01—Abstract
Summary
Summary of the 20-F filed August 23, 2019. Cited figures are marked; the original filing is the authoritative source.
Atlassian Corporation Plc's annual report on Form 20-F for the fiscal year ended June 30, 2019 shows total revenues of $1.21 billiona, up 37% from $880,978 thousand in fiscal 2018 (restated under IFRS 15).
Subscription revenue grew 54% to $633.95 millionb and now is the largest revenue line, while maintenance revenue rose 21% to $394.5 million. Gross margin improved to 83% from 80%, and non-IFRS operating income reached $251.2 million. Despite this, the company posted an IFRS operating loss of $63.4 million and a net loss of $637.6 million, or $2.67 per share.
The net loss was driven mainly by a $535.5 millionc non-operating expense, primarily the $533.9 million mark-to-fair-value loss on the embedded exchange feature of the $1 billion exchangeable senior notes, partly offset by capped call assets. The company reports free cash flow of $422.2 million, up from $281.2 million, and cash and short-term investments of about $1.7 billion. Balance sheet and liquidity risks are notable.
The notes' exchange condition was met as of June 30, 2019, so the notes and related derivative liability are classified as current, and current liabilities were $2.33 billiond against current assets of $2.04 billion, producing negative working capital of $287.6 million. Management states that cash and cash equivalents plus cash from operations should be sufficient for at least the next 12 months.
Governance is concentrated: Class B shares with ten votes each give holders about 91% of voting power, and co-CEOs Michael Cannon-Brookes and Scott Farquhar together hold about 90%. The company also reports as a foreign private issuer under IFRS and is not listed in the UK.
02—Key points
Key Highlights
- Total revenues of $1,210,127 thousand, up 37% from $880,978 thousand in fiscal 2018; subscription revenues rose 54% to $633,950 thousand.
- Gross profit of $999,842 thousand (83% of revenues) versus $708,288 thousand (80%) in fiscal 2018.
- IFRS operating loss of $63,362 thousand, with non-IFRS operating income of $251,201 thousand.
- Net loss of $637,621 thousand ($2.67 per share), driven by a $535,453 thousand other non-operating expense, mainly the mark-to-fair-value of the exchange feature of the Notes and capped calls.
- Free cash flow of $422,150 thousand, up from $281,247 thousand; net cash from operating activities of $466,342 thousand.
- Working capital was negative $287,597 thousand at June 30, 2019 because the $1 billion exchangeable senior notes became current after the exchange condition was met.
- Class B shares with ten votes each hold approximately 91% of voting power, with the co-CEOs holding approximately 90%.
03—Questions
Frequently Asked Questions
Why did Atlassian report a much larger net loss than its operating loss?
Other non-operating expense, net was $535,453 thousand, primarily from the $533,908 thousand unrealized loss on the exchange derivative and capped call transactions tied to the exchangeable senior notes. The filing states that the notes' embedded exchange feature is marked to fair value each period, so this item can move significantly with the share price.
Are the exchangeable senior notes a near-term liquidity concern?
The filing states the conditional exchange feature was triggered as of June 30, 2019, and the notes are exchangeable between July 1, 2019 and September 30, 2019. Any exchange must be settled in cash, and the notes ($853,576 thousand net carrying amount) plus the exchange derivative liability were classified as current. Management believes cash, cash equivalents and operating cash flow will be sufficient for at least the next 12 months.
What drove revenue growth in fiscal 2019?
The filing attributes growth primarily to additional subscriptions from the existing customer base, with over 90% of total revenues coming from customer accounts existing on or before June 30, 2018. Customers rose to 152,727 from 125,796. Maintenance growth reflected renewals of maintenance contracts on perpetual licenses, and other revenue rose 45% on Atlassian Marketplace third-party app sales.
What is the risk from the dual-class share structure?
Class B ordinary shares carry ten votes per share and represent approximately 91% of voting power as of June 30, 2019. The filing states this concentrated control may delay or prevent a change in control and could deprive Class A shareholders of a potential takeover premium.
04—Continue