01—Abstract
Summary
Summary of the 20-F filed August 18, 2016. Cited figures are marked; the original filing is the authoritative source.
Atlassian Corporation Plc filed this annual report on Form 20-F for the fiscal year ended June 30, 2016, reporting under International Financial Reporting Standards (IFRS).
Total revenues rose to $457.06 milliona from $319.52 million, with subscription revenue up to $146.66 million from $85.89 million and maintenance revenue up to $218.85 million from $160.37 million. The company swung to an IFRS operating loss of $5.88 million from operating income of $1.71 million the prior year, and net income fell to $4.37 million from $6.78 million. Management attributes the decline to continued heavy investment in research and development, cloud infrastructure, global expansion and share-based compensation, which rose to $75.48 million from $41.53 million.
Non-IFRS operating income was $77.09 millionb and free cash flow was $95.33 million for the year. The balance sheet strengthened substantially following the December 2015 initial public offering, which sold 22 million Class A ordinary shares at $21.00 per share for net proceeds of $431.4 million. Cash and cash equivalents were $259.71 million and short-term investments were $483.41 million at June 30, 2016, against total liabilities of $259.31 million.
Customers grew to 60,950 from 48,622, and the company reported 1,760 employees. Governance-wise, the dual-class structure gives Class B holders roughly 95%c of voting power, with co-CEOs Michael Cannon-Brookes and Scott Farquhar together holding about 94%, which the filing flags as a risk to Class A shareholders.
02—Key points
Key Highlights
- Total revenues increased 43% to $457.06 million for fiscal 2016, with subscription revenues up 71% to $146.66 million.
- IFRS operating income swung to a loss of $5.88 million, compared with operating income of $1.71 million in fiscal 2015, as research and development expenses rose to $208.31 million.
- Share-based payment expense increased to $75.48 million from $41.53 million, and non-IFRS operating income was $77.09 million.
- Free cash flow was $95.33 million, up from $65.55 million, with net cash provided by operating activities of $129.54 million.
- The December 2015 IPO raised net proceeds of $431.4 million, leaving cash and cash equivalents of $259.71 million and short-term investments of $483.41 million at June 30, 2016.
- Customers increased to 60,950 from 48,622, and the filing states that no single customer contributed more than 1% of total revenues.
- Class B shareholders hold approximately 95% of voting power, which the filing identifies as a risk to Class A shareholders.
03—Questions
Frequently Asked Questions
Why did the company report an operating loss in fiscal 2016 after being profitable in prior years?
The filing attributes the decline to significant ongoing investments in research and development and technology infrastructure for cloud offerings, global expansion, new products, and higher share-based compensation. Research and development expense rose to $208.31 million from $140.85 million, and general and administrative expense rose to $85.46 million from $56.03 million. The company states it does not expect to achieve IFRS profitability in the near term.
How is the company's revenue mix changing?
Subscription revenue grew to $146.66 million, or 32% of total revenues, from 27% in fiscal 2015, while maintenance revenue fell to 48% of total revenues from 50%. The filing says it expects subscription revenue to keep growing faster than perpetual license revenue as customers adopt cloud-based services. Perpetual license revenue was $65.49 million.
What is the risk associated with the dual-class share structure?
Class B ordinary shares carry ten votes per share and collectively hold approximately 95% of voting power, with the co-CEOs together holding about 94%. Holders of Class A shares therefore have limited ability to influence major transactions, including a change in control, and the concentrated control could deter a sale of the company at a premium.
What did the company do with the IPO proceeds?
Through June 30, 2016, the company used existing cash and the net proceeds of the IPO for working capital and general corporate purposes, including research and development spending focused on product development. The filing notes it may also use proceeds to hire personnel and to make acquisitions or investments in complementary companies or technologies.
What is the company's free cash flow and how is it defined?
Free cash flow is a non-IFRS measure defined as net cash provided by operating activities less capital expenditures. For fiscal 2016 it was $95.33 million, compared with $65.55 million in fiscal 2015, reflecting operating cash flow of $129.54 million less capital expenditures of $34.21 million.
04—Continue