activities
Repayment of lease liability
Consolidated
2020
$’000
2019
$’000
(93)
(115)
(208)
(642)
(850)
(457)
–
(457)
–
(457)
Practical expedients applied
In applying AASB 16 for the first time, the Group has used the following practical expedients permitted by the standard:
l Applying a single discount rate to a portfolio of leases with similar characteristics;
l Accounting for leases which end within 12 months of the date of initial application as short-term leases; and
l Excluding initial direct costs from the measurement of the right-of-use asset.
The lease term was determined through management’s assessment of the contracted lease terms.
Interpretation 23 Uncertainty over Income Tax
The Group has adopted Interpretation 23 from 1 July 2019. The interpretation clarifies how to apply the recognition
and measurement requirements of AASB 112 ‘Income Taxes’ in circumstances where uncertain tax treatments exists.
The interpretation requires: the Group to determine whether each uncertain tax treatment should be treated separately or
together, based on which approach better predicts the resolution of the uncertainty; the Group to consider whether it is probable
that a taxation authority will accept an uncertain tax treatment; and if the Group concludes that it is not probable that the taxation
authority will accept an uncertain tax treatment, it shall reflect the effect of uncertainty in determining the related taxable profit
(tax loss), tax bases, unused tax losses, unused tax credits or tax rates, measuring the tax uncertainty based on either the most
likely amount or the expected value. In making the assessment it is assumed that a taxation authority will examine amounts it
has a right to examine and have full knowledge of all related information when making those examinations. Interpretation 23
was adopted using the modified retrospective approach and as such comparatives have not been restated. There was no impact
of adoption on opening retained profits as at 1 July 2019.
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.
37
Audinate Annual Report 2020 | Parent entity information
These financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed
in note 31.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Audinate Group Limited as at
30 June 2020 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.
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 are 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.
Revenue recognition
Audinate generates the following streams of revenue:
l Chips, cards and modules (including adapters);
l Software and licence fees;
l Support and maintenance; and
l Royalties.
38
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 Each of the above products and 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.
Revenue recognition for each of the above is as follows:
Revenue stream
Performance obligations
Timing of recognition
Chips, cards and modules
(including adapters)
Software and licence fees
Goods dispatched from warehouse.
Recognised at point of dispatch from warehouse, when control
is transferred to the customer on basis of ex-works terms.
Provision of access to software and
activation code.
Revenue from software is recognised at point of sale and
access to software is granted.
Support and maintenance
As defined in contract.
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.
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.
Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received
and the Group will comply with all attached conditions. Government grants are recognised in profit or loss over the period
necessary to match with the costs that they are intended to compensate. The Group received COVID-19 related government
grants for wage subsidies and cash flow boost in Australia and small business grant in the UK during the year. The grants are
recognised as other income and are included in note 7.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net
carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Income tax
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable
income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the
assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
l 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
l 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.
39
Audinate Annual Report 2020 | 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.
Audinate Group Limited (the ‘head entity’) and its wholly-owned Australian subsidiaries formed an income tax consolidated group
under the tax consolidation regime in 2017.
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 First In, First Out 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.
40
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 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.
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.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost
of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the
site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of
the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term,
the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement
of lease liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of
12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.
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 the expected benefit, being the finite useful life of three years.
Intellectual property
Significant costs associated with 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 2-5 years.
41
Audinate Annual Report 2020 | 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 value 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.
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
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.
Lease liability
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value
of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that
rate cannot be readily determined, the Group’s incremental borrowing rate. Lease payments comprise of fixed payments less
any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under
residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and
any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the
period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there
is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease
term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the
corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.
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.
42
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 Share-based payments
Equity-settled transactions are awards of shares, performance rights 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.
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.
43
Audinate Annual Report 2020 | 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.
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 2020. 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.
Conceptual Framework for Financial Reporting (Conceptual Framework)
The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 January 2020 and early
adoption is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on
measurement that affects several Accounting Standards. Where the Group has relied on the existing framework in determining
its accounting policies for transactions, events or conditions that are not otherwise dealt with under the Australian Accounting
Standards, the Group may need to review such policies under the revised framework. At this time, the application of the
Conceptual Framework is not expected to have a material impact on the Group’s financial statements.
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.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the COVID-19 pandemic has had, or may have, on the Group
based on known information. This consideration extends to the nature of the products and services offered, customers, supply
chain, staffing and geographic regions in which the Group operates. The COVID-19 pandemic can result in a wide range of
potential revenue outcomes in the forthcoming financial year, hence one of the main reasons for the equity raising undertaken
subsequent to 30 June 2020. Other than as addressed in specific notes, there does not currently appear to be either any other
significant impact upon the financial statements or any other significant uncertainties with respect to events or conditions which
may impact the Group unfavourably as at the reporting date or subsequently as a result of the COVID-19 pandemic.
44
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 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.
Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime
expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for
each group. These assumptions include recent sales experience, historical collection rates, the impact of the COVID-19 pandemic
and forward-looking information that is available. The allowance for expected credit losses, as disclosed in note 11, is calculated
based on the information available at the time of preparation. The actual credit losses in future years may be higher or lower.
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.
Lease term
The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is
exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying
asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included
in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an
extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered
may include the importance of the asset to the Group’s operations; comparison of terms and conditions to prevailing market
rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace
the asset. The Group reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination
option, if there is a significant event or significant change in circumstances.
Useful life of capitalised development costs
The Group regularly considers the useful life of development costs, which is currently estimated to be three years. In determining
the appropriate useful life for these assets a range of factors are taken into account including the specific nature of the asset
created, risk of technical obsolescence, business performance and market conditions. To the extent that there is a change to the
useful life of these assets (not related to impairment) the amortisation charge is changed prospectively.
Note 4. Operating segments
Identification of reportable operating segments
The Group operates in one segment, based on the internal reports that are reviewed and used by the Board of Directors (who
are identified as the Chief Operating Decision Makers) 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 43% (2019: 41%) of the Group’s revenue during the year ended 30 June 2020 and of that amount the
largest customer represents approximately 11% (2019: 13%) of the Group’s revenue.
45
Audinate Annual Report 2020 | 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 38% (2019: 39%);
b) Asia 32% (2019: 33%); and c) Europe and Middle East 30% (2019: 28%). 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 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)
Sales to external
customers*
Geographical
non-current assets
2020
$’000
2019
$’000
2020
$’000
2019
$’000
30,317
28,292
16,253
10,306
–
–
–
–
–
21
30
3
244
26
4
646
30,317
28,313
16,530
10,982
Consolidated
2020
$’000
2019
$’000
30,317
28,313
Consolidated
2020
$’000
2019
$’000
23,517
24,031
6,123
3,779
677
503
30,317
28,313
Timing of revenue recognition
Revenue from providing support and maintenance is recognised over the period of time in which the services are provided.
All other revenue is recognised when the service is provided or the goods are dispatched from the warehouse.
46
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 Note 6. Expenses
(Loss)/profit before income tax includes the following specific expenses:
Depreciation and amortisation
Depreciation of property, plant and equipment
Depreciation of office leases – right-of-use
Amortisation of intangibles
Depreciation and amortisation – capitalised
Total depreciation and amortisation
Finance costs
Interest and finance charges paid/payable on lease liabilities
Interest – other
Total finance costs
Leases
Minimum lease payments
Short-term lease payments
Low-value assets lease payments
Total lease expense
Employee benefit expenses
Salaries and wages
Post-employment benefits
Share-based payments
Other costs
Total employee benefit expenses*
Consolidated
2020
$’000
2019
$’000
474
682
3,698
(432)
4,422
115
2
117
–
79
15
94
344
–
2,075
–
2,419
–
–
–
378
72
7
457
11,217
9,699
1,000
1,103
2,477
676
686
1,639
15,797
12,700
* During the current year director fees and mileage allowances paid to employees have been classified as employee expenses. Consequently comparative
information (for the year ended 30 June 2019) for employee expenses has been increased by $412,000 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
Interest revenue
Government grants
Consolidated
2020
$’000
2019
$’000
11
320
503
834
104
192
–
296
47
Audinate Annual Report 2020 | Government grants
During the Coronavirus (‘COVID-19’) pandemic, the Group has received $434,000 from JobKeeper support payments from the
Australian Government which are passed on to eligible employees. These have been recognised as government grants in the
financial statements and recorded as other income over the periods in which the related employee benefits are recognised as
an expense. The JobKeeper payment scheme in its current form runs for the fortnights from 30 March until 27 September 2020.
The Group is expected to be eligible for approximately $688,000 of additional JobKeeper support payments from the government
to the end of September 2020 on the condition that employee benefits continue to be paid. In addition the Group received a
$50,000 cash flow boost from the Australian Government and a $19,000 small business grant from the UK Government.
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.
Consolidated
2020
$’000
2019
$’000
(2,737)
(1,004)
(55)
1,627
3,630
2,465
(1,673)
(460)
74
2,552
(3,573)
3,630
241
2,464
(55)
56
2,465
36
948
–
(20)
642
177
339
1,832
(2,564)
–
193
(23)
36
(33)
(20)
Income tax expense/(benefit)
Current tax
Under provision prior year
Deferred tax – origination and reversal of temporary differences
Derecognition of tax losses
Aggregate income tax expense/(benefit)
Numerical reconciliation of income tax expense/(benefit) and tax at the statutory rate
(Loss)/profit before income tax (expense)/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
Research and development incentive benefit
Derecognition of tax losses
Non-deductible expenses
Under provision prior year
Difference in overseas tax rates
Income tax expense/(benefit)
48
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 Deferred tax asset
Net deferred tax asset comprises temporary differences attributable to:
Lease liabilities
Provisions
Carried forward tax losses
Blackhole expenditure
Trade and other payables
Intangible assets
Right-of-use assets
Property, plant and equipment
Other
Deferred tax asset
Income tax payable
Income tax payable
Consolidated
2020
$’000
2019
$’000
714
649
424
282
96
(1,324)
(684)
(70)
13
100
–
777
1,153
347
115
(202)
–
59
29
2,278
Consolidated
2020
$’000
2019
$’000
258
19
Income tax payable represents an estimate of tax payable by overseas subsidiaries.
The Group has $3,630,000 (2019: $nil) of unused tax credits and offsets for which no deferred tax asset is recognised in the
statement of financial position.
49
Audinate Annual Report 2020 | Note 9. Earnings per share
(Loss)/profit after income tax attributable to the owners of Audinate Group Limited
Consolidated
2020
$’000
(4,138)
2019
$’000
662
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
67,057,118
61,439,782
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
Performance rights
–
–
1,174,297
1,995,000
Weighted average number of ordinary shares used in calculating diluted earnings per share
67,057,118
64,609,079
Basic earnings per share
Diluted earnings per share
Cents
Cents
(6.17)
(6.17)
1.08
1.02
At 30 June 2020, options and performance rights over ordinary shares were excluded from the calculation of the weighted
average number of ordinary shares used in calculating diluted earnings per share due to being anti-dilutive.
Note 10. Current assets – cash and cash equivalents
Consolidated
2020
$’000
5,161
2019
$’000
4,315
24,125
25,754
29,286
30,069
Consolidated
2020
$’000
1,394
(11)
1,383
466
1,849
2019
$’000
2,647
(2)
2,645
227
2,872
Cash at bank
Cash on deposit
Note 11. Current assets – trade and other receivables
Trade receivables
Less: Allowance for expected credit losses
Other receivables
50
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 Allowance for expected credit losses
The Group has recognised a loss of $22,000 in respect of the expected credit losses for the year ended 30 June 2020
(2019: $2,000).
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Consolidated
Not overdue
Expected
credit loss rate
2020
%
2019
%
0.068%
0.066%
Carrying amount
Allowance for expected
credit losses
2020
$’000
1,394
2019
$’000
2,647
2020
$’000
11
2019
$’000
2
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Closing balance
Note 12. Current assets – inventories
Raw materials – at cost
Finished goods – at cost
Note 13. Current assets – other assets
Prepayments
Deposits
Consolidated
2020
$’000
2019
$’000
2
22
(13)
11
–
2
–
2
Consolidated
2020
$’000
395
1,250
1,645
2019
$’000
238
1,565
1,803
Consolidated
2020
$’000
590
403
993
2019
$’000
594
218
812
51
Audinate Annual Report 2020 | 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
Reconciliations
Consolidated
2020
$’000
2019
$’000
792
(134)
658
72
(37)
35
482
(206)
276
83
(45)
38
1,587
1,409
(825)
762
(710)
699
1,455
1,013
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 2018
Additions
Depreciation expense
Balance at 30 June 2019
Additions
Exchange differences
Depreciation expense
Balance at 30 June 2020
Leasehold
improvements
$’000
Furniture and
fittings
$’000
Computer and
equipment
$’000
104
290
(118)
276
516
–
(134)
658
55
6
(23)
38
19
1
(23)
35
532
370
(203)
699
379
1
(317)
762
Total
$’000
691
666
(344)
1,013
914
2
(474)
1,455
52
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 Note 15. Non-current assets – right-of-use assets
Office leases – right-of-use
Less: Accumulated depreciation
Consolidated
2020
$’000
3,160
(679)
2,481
2019
$’000
–
–
–
Additions to the right-of-use assets during the year were $3,085,000.
The Group leases offices under agreements of between 1 to 5 years with, in some cases, options to extend. The leases have
various escalation clauses. On renewal, the terms of the leases are renegotiated.
Note 16. Non-current assets – intangibles
Development costs
Less: Accumulated amortisation
Intellectual property
Less: Accumulated amortisation
Software – at cost
Less: Accumulated amortisation
Consolidated
2020
$’000
2019
$’000
18,964
11,956
(8,488)
10,476
518
(284)
234
1,579
(239)
1,340
(5,093)
6,863
335
(158)
177
713
(62)
651
12,050
7,691
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 2018
Additions
Amortisation expense
Balance at 30 June 2019
Additions
Amortisation expense
Balance at 30 June 2020
Development
costs
$’000
Intellectual
property
$’000
Software
$’000
3,514
5,270
(1,921)
6,863
7,008
(3,395)
10,476
194
75
(92)
177
183
(126)
234
171
542
(62)
651
866
(177)
1,340
Total
$’000
3,879
5,887
(2,075)
7,691
8,057
(3,698)
12,050
53
Audinate Annual Report 2020 | Note 17. Non-current assets – other assets
Security deposit*
* Represents amount held as security for Sydney office lease.
Note 18. Current liabilities – trade and other payables
Trade payables
Accrued expenses
Other payables
Refer to note 23 for further information on financial instruments.
Note 19. Current liabilities – contract liabilities
Contract liabilities
Consolidated
2020
$’000
444
2019
$’000
–
Consolidated
2020
$’000
1,541
385
1,108
3,034
2019
$’000
1,122
726
565
2,413
Consolidated
2020
$’000
512
2019
$’000
308
Reconciliation
Reconciliation of the written down values at the beginning and end of the current financial year is set out below:
Consolidated
2020
$’000
308
–
2019
$’000
–
134
1,640
1,152
–
(1,436)
512
(134)
(844)
308
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
54
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 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 $512,000 as at 30 June 2020 ($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 20. Equity – contributed capital
Fully paid ordinary shares
Consolidated
2020
$’000
279
233
512
2019
$’000
204
104
308
Consolidated
2020
Shares
2019
Shares
2020
$’000
2019
$’000
Ordinary shares – fully paid
67,940,499
64,296,003
87,526
83,143
Ordinary shares
Ordinary shares entitle the holder to participate in any dividends declared and any proceeds attributable to shareholders should
the Company be wound up, in proportions that consider both the number of shares held and the extent to which those shares are
paid up. 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 2019 financial statements.
55
Audinate Annual Report 2020 | Movements in ordinary share capital
Details
Balance
Date
Shares
Issue price
1 July 2018
60,936,358
$’000
63,288
Issue of shares – exercise of options
21 September 2018
10,000
$0.0360
Issue of shares – exercise of options
21 September 2018
100,000
$0.0620
50,000
20,000
50,000
8,000
8,000
20,000
10,000
12,000
$0.0620
$0.0360
$0.0620
$0.2600
$0.2600
$0.0620
$0.0620
$0.0620
8,000
$0.2600
10,000
99,502
15,000
38,000
$0.0620
$0.2600
$0.2600
$0.0620
8,000
$0.2600
–
6
3
1
3
2
2
1
1
1
2
1
–
4
2
2
2,857,143
$7.0000
20,000
20,000
16,000
–
–
$0.0620
$0.2600
–
–
1
4
(572)
391
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares
Issue of shares – exercise of options
Issue of shares – exercise of options
Share issue costs, net of tax
Transfer from share-based payments reserve
2 November 2018
19 November 2018
25 February 2019
6 March 2019
13 March 2019
13 March 2019
14 March 2019
25 March 2019
25 March 2019
5 April 2019
5 April 2019
17 May 2019
17 May 2019
7 June 2019
13 June 2019
21 June 2019
21 June 2019
56
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 Details
Balance
Issue of shares – share purchase plan
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares – exercise of options
Date
Shares
Issue price
30 June 2019
64,296,003
11 July 2019
19 July 2019
19 July 2019
19 July 2019
19 July 2019
571,429
$7.0000
20,000
$0.0620
9,923
8,000
3,871
8,000
$0.0620
$0.2600
$0.2600
$0.2600
Issue of shares – exercise of options
19 August 2019
Issue of shares – vesting of performance rights
16 September 2019
1,995,000
$0.0000
Issue of shares – exercise of options
20 September 2019
9,916
$0.0620
Issue of shares – exercise of options
Issue of shares – exercise of options
3 October 2019
3 October 2019
370,042
$0.0620
12,000
$0.2600
Issue of shares – under long-term incentive plan
16 October 2019
5,004
$7.2150
Issue of shares – exercise of options
8 November 2019
100,000
$0.0620
Issue of shares – exercise of options
8 November 2019
12,000
$0.2600
Issue of shares – exercise of options
22 November 2019
2,901
$0.2600
Issue of shares – vesting of performance rights
12 December 2019
267,811
$0.8000
Issue of shares – vesting of performance rights
12 December 2019
105,599
$2.6110
Issue of shares – exercise of options
20 March 2020
Issue of shares – exercise of options
Issue of shares – exercise of options
Issue of shares – exercise of options
Share issue costs
Deferred tax credit recognised directly in equity
17 April 2020
17 April 2020
5 June 2020
10,000
10,000
$0.0620
$0.0620
3,000
$0.2600
120,000
$0.2600
–
–
–
–
$’000
83,143
4,000
1
–
2
–
2
–
–
23
3
36
6
3
–
214
276
1
1
1
31
(299)
82
Balance
30 June 2020
67,940,499
87,526
The table above includes shares issued to employees under a cashless exercise election.
57
Audinate Annual Report 2020 | Note 21. Equity – reserves
Foreign currency reserve
Share-based payments reserve
Consolidated
2020
$’000
(145)
1,498
1,353
2019
$’000
(146)
921
775
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 2018
Foreign currency translation
Share-based payments
Transfer to equity for vested options
Balance at 30 June 2019
Foreign currency translation
Share-based payments
Transfer to equity for issue of shares – vested performance rights
Transfer to equity for issue of shares – under long-term incentive plan
Balance at 30 June 2020
Foreign
currency
$’000
Share-based
payments
$’000
(105)
(41)
–
–
(146)
1
–
–
–
(145)
626
–
686
(391)
921
–
1,103
(490)
(36)
1,498
Total
$’000
521
(41)
686
(391)
775
1
1,103
(490)
(36)
1,353
Note 22. Equity – dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
58
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 Note 23. 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.
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
Interest rate risk
Consolidated
2020
$’000
2019
$’000
20,374
20,251
(13,141)
(11,714)
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:
Cash at bank
Cash on deposit
2020
2019
Weighted
average
interest
rate
%
Weighted
average
interest
rate
%
Balance
$’000
Balance
$’000
–
5,161
–
4,315
0.65%
24,125
1.59%
25,754
Net exposure to cash flow interest rate risk
29,286
30,069
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.
59
Audinate Annual Report 2020 | 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.
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 – 2020
Non-interest bearing
Trade payables
Accrued expenses
Other payables
Interest-bearing
– fixed rate
Lease liability
Other liabilities
Total non-derivatives
Consolidated – 2019
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
$’000
Over
5 years
$’000
Remaining
contractual
maturities
$’000
–
–
–
4.08%
4.00%
1,541
385
1,108
679
117
3,830
–
–
–
665
117
782
–
–
–
1,472
–
1,472
–
–
–
–
–
–
1,541
385
1,108
2,816
234
6,084
Weighted
average
interest rate
%
1 year or less
$’000
Between
1 and 2 years
$’000
Between
2 and 5 years
$’000
Over
5 years
$’000
Remaining
contractual
maturities
$’000
–
–
–
1,122
726
565
2,413
–
–
–
–
–
–
–
–
–
–
–
–
1,122
726
565
2,413
The cash flows in the maturity analysis above are not expected to occur earlier than contractually disclosed above.
60
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 Note 24. 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 25. 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, and unrelated firms:
Audit services
Audit or review of the Group financial statements
Audit of the controlled entities
Note 26. Contingent liabilities
The Group had no contingent liabilities at 30 June 2020 or 30 June 2019.
Note 27. 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
Refer to note 2 for details on the impact of AASB 16 ‘Leases’ adopted by the Group from 1 July 2019.
Consolidated
2020
$
2019
$
127,270
115,990
23,145
–
150,415
115,990
Consolidated
2020
$’000
2019
$’000
–
–
–
–
–
–
492
450
719
2,984
64
3,767
61
Audinate Annual Report 2020 | Note 28. 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:
Consolidated
2020
$
2019
$
1,352,880
1,724,319
89,502
84,583
521,518
289,868
1,963,900
2,098,770
Short-term employee benefits
Post-employment benefits
Share-based payments
Note 29. Related party transactions
Parent entity
Audinate Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 30.
Key management personnel
Disclosures relating to key management personnel are set out in note 28 and the remuneration report included in the directors’
report.
Transactions with related parties
There were no transactions with related parties during the current and previous financial year.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from related parties
As described in the directors’ report, Audinate Pty Limited offered employees interest bearing, non-recourse loans in order to fund
the exercise of options prior to the IPO. These loans were fully repaid during the year ended 30 June 2020. The total value of the
loans outstanding at 30 June 2019 was $91,237, inclusive of a loan outstanding from Aidan Williams of $40,650.
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.
62
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 Note 30. 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
Principal place of business/
Country of incorporation
Audinate Pty Limited
Australia
Audinate, Inc.
Audinate Limited
Audinate Limited
Audinate Holdings Pty Limited
United States of America
United Kingdom
Hong Kong
Australia
Note 31. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(loss) after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Net assets
Equity
Contributed capital
Reserves
Accumulated losses
Total equity
Ownership interest
2020
%
100%
100%
100%
100%
100%
2019
%
100%
100%
100%
100%
100%
Parent
2020
$’000
61
61
2019
$’000
(1,303)
(1,303)
Parent
2020
$’000
2019
$’000
36,569
29,668
95,888
91,111
175
175
419
419
95,713
90,692
95,807
91,424
1,498
(1,592)
921
(1,653)
95,713
90,692
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.
63
Audinate Annual Report 2020 | 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 2020 or 30 June 2019.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2020 or 30 June 2019.
Capital commitments – Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 or 30 June 2019.
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:
l Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
l Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator
of an impairment of the investment.
Note 32. Cash flow information
Reconciliation of (loss)/profit after income tax to net cash from operating activities
(Loss)/profit after income tax (expense)/benefit for the year
Adjustments for:
Depreciation and amortisation
Share-based payments
Net unrealised foreign exchange loss/(gain)
Change in operating assets and liabilities:
Consolidated
2020
$’000
(4,138)
4,422
1,103
10
2019
$’000
662
2,419
686
(29)
Decrease/(increase) in trade and other receivables
1,061
(1,063)
Decrease/(increase) in inventories
Decrease/(increase) in deferred tax assets
Decrease/(increase) in current tax asset
Increase in other operating assets
Increase in trade and other payables
Increase/(decrease) in income tax payable
Increase/(decrease) in other operating liabilities
Net cash from operating activities
158
2,269
–
(162)
641
235
(764)
(578)
(187)
1,344
(722)
117
(4)
971
4,835
3,616
64
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 Non-cash investing and financing activities
Consolidated
Additions to the right-of-use assets
Depreciation and amortisation capitalised to development costs
Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2018
Balance at 30 June 2019
Net cash used in financing activities
Leases recognised on the adoption of AASB 16
Acquisition of leases
Modification of leases
Transfer from onerous lease accrual
Exit of lease
Foreign currency translation
Balance at 30 June 2020
2020
$’000
3,085
432
3,517
2019
$’000
–
–
–
Lease
liability
$’000
–
–
(642)
318
3,085
(88)
269
(361)
7
2,588
65
Audinate Annual Report 2020 | Note 33. 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:
2020
Start date
End date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other*
Balance at
the end of
the year
30/06/2017
17/10/2019
$0.0620
370,042
30/06/2017
09/12/2019
30/06/2017
09/01/2020
30/06/2017
21/08/2020
$0.0620
$0.0620
$0.0620
10,000
10,000
10,000
30/06/2017
09/12/2020
$0.0620
260,000
30/06/2017
11/06/2022
$0.2600
135,000
30/06/2017
23/08/2022
$0.2600
372,800
30/06/2017
31/01/2023
$0.2600
40,000
1,207,842
* Other includes the impact of cashless exercise of options.
–
–
–
–
–
–
–
–
–
(369,958)
(10,000)
(9,923)
(10,000)
(130,000)
(29,901)
(123,871)
(16,000)
(699,653)
(84)
–
(77)
–
–
(99)
(129)
–
–
–
–
–
130,000
105,000
248,800
24,000
(389)
507,800
2019
Start date
End date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other*
Balance at
the end of
the year
30/06/2017
23/11/2018
$0.0360
30,000
30/06/2017
17/10/2019
$0.0620
448,042
30/06/2017
09/12/2019
30/06/2017
09/01/2020
30/06/2017
21/08/2020
$0.0620
$0.0620
$0.0620
10,000
10,000
42,000
30/06/2017
09/12/2020
$0.0620
460,000
30/06/2017
11/06/2022
$0.2600
158,000
30/06/2017
23/08/2022
$0.2600
508,800
30/06/2017
31/01/2023
$0.2600
48,000
1,714,842
* Other includes the impact of cashless exercise of options.
–
–
–
–
–
–
–
–
–
–
(30,000)
(78,000)
–
–
(32,000)
(200,000)
(23,000)
–
–
–
–
–
–
–
–
370,042
10,000
10,000
10,000
260,000
135,000
(131,502)
(4,498)
372,800
(8,000)
–
40,000
(502,502)
(4,498)
1,207,842
507,800 options were exercisable at the end of the financial year (2019: 1,207,842).
The weighted average share price of the Company during the financial year was $6.46 (2019: $5.47).
66
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 Share rights
Set out below are summaries of performance rights granted:
2020
Grant date
Vesting date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
lapsed/other
Balance at
the end of
the year
30/06/2017
15/07/2020
$0.0000
334,375
30/06/2017
15/07/2021
$0.0000
334,375
30/06/2017
15/07/2022
$0.0000
334,349
02/08/2017
15/09/2019
$0.0000
1,995,000
29/06/2018
15/07/2020
29/06/2018
15/07/2021
29/06/2018
15/07/2022
$0.0000
$0.0000
$0.0000
17,425
17,425
17,421
26/03/2019
30/06/2022
$0.0000
487,557
–
–
–
–
–
–
–
–
(89,271)
(89,271)
(89,269)
(1,995,000)
–
–
–
(105,599)
16/10/2019
31/08/2020
16/10/2019
31/08/2021
30/06/2020
30/06/2022
30/06/2020
06/01/2022
30/06/2020
06/01/2023
$0.0000
$0.0000
$0.0000
$0.0000
$0.0000
–
–
–
–
–
16,485
16,485
163,864
10,792
10,791
–
–
–
–
–
–
245,104
(632)
244,472
(5,901)
239,179
–
–
–
–
–
(796)
(796)
–
–
–
–
17,425
17,425
17,421
381,958
15,689
15,689
163,864
10,792
10,791
3,537,927
218,417
(2,368,410)
(8,125)
1,379,809
2019
Grant date
Vesting date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
lapsed/other
Balance at
the end of
the year
30/06/2017
15/07/2020
$0.0000
340,277
30/06/2017
15/07/2021
$0.0000
340,277
30/06/2017
15/07/2022
$0.0000
340,250
02/08/2017
15/09/2019
$0.0000
1,995,000
29/06/2018
15/07/2020
29/06/2018
15/07/2021
29/06/2018
15/07/2022
26/03/2019
30/06/2022
$0.0000
$0.0000
$0.0000
$0.0000
17,425
17,425
17,421
–
–
–
–
–
–
–
–
487,557
3,068,075
487,557
–
–
–
–
–
–
–
–
–
(5,902)
(5,902)
(5,901)
–
–
–
–
–
334,375
334,375
334,349
1,995,000
17,425
17,425
17,421
487,557
(17,705)
3,537,927
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 1.1 years
(2019: 1 year).
67
Audinate Annual Report 2020 | The 163,864 performance rights issued with a grant date of 30 June 2020 were externally valued based on a share price of
$7.32, an exercise price of zero, volatility of 35% – 45%, a risk-free interest rate of 0.71% and probability weighting reflecting
the probability of meeting the vesting conditions. The fair value of the share rights based on these inputs is $4.37 per share.
These performance rights vesting upon:
l Achieving total shareholder return equal to the 50th percentile of the relevant Index and vest fully at the 75th percentile; and
l The employee remaining an employee up to an including the vesting date.
The remaining performance rights issued in the current year with a grant date of 16 October 2019 and 30 June 2020 were valued
using the 30-day Volume Weighted Average Price (‘VWAP’) at $7.21 and $8.24 respectively. These performance rights vest upon
the employee remaining an employee up to and including the vesting date.
At the Annual General Meeting on 24 October 2019, the shareholders approved the removal of the vesting conditions and
performance hurdles from the 373,410 performance rights held by the former CEO, Lee Ellison as outlined below.
267,811 performance rights issued on 30 June 2017 under the Employee Incentive Offer as part of the IPO which were subject to
the following vesting conditions and performance hurdles:
l A vesting condition that Lee remains an employee of the Group up to and including the vesting dates for the relevant tranches
of performance rights; and
l Performance hurdles which are based on the Company’s total shareholder return as compared to the S&P/Emerging
Companies Index with such performance to be tested in three tranches over three years on 15 July 2020, 15 July 2021 and
15 July 2022; and
105,599 performance rights issued on 26 March 2019 following shareholder approval at the 2018 Annual General Meeting, which
were subject to the following vesting conditions and performance hurdles:
l A vesting condition that Lee remains an employee of the Group up to and including the vesting date for the performance rights;
and
l Performance hurdle which is based on the Company’s total shareholder return as compared to the S&P/Emerging Companies
Index with such performance to be tested on 15 July 2021.
The removal of the vesting condition that Lee remains an employee of the Group up to and including the vesting date for
the performance rights resulted in an acceleration of the share based payments expense of $198,651 in the year ended
30 June 2020.
The removal of the performance condition was externally valued based on a share price of $7.32, an exercise price of zero,
volatility of 35% – 45%, a risk-free interest rate of 0.56% to 0.71% and probability weighting reflecting the probability of meeting
the vesting conditions. The fair value of the removal of the performance conditions for the 267,811 share rights resulted in a value
of $0.02 per performance right. The fair value of the removal of the performance conditions for the 105,599 performance rights
resulted in a value of $0.43 per performance right. This resulted in an additional share-based payments expense of $50,764 in
the year ended 30 June 2020.
Shares issued
On 16 October 2019, the Company issued 5,004 shares (issue price $7.21460) to staff under Company’s the long-term incentive
plan following the release of the Company’s 2019 results.
Note 34. Events after the reporting period
The Group completed an institutional placement on 22 July 2020 which raised $28 million of cash and resulted in the issue of
5,436,894 ordinary shares on this date. In addition, a Share Purchase Plan was completed on 17 August 2020 which raised
$12 million of cash and resulted in the issue of 2,343,750 ordinary shares on this date.
No other matter or circumstance has arisen since 30 June 2020 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.
68
Notes to the Consolidated Financial Statements| Audinate Annual Report 2020 In the Directors’ opinion:
l The attached financial statements and notes comply with the Accounting Standards and other mandatory professional
reporting requirements;
l 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;
l The attached financial statements and notes give a true and fair view of the Group’s financial position as at 30 June 2020
and of its performance for the financial year ended on that date; and
l 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
20 August 2020
Sydney
69
Directors’ DeclarationAudinate Annual Report 2020 | Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney, NSW, 2000
Australia
Phone: +61 2 9322 7000
www.deloitte.com.au
Independent Auditor’s Report to the members of
Audinate Group Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Audinate Group Limited (the “Company”) and its subsidiaries (the
“Group”) which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated
statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity
and the consolidated statement of cash flows for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies and other explanatory information, and the directors’
declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial
performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section
of our report. We are independent of the Group in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code)
that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given
to the directors of the Company, would be in the same terms if given to the directors as at the time of this
auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network
70
Independent Auditor’s Reportto the members of Audinate Group Limited| Audinate Annual Report 2020
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
How the scope of our audit responded to the
Key Audit Matter
Capitalisation and carrying value of development costs
As at 30 June 2020, the group has capitalised
development costs totalling $10.476 million as
disclosed in Note 16.
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 in assessing whether the criteria for
capitalisation of such costs has been met per the
relevant accounting standard, particularly
in
determining:
•
•
The appropriateness of the costs that can
be capitalised and whether these costs
were directly attributable to relevant
products developed; and
The extent to which these capitalised
development costs will generate sufficient
economic benefit to support their carrying
values.
Our procedures included, but were not limited to:
• Discussed
the
products
for which
development costs have been capitalised
with management to understand the nature
and feasibility of the products at 30 June
2020,
•
a
basis,
sample
• Obtained an understanding of the key
controls in place over the process for
recording and identifying qualifying costs to
be capitalised,
Assessed
the
on
appropriateness of costs capitalised by
agreeing the material costs, overheads and
engineers’ hours
to external
invoices, internal timesheets and payroll
records, and
Evaluated
the
carrying value of the capitalised development
costs by major product, with reference to
historical and forecast cashflow and analysis
of sale trends.
the appropriateness of
incurred
•
We also assessed the appropriateness of the
disclosures included in the Notes to the financial
statements.
71
Audinate Annual Report 2020 |
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Directors’ Report and ASX Additional Information, which we obtained prior to the date of this
auditor’s report, the other information also includes the annual report (but does not include the financial report
and our auditor’s report thereon) which is expected to be made available to us after that date.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we
have performed on the other information that we obtained prior to the date of this auditor’s report, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
When we read the annual report, if we conclude that there is a material misstatement therein, we are required
to communicate the matter to the directors and use our professional judgement to determine the appropriate
action.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with the Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
•
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial report or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.
72
Independent Auditor’s Reportto the members of Audinate Group Limited| Audinate Annual Report 2020
•
•
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are responsible
for the direction, supervision and performance of the Group’s audit. We remain solely responsible for
our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats
or safeguards applied.
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included on pages 16 to 26 of the Directors’ Report for the year
ended 30 June 2020.
In our opinion, the Remuneration Report of Audinate Group Limited, for the year ended 30 June 2020, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on
the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
Helen Hamilton-James
Partner
Chartered Accountants
Sydney, 20 August 2020
73
Audinate Annual Report 2020 |
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
Australian Super Pty Ltd
Date of
Notice
Number of
Securities
10/07/2017
6,289,308
05/03/2020
8,234,011
28/07/2020
4,359,029
%
10.57
9.20
6.42
Number of security holders and securities on issue
Audinate Group Limited has issued the following securities:
(a) 75,786,756 fully paid ordinary shares held by 13,898 shareholders;
(b) 440,200 unlisted options held by 18 option holders; and
(c) 1,379,809 unlisted performance rights held by 48 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
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Fully Paid Ordinary shares
Holders
Shares
7,929
3,487,407
4,570
10,710,047
857
6,175,367
511
10,941,345
31
44,472,590
%
4,60
14.44
8.15
14.44
58.58
13,898
75,786,756
100.00
Unmarketable parcel of shares
The number of shareholders holding less than a marketable parcel of ordinary shares is 545 based on Audinate Group Limited’s
closing share price of $5.40 on 25 August 2020.
74
Shareholder Informationas at 25 August 2020| Audinate Annual Report 2020 Twenty largest shareholders of quoted equity securities
Details of the 20 largest shareholders of quoted securities by registered shareholding are:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Name
J P Morgan Nominees Australia Pty Limited
HSBC Custody Nominees (Australia) Limited
Yamaha Corporation
Mr Aidan Williams
Citicorp Nominees Pty Limited
National Nominees Limited
Geetha Varuni Witana
Mr David John Myers
BNP Paribas Nominees Pty Ltd
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