6-K 1 a6-kq1fy21quarterlyrep.htm 6-K Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
 
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
 
For the quarter ended September 30, 2020
 
Commission File Number 001-37651

Atlassian Corporation Plc
(Translation of registrant’s name into English)
 
Exchange House
Primrose Street
London EC2A 2EG
c/o Herbert Smith Freehills LLP
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F:
Form 20-F ☑ Form 40-F ☐
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
 


1


QUARTERLY REPORT
TABLE OF CONTENTS

1


ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. $ and shares in thousands, except per share data)
(unaudited)
  Three Months Ended September 30,
 Notes20202019
Revenues: 
Subscription $277,964 $201,095 
Maintenance 127,694 110,071 
Perpetual license 22,137 24,744 
Other 31,711 27,480 
Total revenues12459,506 363,390 
Cost of revenues (1) (2) 73,684 62,279 
Gross profit 385,822 301,111 
Operating expenses: 
Research and development (1) (2) 232,235 175,882 
Marketing and sales (1) (2) 70,286 68,043 
General and administrative (1) 71,369 61,741 
Total operating expenses 373,890 305,666 
Operating income (loss) 11,932 (4,555)
Other non-operating income (expense), net(26,271)82,235 
Finance income 2,590 9,112 
Finance costs (12,575)(12,327)
Income (loss) before income tax benefit (expense) (24,324)74,465 
Income tax benefit (expense)52,770 (5,145)
Net income (loss) $(21,554)$69,320 
Net income (loss) per share attributable to ordinary shareholders: 
Basic14$(0.09)$0.29 
Diluted14$(0.09)$0.28 
Weighted-average shares outstanding used to compute net income (loss) per share attributable to ordinary shareholders: 
Basic14248,015 242,791 
Diluted14248,015 250,883 

(1)Amounts include share-based payment expense, as follows:
Cost of revenues$5,256 $4,712 
Research and development61,451 48,939 
Marketing and sales6,784 10,631 
General and administrative12,240 13,014 

(2)Amounts include amortization of acquired intangible assets, as follows:
Cost of revenues$5,419 $8,488 
Research and development41 41 
Marketing and sales2,299 3,686 
The above consolidated statements of operations should be read in conjunction with the accompanying notes.
2

ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(U.S. $ in thousands)
(unaudited)
  Three Months Ended September 30,
 Notes20202019
Net income (loss) $(21,554)$69,320 
Items that will not be reclassified to profit or loss in subsequent periods:
Net change in unrealized gain (loss) on investments classified at fair value through other comprehensive income357,991 (15,930)
Income tax effect(13,176)3,636 
Other comprehensive income (loss) for items that will not be reclassified to profit or loss, net of tax44,815 (12,294)
Items that will be reclassified to profit or loss in subsequent periods:
Foreign currency translation adjustment1,059 (811)
Net change in unrealized gain (loss) on investments classified at fair value through other comprehensive income(1,313)456 
Net gains (losses) on derivative instruments36,602 (5,745)
Income tax effect (3,234)(84)
Other comprehensive income (loss) after tax that will be reclassified to profit or loss in subsequent periods3,114 (6,184)
Other comprehensive income (loss), net of tax 47,929 (18,478)
Total comprehensive income, net of tax $26,375 $50,842 

The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.
3

ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(U.S. $ in thousands)
NotesSeptember 30, 2020June 30, 2020
(unaudited)
Assets
Current assets:
Cash and cash equivalents11$1,560,262 $1,479,969 
Short-term investments3624,158 676,072 
Trade receivables6120,296 112,019 
Tax receivables2,767 1,509 
Derivative assets3, 13316,548 327,487 
Prepaid expenses and other current assets55,576 46,730 
Total current assets2,679,607 2,643,786 
Non-current assets:
Property and equipment, net7100,393 97,648 
Deferred tax assets52,498 35,351 
Goodwill8675,104 645,140 
Intangible assets, net8131,530 129,690 
Right-of-use assets, net9212,242 217,683 
Other non-current assets11186,774 124,774 
Total non-current assets1,358,541 1,250,286 
Total assets$4,038,148 $3,894,072 
Liabilities
Current liabilities:
Trade and other payables11$155,784 $202,570 
Tax liabilities29,334 19,583 
Provisions17,472 14,291 
Deferred revenue602,265 573,813 
Lease obligations937,511 34,743 
Derivative liabilities31,299,086 1,284,596 
Current portion of exchangeable senior notes, net13898,352 889,183 
Total current liabilities3,039,804 3,018,779 
Non-current liabilities:
Deferred tax liabilities48,783 31,304 
Provisions11,121 9,493 
Deferred revenue22,676 27,192 
Lease obligations9222,651 229,825 
Other non-current liabilities4,669 2,173 
Total non-current liabilities309,900 299,987 
Total liabilities3,349,704 3,318,766 
Equity
Share capital24,864 24,744 
Share premium460,785 459,892 
Other capital reserves1,216,668 1,130,918 
Other components of equity124,073 76,144 
Accumulated deficit(1,137,946)(1,116,392)
Total equity688,444 575,306 
Total liabilities and equity$4,038,148 $3,894,072 

The above consolidated statements of financial position should be read in conjunction with the accompanying notes.
4

ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(U.S. $ in thousands)
(unaudited)
Other components of equity
Share capitalShare premiumOther capital reservesCash flow hedge reserveForeign currency translation reserveInvestments at fair value through other comprehensive income reserveAccumulated deficitTotal equity
Balance as of June 30, 2020$24,744 $459,892 $1,130,918 $6,167 $3,759 $66,218 $(1,116,392)$575,306 
Net loss(21,554)(21,554)
Other comprehensive income (loss), net of tax— — — 3,119 1,059 43,751 — 47,929 
Total comprehensive income (loss), net of tax— — — 3,119 1,059 43,751 (21,554)26,375 
Issuance of ordinary shares upon exercise of share options30893923
Vesting of early exercised shares4(4)
Issuance of ordinary shares for settlement of restricted share units86(86)
Share-based payment85,80285,802
Tax benefit from share plans3838
12089385,75086,763
Balance as of September 30, 2020$24,864 $460,785 $1,216,668 $9,286 $4,818 $109,969 $(1,137,946)$688,444 

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
5

ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
(U.S. $ in thousands)
(unaudited)
Other components of equity
Share capitalShare premiumOther capital reservesCash flow hedge reserveForeign currency translation reserveInvestments at fair value through other comprehensive income reserveAccumulated deficitTotal Equity
Balance as of June 30, 2019$24,199 $458,166 $816,660 $(2,547)$4,372 $30,254 $(765,637)$565,467 
Net loss69,32069,320
Other comprehensive income (loss), net of tax(5,745)(811)(11,922)(18,478)
Total comprehensive income (loss), net of tax(5,745)(811)(11,922)69,32050,842
Issuance of ordinary shares upon exercise of share options25630655
Vesting of early exercised shares3333
Issuance of ordinary shares for settlement of restricted share units (RSUs)99(99)
Share-based payment77,29677,296
Tax benefit from share plans5656
Cumulative effect of applying new accounting pronouncement*(101)(101)
15763077,253(101)77,939
Balance as of September 30, 2019$24,356 $458,796 $893,913 $(8,292)$3,561 $18,332 $(696,418)$694,248 
* Reflects the impact of adopting IFRS 16, Leases (“IFRS 16”) using the modified retrospective method. We adopted IFRS 16 on July 1, 2019.
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

6

ATLASSIAN CORPORATION PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. $ in thousands)
(unaudited)
 Three Months Ended September 30,
20202019
Operating activities 
Income (loss) before income tax benefit (expense) $(24,324)$74,465 
Adjustments to reconcile income (loss) before income tax benefit (expense) to net cash provided by operating activities: 
Depreciation and amortization13,411 16,657 
Depreciation of right-of-use assets9,214 8,358 
Loss (gain) on sale of investments, disposal of assets and other248 (47)
Net unrealized foreign currency loss (gain)5,567 (2,237)
Share-based payment expense 85,731 77,296 
Net unrealized loss (gain) on exchange derivative and capped call transactions27,496 (82,103)
Amortization of debt discount and issuance cost9,173 8,742 
Interest income(2,590)(9,112)
Interest expense 3,402 3,583 
Changes in assets and liabilities: 
Trade receivables (8,378)(16,837)
Prepaid expenses and other assets (11,418)(8,597)
Trade and other payables, provisions and other non-current liabilities (47,384)(31,829)
Deferred revenue 22,636 31,556 
Interest received 4,156 8,679 
Income tax paid, net (7,475)(2,383)
Net cash provided by operating activities 79,465 76,191 
Investing activities 
Business combinations, net of cash acquired (32,464)(815)
Purchases of property and equipment(7,817)(6,113)
Purchases of investments (33,252)(323,756)
Proceeds from maturities of investments 74,677 122,449 
Proceeds from sales of investments7,087 59,019 
Payment of deferred consideration (185)— 
Net cash provided by (used in) investing activities 8,046 (149,216)
Financing activities 
Proceeds from exercise of share options 922 655 
Payments of lease obligations(11,096)(7,670)
Repayment of exchangeable senior notes (8)— 
Net cash used in financing activities (10,182)(7,015)
Effect of exchange rate changes on cash and cash equivalents 2,964 (1,210)
Net increase (decrease) in cash and cash equivalents 80,293 (81,250)
Cash and cash equivalents at beginning of period1,479,969 1,268,441 
Cash and cash equivalents at end of period$1,560,262 $1,187,191 

The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.
7



ATLASSIAN CORPORATION PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




(unaudited)
1. Corporate Information
Atlassian Corporation Plc (the “Company”) is a public company limited by shares, incorporated and registered in the United Kingdom. The registered office of the Company and its subsidiaries (collectively, “Atlassian,” the “Group,” “our,” or “we”) is located at Exchange House, Primrose Street, London EC2A 2EG, c/o Herbert Smith Freehills LLP.
We design, develop, license and maintain software and provision software hosting services to help teams organize, discuss and complete their work. Our primary products include Jira Software, targeting software teams, and Jira Core, targeting other business teams (collectively, “Jira”), Confluence for team content creation and sharing, Trello for capturing and adding structure to fluid, fast-forming work for teams, Jira Service Desk for team service and support applications, Opsgenie for incident management, Jira Align for enterprise agile planning, Bitbucket for code sharing and management, and Atlassian Access for enterprise-grade security and centralized administration.
2. Summary of Significant Accounting Policies
Basis of preparation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the Group’s accounting policies, which are in accordance with International Financial Reporting Standards (“IFRS”), and in compliance with International Accounting Standard (“IAS”) 34. Our accounting policies apply standards issued by the International Accounting Standards Board (“IASB”) and related interpretations issued by the IFRS Interpretations Committee (“IFRS IC”). The consolidated financial statements have been prepared on a historical cost basis, except for debt and equity financial assets and derivative financial instruments that have been measured at fair value.
Certain information and disclosures normally included in the notes to annual financial statements have been condensed or omitted. We believe that the condensed information and disclosures made are adequate and that the information gives a true and fair view. The information included in this quarterly report on Form 6-K should be read in conjunction with the Group’s audited consolidated financial statements and accompanying notes included in the Group’s annual report on Form 20-F for the year ended June 30, 2020, which was filed with the Securities and Exchange Commission (“SEC”) on August 14, 2020.
All amounts included in the unaudited interim consolidated financial statements are reported in thousands of U.S. dollars (U.S. $ in thousands) except where otherwise stated. Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
The accompanying consolidated statements of financial position as of September 30, 2020, the consolidated statements of operations, comprehensive income, changes in equity and cash flows for the three months ended September 30, 2020 and 2019, and related footnote information are unaudited. The consolidated statement of financial position as of June 30, 2020 was derived from the audited consolidated financial statements included in the Group’s annual report on Form 20-F. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, necessary to present fairly the Group’s financial position as of September 30, 2020, and the results of operations and cash flows for the three months ended September 30, 2020 and 2019. The results of the three months ended September 30, 2020 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year.




8

Use of estimates
The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgments and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgments and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which forms the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions and may materially affect the financial results or the financial position reported in future periods.
In January 2020, the World Health Organization declared a novel coronavirus (“COVID-19”) a Public Health Emergency of International Concern, and a pandemic in March 2020. The impact of COVID-19 continues to unfold and the extent of the impact will depend on a number of factors, including the duration and spread of the outbreak, its severity, the actions taken by governments and authorities to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. The Group considered the impact of COVID-19 on the assumptions and estimates used, including the allowance for credit losses for accounts receivable, the creditworthiness of customers entering into revenue arrangements, our impairment assessment of assets, the fair values of our financial instruments, and income taxes, which require increased judgement and carry a higher degree of estimate uncertainty. The Group determined that there were no material adverse impacts on the consolidated financial statements for the three months ended September 30, 2020. As events continue to evolve and additional information becomes available, the Group’s assumptions and estimates may change in future periods.
Updated significant accounting policies
There have been no changes to our critical accounting policies and estimates described in the Group’s annual report on Form 20-F for the year ended June 30, 2020, filed with the SEC on August 14, 2020.
3. Financial Instruments Investments
As of September 30, 2020, the Group’s investments consisted of the following:
 Amortized CostUnrealized GainsUnrealized LossesFair Value
 (U.S. $ in thousands)
Debt Investments   
Marketable debt securities:
U.S. treasury securities$292,035 $1,611 $— $293,646 
Agency securities24,275 217 — 24,492 
Certificates of deposit and time deposits7,000 — — 7,000 
Commercial paper11,488 — — 11,488 
Corporate debt securities285,770 2,383 — 288,153 
Municipal securities2,700 26 — 2,726 
Total debt investments$623,268 $4,237 $— $627,505 
Equity Investments
Marketable equity securities$20,270 $137,908 $— $158,178 
Non-marketable equity securities5,250 — — 5,250 
Total equity investments$25,520 $137,908 $— $163,428 
Total investments$648,788 $142,145 $— $790,933 
As of September 30, 2020, the Group had $624.2 million of investments which were classified as short-term investments on the Group’s consolidated statement of financial position. Additionally, the Group had marketable equity securities totaling $158.2 million, non-marketable equity securities totaling $5.3 million, and certificates of deposit and time deposits totaling $3.3 million all of which were classified as long-term and were included in other non-current assets on the Group’s consolidated statement of financial position.
9

As of June 30, 2020, the Group’s investments consisted of the following:

 Amortized CostUnrealized GainsUnrealized LossesFair Value
 (U.S. $ in thousands)
Debt Investments
Marketable debt securities:
U.S. treasury securities$294,103 $2,017 $(2)$296,118 
Agency securities24,280 306 — 24,586 
Certificates of deposit and time deposits15,399 — — 15,399 
Commercial paper31,937 — — 31,937 
Corporate debt securities305,448 3,205 (2)308,651 
Municipal securities2,700 28 — 2,728 
Total debt investments$673,867 $5,556 $(4)$679,419 
Equity Investments
Marketable equity securities$20,270 $79,917 $— $100,187 
Non-marketable equity securities3,750 — — 3,750 
Total equity investments$24,020 $79,917 $— $103,937 
Total investments$697,887 $85,473 $(4)$783,356 
As of June 30, 2020, the Group had $676.1 million of investments which were classified as short-term investments on the Group’s consolidated statement of financial position. Additionally, the Group had marketable equity securities totaling $100.2 million, non-marketable equity securities totaling $3.8 million, and certificates of deposit and time deposits totaling $3.3 million, all of which were classified as long-term and were included in other non-current assets on the Group’s consolidated statement of financial position.
The table below summarizes the Group’s debt investments by remaining contractual maturity:
As of
 September 30, 2020June 30, 2020
 (U.S. $ in thousands)
Recorded as follows:   
Due in one year or less$485,330 $443,324 
Due after one year142,175 236,095 
Total debt investments$627,505 $679,419 

10

Fair value measurements
The following table presents the Group’s financial instruments measured and recognized at fair value as of September 30, 2020, by level within the fair value hierarchy:
Level 1Level 2Level 3Total
(U.S. $ in thousands)
Description
Assets measured at fair value
Cash and cash equivalents:
Money market funds$462,398 $— $— $462,398 
Agency securities— 850 — 850 
Commercial paper— 241,628 — 241,628 
Corporate debt securities— 15,212 — 15,212 
Short-term investments:
U.S. treasury securities— 293,646 — 293,646 
Agency securities— 24,492 — 24,492 
Certificates of deposit and time deposits— 3,653 — 3,653 
Commercial paper— 11,488 — 11,488 
Corporate debt securities— 288,153 — 288,153 
Municipal securities— 2,726 — 2,726 
Current derivative assets:
Derivative assets - hedging— 20,821 — 20,821 
Derivative assets - capped call transactions— — 295,727 295,727 
Other non-current assets:
Certificates of deposit and time deposits— 3,347 — 3,347 
Marketable equity securities158,178 — — 158,178 
Non-marketable equity securities— — 5,250 5,250 
Total assets measured at fair value$620,576 $906,016 $300,977 $1,827,569 
Liabilities measured at fair value    
Current derivative liabilities:
Derivative liabilities - hedging$— $3,386 $— $3,386 
Derivative liabilities - exchangeable feature of exchangeable senior notes— — 1,295,700 1,295,700 
Non-current derivative liabilities:
Derivative liabilities - hedging— 321 — 321 
Total liabilities measured at fair value$— $3,707 $1,295,700 $1,299,407 
There were no transfers between levels during the three months ended September 30, 2020.
11

The following table presents the Group’s financial instruments measured and recognized at fair value as of June 30, 2020, by level within the fair value hierarchy:
Level 1Level 2Level 3Total
(U.S. $ in thousands)
Description
Assets measured at fair value
Cash and cash equivalents:
Money market funds$439,947 $— $— $439,947 
U.S. treasury securities— 5,599 — 5,599 
Agency securities— 8,749 — 8,749 
Commercial paper— 167,248 — 167,248 
Corporate debt securities— 27,365 — 27,365 
Short-term investments:
U.S. treasury securities— 296,118 — 296,118 
Agency securities— 24,586 — 24,586 
Certificates of deposit and time deposits— 12,052 — 12,052 
Commercial paper— 31,937 — 31,937 
Corporate debt securities— 308,651 — 308,651 
Municipal securities— 2,728 — 2,728 
Current derivative assets:
Derivative assets - hedging— 16,879 — 16,879 
Derivative assets - capped call transactions— — 310,608 310,608 
Other non-current assets:
Certificates of deposit and time deposits— 3,347 — 3,347 
Marketable equity securities100,187 — — 100,187 
Non-marketable equity securities— — 3,750 3,750 
Total assets measured at fair value$540,134 $905,259 $314,358 $1,759,751 
Liabilities measured at fair value
Current derivative liabilities:
Derivative liabilities - hedging$— $1,507 $— $1,507 
Derivative liabilities - exchangeable feature of exchangeable senior notes— — 1,283,089 1,283,089 
Non-current derivative liabilities:
Derivative liabilities - hedging— — 
Total liabilities measured at fair value$— $1,509 $1,283,089 $1,284,598 
Due to the short-term nature of trade receivables, contract assets and trade and other payables, their carrying amount is assumed to approximate their fair value.
Determination of fair value
The following table sets forth a description of the valuation techniques and the inputs used in fair value measurement:
12

TypeValuation TechniqueInputs
Money market fundQuoted price in active marketN/A
Marketable debt securitiesQuoted market price to the extent possible or alternative pricing sources and models utilizing market observable inputsN/A
Marketable equity securitiesQuoted price in active marketN/A
Non-marketable equity securitiesPublicly available financing round valuationN/A
Foreign currency forward contractsDiscounted cash flowForeign currency spot and forward rate
Interest rate
Credit quality of counterparties
Exchange and Capped Call Derivatives
Black-Scholes option pricing modelsStock price
Time to expiration of the options
Stock price volatility
Interest rate
Exchangeable senior notesQuoted market priceN/A
Level 3 financial instruments
In April 2018, Atlassian Inc., a wholly-owned subsidiary of the Company, issued $1 billion in exchangeable senior notes (“the Notes”) and entered into related capped call transactions. Please refer to Note 13, “Exchangeable Senior Notes” for details. The embedded exchange feature of the Notes and capped call transactions (“Exchange and Capped Call Derivatives”) are classified as level 3 as the Group uses stock price volatility implied from options traded with a substantially shorter term, which makes this an unobservable input that is significant to the valuation.
The stock price volatility as of September 30, 2020, ranged from 42.6% to 43.9%. As of September 30, 2020, a 10% higher volatility, holding other inputs constant, would result in an approximately $36.9 million higher unrealized loss for the three months ended September 30, 2020.
The following table presents the reconciliations of Level 3 financial instrument fair values:
 Capped CallEmbedded Exchange Feature of NotesNon-marketable Investments
 (U.S. $ in thousands)
Balance as of June 30, 2020$310,608 $(1,283,089)$3,750 
Settlements or purchases
(1)1,500 
Gains (losses)
Recognized in other non-operating income (expense), net
(14,880)(12,616)— 
Balance as of September 30, 2020$295,727 $(1,295,700)$5,250 
Change in unrealized gains (losses) relating to assets and liabilities held at the end of the reporting period
Recognized in other non-operating income (expense), net
$(14,880)$(12,616)$— 

13

Derivative financial instruments
The Group has derivative instruments that are used for hedging activities as discussed below and derivative instruments relating to the Notes and the capped call transactions as discussed in Note 13, “Exchangeable Senior Notes.
The fair value of the hedging derivative instruments were as follows:
As of
Statement of Financial Position LocationSeptember 30, 2020June 30, 2020
(U.S. $ in thousands)
Derivative assets - hedging
Derivatives designated as hedging instruments:
Foreign exchange forward contractsCurrent derivative assets$20,471 $14,195 
Derivatives not designated as hedging instruments:
Foreign exchange forward contractsCurrent derivative assets350 2,684 
Total derivative assets$20,821 $16,879 
Derivative liabilities - hedging
Derivatives designated as hedging instruments:
Foreign exchange forward contractsCurrent derivative liabilities$426 $1,164 
Foreign exchange forward contractsOther non-current liabilities321 
Derivatives not designated as hedging instruments:
Foreign exchange forward contractsCurrent derivative liabilities2,960 343 
Total derivative liabilities$3,707 $1,509 
The following table sets forth the notional amounts of our derivative instruments as of September 30, 2020 (U.S. $ in thousands):
Notional Amounts of Derivative Instruments
Notional Amount by Term to MaturityClassification by Notional Amount
Under 12 monthsOver 12 monthsTotalCash Flow HedgeNon HedgeTotal
AUD/USD forward contracts:
Notional amount$365,784 $17,625 $383,409 $237,828 $145,581 $383,409 
Average forward rate0.6834 0.7259 — 0.6603 0.7262 — 
EUR/USD forward contracts:
Notional amount9,368 — 9,368 — 9,368 9,368 
Average forward rate1.1842 — — — 1.1842 — 
Total$375,152 $17,625 $392,777 $237,828 $154,949 $392,777 
14

The following table sets forth the notional amounts of our derivative instruments at June 30, 2020 (U.S. $ in thousands):
Notional Amounts of Derivative Instruments
Notional Amount by Term to MaturityClassification by Notional Amount
Under 12 monthsOver 12 monthsTotalCash Flow HedgeNon HedgeTotal
AUD/USD forward contracts:
Notional amount$393,705 $8,441 $402,146 $256,890 $145,256 $402,146 
Average forward rate0.6610 0.6844 — 0.6536 0.6754 — 
EUR/USD forward contracts:
Notional amount7,205 — 7,205 — 7,205 7,205 
Average forward rate1.1179 — — — 1.1179 — 
Total$400,910 $8,441 $409,351 $256,890 $152,461 $409,351 
The effects of derivatives designated as hedging instruments on our consolidated financial statements were as follows (amounts presented are prior to any income tax effects):
Three Months Ended September 30,
20202019
(U.S. $ in thousands)
Gains (losses) recognized into general and administrative - ineffective portion$31 $(48)
Gross unrealized gains (losses) recognized in other comprehensive income (loss)$9,558 $(8,030)
Net gain (loss) reclassified from cash flow hedge reserve into profit or loss - effective portion:$2,956 $(2,285)
Recognized in cost of revenues(198)
Recognized in research and development2,665 (1,437)
Recognized in marketing and sales39 (77)
Recognized in general and administrative251 (573)
Change in fair value used for measuring ineffectiveness:
Cash flow hedging instruments$9,589 $(8,078)
Hedged item - highly probable forecast purchases9,558 (8,030)

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4. Expenses
Income (loss) before income tax benefit (expense) included the following expenses:
 Three Months Ended September 30,
 20202019
 (U.S. $ in thousands)
Depreciation:  
Equipment$570 $457 
Computer hardware and software410 258 
Furniture and fittings851 666 
Leasehold improvements3,820 3,061 
Total depreciation5,651 4,442 
Amortization:
Patents and trademarks300 1,921 
Customer relationships2,216 1,845 
Acquired developed technology5,244 8,449 
Total amortization7,760 12,215 
Total depreciation and amortization$13,411 $16,657 
Employee benefits expense:
Salaries and wages$145,435 $108,318 
Variable compensation24,011 19,904 
Payroll taxes13,014 10,171 
Share-based payment expense85,731 77,296 
Defined contribution plan expense8,498 6,388 
Contractor expense9,734 7,762 
Other19,525 14,148 
Total employee benefits expense$305,948 $243,987 

5. Income Tax
The Group reported a tax benefit of $2.8 million on pretax loss of $24.3 million for the three months ended September 30, 2020, as compared to a tax expense of $5.1 million on pretax income of $74.5 million for the three months ended September 30, 2019.
During the three months ended September 30, 2020, the Group recorded an income tax benefit of $14.7 million to increase the carrying value of the U.S. deferred tax assets and an income tax benefit of $2.0 million to increase the carrying value of Australian deferred tax assets. The increases in carrying value of deferred tax assets are a result of year to date unrealized investment and foreign exchange hedging gains that support their recognition. In addition, after the acquisition of Mindville, AB (“Mindville”), the Group recorded $5.4 million of income tax expense in Sweden upon transfer of Mindville’s intellectual property to the U.S. For details of the Mindville acquisition, please refer to Note 10, “Business Combinations.
The Group’s effective tax rate substantially differed from the United Kingdom’s income tax rate of 19% primarily due to the recognition of significant permanent differences during the three months ended September 30, 2020. Significant permanent differences include non-deductible charges relating to the Notes and related capped calls, research and development incentives, losses and other future tax benefits for which no deferred tax asset has been recorded, non-deductible share-based payment expense, and taxes in foreign jurisdictions with a tax rate different than the United Kingdom statutory rate, primarily Australia.
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6. Trade Receivables
The Group’s trade receivables consisted of the following:
As of
 September 30, 2020June 30, 2020
 (U.S. $ in thousands)
Gross trade receivables$121,066 $113,175 
Expected credit loss allowance(770)(1,156)
Total trade receivables$120,296 $112,019 
As of both September 30, 2020 and June 30, 2020, one customer represented more than 10% of the total trade receivables balance.
7. Property and Equipment
Property and equipment, net consisted of the following:
 EquipmentComputer
Hardware
and
Software
Furniture
and
Fittings
Leasehold
Improvements and Other
Construction in ProgressTotal
 (U.S. $ in thousands)
Cost as of June 30, 2020
$9,652 $12,065 $19,687 $103,100 $11,261 $155,765 
Additions900 170 649 29 6,531 8,279 
Disposals(16)(1,114)(33)(5)— (1,168)
Effect of change in exchange rates21 102 325 278 729 
Cost as of September 30, 2020
10,557 11,124 20,405 103,449 $18,070 163,605 
Accumulated depreciation as of June 30, 2020
(5,618)(8,611)(8,388)(35,500)— (58,117)
Depreciation expense(570)(410)(851)(3,820)— (5,651)
Disposals16 707 29 — 756 
Effect of change in exchange rates(16)(3)(28)(153)— (200)
Accumulated depreciation as of September 30, 2020
(6,188)(8,317)(9,238)(39,469)— (63,212)
Net book amount as of
September 30, 2020
$4,369 $2,807 $11,167 $63,980 $18,070 $100,393 
Construction in progress is related to costs associated with development of additional office space in Sydney, Australia.
8. Goodwill and Intangible Assets
Goodwill
Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. Goodwill amounts are not amortized, but rather tested for impairment at least annually during the fourth quarter, or when indicators of impairment exist.
Goodwill consisted of the following:
 NotesGoodwill
 (U.S. $ in thousands)
Balance as of June 30, 2020$645,140 
Additions1030,039 
Effect of change in exchange rates(75)
Balance as of September 30, 2020$675,104 
There was no impairment of goodwill during the three months ended September 30, 2020.
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Intangible assets
Intangible assets consisted of the following:
 Patents,
Trademarks
and Other Rights
Acquired Developed TechnologyCustomer
Relationships
Total
 (U.S. $ in thousands)
Cost as of June 30, 2020$27,795 $214,744 $128,502 $371,041 
Additions— 8,200 1,400 9,600 
Disposals(220)(6,900)(310)(7,430)
Cost as of September 30, 202027,575 216,044 129,592 373,211 
Accumulated amortization as of
June 30, 2020
(23,205)(147,146)(71,000)(241,351)
Amortization charge(300)(5,244)(2,216)(7,760)
Disposals220 6,900 310 7,430 
Accumulated amortization as of September 30, 2020
(23,285)(145,490)(72,906)(241,681)
Net book amount as of
September 30, 2020
$4,290 $70,554 $56,686 $131,530 
As of September 30, 2020, no development costs have qualified for capitalization, and all development costs have been expensed as incurred.
9. Leases
The Group leases various offices in locations including, Sydney, Australia; the San Francisco Bay Area, California, New York, New York, Austin, Texas, and Boston, Massachusetts, in the United States; Amsterdam, the Netherlands; Manila, the Philippines; Bengaluru, India; Yokohama, Japan; Ankara, Turkey, and Stockholm, Sweden under leases expiring within one to nine years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.
The following table sets forth the carrying amounts of our right-of-use assets and lease obligations and the movements during the three months ended September 30, 2020:
Office Leases
Right-of-Use AssetsLease Obligations
(U.S. $ in thousands)
As of June 30, 2020$217,683 $264,568 
Additions3,580 3,345 
Depreciation expense(9,214)— 
Interest expense— 1,807 
Payments— (11,096)
Effect of change in exchange rates193 1,538 
As of September 30, 2020$212,242 $260,162 
Lease obligations, current$37,511 
Lease obligations, non-current222,651 
Total lease obligations, as of September 30, 2020
$260,162 
During the three months ended September 30, 2020, we recognized expense from short-term leases and low value leases of $0.2 million and $0.3 million, respectively. Total cash outflows for leases were $11.9 million,
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including cash outflows of $9.3 million for the principal portion of the lease obligations, $1.8 million for the interest portion of the lease obligations and $0.8 million for short-term leases and low value leases.
As of September 30, 2020, we have entered into leases with future lease payments of $91.2 million that have not yet commenced and are not yet recorded on our consolidated statements of financial position. These leases will commence between fiscal years 2021 and 2022 with non-cancelable lease terms of 2 to 12 years.
10. Business Combinations
Fiscal year 2021
Mindville
On July 24, 2020, we acquired 100% of the outstanding equity of Mindville, an asset and configuration management company based in Sweden. Total purchase price consideration for Mindville was approximately $36.4 million in cash. In addition, the Company granted $12.0 million worth of restricted shares of the Company to key employees of Mindville, which are subject to future vesting provisions based on service conditions and accounted for as share based compensation.
With the acquisition of Mindville, Atlassian brings critical configuration management database capabilities to Jira Service Desk to better meet the needs of its IT customers. We have included the financial results of Mindville in our consolidated financial statements from the date of acquisition, which have not been material. Pro forma results of operations have not been presented for the three months ended September 30, 2020 because the effect of the acquisition was not material to the financial statements.
The following table summarizes the preliminary estimated fair values of assets acquired and liabilities assumed as of the date of acquisition:
Fair Value
(U.S. $ in thousands)
Cash and cash equivalents$1,235 
Tax receivables, current166 
Prepaid expenses and other current assets668 
Property and equipment, net52 
Right-of-use assets, net403 
Intangible assets9,600 
Goodwill30,039 
Trade and other payables(492)
Tax liabilities(23)
Provisions, current(135)
Deferred revenue(1,300)
Lease obligations, current(268)
Deferred tax liabilities(2,694)
Lease obligations, non-current(136)
Other non-current liabilities(669)
Net assets acquired$36,446 
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities. The goodwill balance is deductible in the U.S. and not deductible in Sweden for income tax purposes. The fair values assigned to tangible assets acquired, liabilities assumed and identifiable intangible assets were based on management’s estimates and assumptions. The fair value of acquired receivables approximates the gross contractual amounts receivable. The deferred tax liabilities were primarily a result of the difference in the book basis and tax basis related to the identifiable intangible assets. Transaction costs of $1.1 million were expensed as incurred, which was included in general and administrative expenses.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition:
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Fair ValueUseful Life
(U.S. $ in thousands)(years)
Developed technology$8,200 5
Customer relationships1,400 5
Total intangible assets subject to amortization$9,600 
The amount recorded for developed technology represents the estimated fair value of Mindville’s asset and configuration management solution. The amount recorded for customer relationships represents the fair value of the underlying relationships with Mindville’s customers. The purchase price allocations are preliminary and subject to revision as additional information existing as of the acquisition date but unknown to us may become available within the respective measurement period (up to one year from the respective acquisition date). The primary areas of the purchase price allocation that are not yet finalized are identification of contingencies.
Fiscal year 2020

Code Barrel
On October 15, 2019, we acquired 100% of the outstanding equity of Code Barrel Pty Ltd (“Code Barrel”), a workflow automation tool for Jira. Total purchase price consideration for Code Barrel was approximately $39.1 million in cash. In addition, the Company granted $27.0 million worth of restricted shares of the Company to key employees of Code Barrel, which are subject to future vesting provisions based on service conditions and accounted for as share based compensation.
Code Barrel is the creator of ‘Automation for Jira,’ a tool for easily automating several aspects of Jira. The acquisition of Code Barrel enhances Jira by helping customers automate more of the time-consuming and error-prone tasks in Jira. We have included the financial results of Code Barrel in our consolidated financial statements from the date of acquisition, which have not been material. Pro forma results of operations have not been presented for the twelve months ended June 30, 2020 because the effect of the acquisition was not material to the financial statements.
The following table summarizes the estimated fair values of assets acquired and liabilities assumed as of the date of acquisition:
Fair Value
(U.S. $ in thousands)
Cash and cash equivalents$1,970 
Intangible assets15,900 
Goodwill23,124 
Trade and other payables(617)
Deferred revenue(600)
Deferred tax liabilities(639)
Net assets acquired$39,138 
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities. The goodwill balance is deductible in the U.S. and not deductible in Australia for income tax purposes. The fair values assigned to tangible assets acquired, liabilities assumed and identifiable intangible assets were based on management’s estimates and assumptions. The deferred tax liabilities were primarily a result of the difference in the book basis and tax basis related to the identifiable intangible assets.
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The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition:
Fair ValueUseful Life
(U.S. $ in thousands)(years)
Developed technology$13,700 4
Customer relationships1,800 3
Trade name400 1
Total intangible assets subject to amortization$15,900 
The amount recorded for developed technology represents the estimated fair value of Code Barrel’s workflow automation technology. The amount recorded for customer relationships represents the fair value of the underlying relationships with Code Barrel’s customers. The amount recorded for trade name represents the fair value of Code Barrel’s brand recognition as of acquisition date. The purchase price allocation was finalized in fiscal year 2021 without further adjustment.
Halp
On May 11, 2020, we acquired 100% of the outstanding equity of Halp, Inc. (“Halp”), a message-based conversational help desk ticketing solution. Total purchase price consideration for Halp was approximately $17.6 million, which consisted of approximately $17.0 million in cash and $0.6 million in fair value of replacement shares attributable to service provided prior to acquisition. The Company issued 9,929 replacement shares and the fair value of the replacement shares was based on grant date stock price of the Company. In addition, the Company granted $4.1 million worth of restricted shares of the Company to key employees of Halp, which are subject to future vesting provisions based on service conditions and accounted for as share based compensation.
The Group acquired Halp to provide customers a standalone solution that allows them to turn their internal messaging tool into a help desk. For customers using Jira Service Desk or similar service management tools, Halp integrates their messaging tool seamlessly with their established workflows. We have included the financial results of Halp in our consolidated financial statements from the date of acquisition, which have not been material to date. Pro forma results of operations have not been presented for the twelve months ended June 30, 2020 because the effect of the acquisition was not material to the financial statements.
The following table summarizes the preliminary estimated fair values of assets acquired and liabilities assumed as of the date of acquisition:
Fair Value
(U.S. $ in thousands)
Cash and cash equivalents$664 
Trade receivables36 
Prepaid expenses and other current assets22 
Deferred tax assets475 
Intangible assets5,350 
Goodwill12,322 
Deferred revenue(50)
Deferred tax liabilities(1,237)
Net assets acquired$17,582 
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities. The goodwill balance is not deductible for income tax purposes. The fair values assigned to tangible assets acquired, liabilities assumed and identifiable intangible assets were based on management’s estimates and assumptions. The fair value of acquired receivables approximates the gross contractual amounts receivable.
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The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition:
Fair ValueUseful Life
(U.S. $ in thousands)(years)
Developed technology$4,400 6
Customer relationships850 6
Trade name100 1
Total intangible assets subject to amortization$5,350 
The amount recorded for developed technology represents the estimated fair value of Halp’s message-based help desk ticketing technology. The amount recorded for customer relationships represents the fair value of the underlying relationships with Halp’s customers. The amount recorded for trade name represents the fair value of Halp’s brand recognition as of the acquisition date. The purchase price allocations are preliminary and subject to revision as additional information existing as of the acquisition date but unknown to us may become available within the respective measurement period (up to one year from the respective acquisition date). The primary areas of the purchase price allocation that are not yet finalized are identification of contingencies.
11. Other Balance Sheet Accounts
Cash and cash equivalents
Cash and cash equivalents consisted of the following:
As of
 September 30, 2020June 30, 2020
 (U.S. $ in thousands)
Cash and bank deposits$831,932 $823,985 
Amounts due from third-party credit card processors8,242 7,076 
U.S. treasury securities— 5,599 
Corporate debt securities15,212 27,365 
Agency securities850 8,749 
Commercial paper241,628 167,248 
Money market funds462,398 439,947 
Total cash and cash equivalents$1,560,262 $1,479,969 
The majority of the Group’s cash and cash equivalents are held in bank deposits, money market funds and short-term investments which have a maturity of three months or less to enable us to meet our short-term liquidity requirements. Money market funds are quoted in active markets and are subject to insignificant risk of changes in value. The Group only purchases investment grade securities rated A- and above, which are highly liquid and subject to insignificant risk of changes in value.
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Other non-current assets
Other non-current assets consisted of the following:
As of
September 30, 2020June 30, 2020
(U.S. $ in thousands)
Marketable equity securities$158,178 $100,187 
Non-marketable equity securities5,250 3,750 
Security deposits4,910 4,873 
Restricted cash9,179 9,174 
Other9,257 6,790 
Total other non-current assets$186,774 $124,774 
As of September 30, 2020 and June 30, 2020, the Group had certificates of deposit and time deposits totaling $3.3 million, which were classified as long-term and were included in security deposits. The Group’s restricted cash was primarily used for commitments of standby letters of credit related to facility leases and was not available for the Group’s use in its operations.
Trade and other payables
Trade and other payables consisted of the following:
As of
 September 30, 2020June 30, 2020
 (U.S. $ in thousands)
Trade payables$34,006 $30,738 
Accrued expenses73,961 76,358 
Accrued compensation and employee benefits20,746 72,627 
Sales and indirect taxes10,151 9,009 
Customer deposits8,316 7,897 
Other payables8,604 5,941 
Total trade and other payables$155,784 $202,570 

12. Revenues
Deferred revenues
We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which are refundable. The changes in the balances of deferred revenue are as follows:
 Three Months Ended September 30,
 20202019
(U.S. $ in thousands)
Deferred revenue, beginning of period$601,005 $468,820 
Additions483,442 394,946 
Subscription revenue(277,964)(201,095)
Maintenance revenue(127,694)(110,071)
Perpetual license revenue(22,137)(24,744)
Other revenue(31,711)(27,480)
Deferred revenue, end of period$624,941 $500,376 
The additions in the deferred revenue balance are primarily cash payments received or due in advance of satisfying our performance obligations and deferred revenue acquired through business combinations.
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For the three months ended September 30, 2020 and 2019, approximately 53% and 52% of revenue recognized was from the deferred revenue balances at the beginning of each period.
Transaction price allocated to remaining performance obligations
Transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized, which includes unearned revenue and unbilled amounts that will be recognized as revenue in future periods. Transaction price allocated to the remaining performance obligations is influenced by several factors, including the timing of renewals, the timing of delivery of software licenses, average contract terms, and foreign currency exchange rates. Unbilled portions of the remaining performance obligations are subject to future economic risks including bankruptcies, regulatory changes and other market factors.
As of September 30, 2020, approximately $664.2 million of revenue is expected to be recognized from transaction price allocated to remaining performance obligations. We expect to recognize revenue on approximately 94% of these remaining performance obligations over the next 12 months with the balance recognized thereafter. 
Disaggregated revenues
Marketplace apps revenue totaled approximately $27.8 million and $24.1 million for the three months ended September 30, 2020 and 2019, respectively, which is included in other revenue.
The Group’s revenues by geographic region based on customers who purchased our products or services are as follows:
 Three Months Ended September 30,
 20202019
(U.S. $ in thousands)
Americas$230,378 $180,834 
EMEA178,069 141,888 
Asia Pacific51,059 40,668 
Total revenues$459,506 $363,390 
Revenues from the United States totaled approximately $202.5 million and $157.9 million for the three months ended September 30, 2020 and 2019, respectively.
13. Exchangeable Senior Notes
2023 Exchangeable Senior Notes
In April 2018, Atlassian, Inc., a wholly-owned subsidiary of the Company, issued $850 million in aggregate principal amount of Notes due on May 1, 2023. In May, 2018, the initial purchasers of the Notes exercised their option to purchase an additional $150 million in aggregate principal amount of the Notes, bringing the total aggregate principal amount of the Notes to $1 billion. The Notes are senior, unsecured obligations of the Group, and are scheduled to mature on May 1, 2023, unless earlier exchanged, redeemed or repurchased. The Notes bear interest at a rate of 0.625% per year payable semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2018. The net proceeds from the offering of the Notes were approximately $990.0 million, after deducting issuance cost.
The exchange feature of the Notes requires bifurcation from the Notes and is accounted for as a derivative liability. The Notes embedded exchange derivative is carried on the consolidated statements of financial position at its estimated fair value and is adjusted at the end of each reporting period, with unrealized gain or loss reflected in the consolidated statements of operations. The fair value of the exchange feature derivative liability was $1,295.7 million and $1,283.1 million as of September 30, 2020 and June 30, 2020, respectively.
In connection with the issuance of the Notes, the Group entered into privately negotiated capped call transactions with certain financial institutions. The capped call transactions expire in May 2023 and must be settled in cash. The capped call transactions are expected to generally offset cash payments due, limited by a capped price per share. The initial cap price of the capped call transactions is $114.42 per share and is subject to certain adjustments under the terms of the capped call transactions. The capped call transactions are accounted for as derivative assets and are carried on the consolidated statements of financial position at their estimated fair value. The capped calls are adjusted to fair value each reporting period, with unrealized gain or loss reflected in the
24

consolidated statements of operations. The fair value of capped call assets was $295.7 million and $310.6 million as of September 30, 2020 and June 30, 2020, respectively.
The current or non-current classification of the embedded exchange derivative liability and the capped calls asset corresponds with the classification of the Notes on the consolidated statements of financial position. The classification is evaluated at each balance sheet date, and may change from time to time depending on whether the exchange conditions are met. As of September 30, 2020 and June 30, 2020, the closing price exchange condition has been met and the Notes, exchange derivative liability and the capped call assets are classified as current. Please refer to Note 3 for details on the valuation of exchange feature derivative liability and capped call assets. During the three months ended September 30, 2020, we have settled four exchange requests for an immaterial amount of the Notes.
The Notes including the exchangeable features are Level 2 instruments, and the fair value of the Notes was $2,279 million and $2,234 million as of September 30, 2020 and June 30, 2020, respectively.

The principal amount, unamortized debt discount, unamortized issuance costs and net carrying amount of the liability component of the Notes as of September 30, 2020 and June 30, 2020, were as follows:
As of
September 30, 2020June 30, 2020
(U.S. $ in thousands)
Principal amount $999,995 $999,999 
Unamortized debt discount (97,192)(105,963)
Unamortized issuance cost(4,451)(4,853)
Net liability $898,352 $889,183 
The effective interest rate, contractual interest expense and amortization of debt discount for the Notes for the three months ended September 30, 2020 and 2019 were as follows:
Three Months Ended September 30,
20202019
(U.S. $ in thousands)
Effective interest rate4.83 %4.83 %
Contractual interest expense$1,562 $1,563 
Amortization of debt discount$8,771 $8,666 
Amortization of issuance cost$402 $397 
Reconciliation of assets and liabilities arising from financing activities:
 Capped Call AssetsNotes, NetEmbedded Exchange Feature of NotesAccrued Interest
(U.S. $ in thousands)
Balance as of June 30, 2020$(310,608)$889,183 $1,283,089 $1,042 
Cash flows(4)(5)— 
Amortization of debt discount and issuance cost— 9,173 — — 
Fair value changes14,880 — 12,616 — 
Accrual of interest— — — 1,562 
Balance as of September 30, 2020$(295,727)$898,352 $1,295,700 $2,604 

14. Earnings Per Share
Basic earnings per share is computed by dividing the net income (loss) attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding during the period. Diluted earnings per share is computed by giving effect to all potential weighted-average dilutive shares. The dilutive effect of outstanding awards is reflected in diluted earnings per share by application of the treasury stock method.
25

A reconciliation of the calculation of basic and diluted net income (loss) per share is as follows:
 Three Months Ended September 30,
 20202019
(U.S. $ in thousands except per share data)
Numerator:
Net income (loss) attributable to ordinary shareholders:$(21,554)$69,320 
Denominator:
Weighted-average ordinary shares outstanding—basic248,015 242,791 
Effect of potentially dilutive shares:
Share options and RSUs— 8,092 
Weighted-average ordinary shares outstanding—diluted248,015 250,883 
Net income (loss) per share attributable to ordinary shareholders:
Basic net income (loss) per share$(0.09)$0.29 
Diluted net income (loss) per share$(0.09)$0.28 
For the three months ended September 30, 2020, potentially anti-dilutive weighted-average shares excluded from the computation of net loss per share were 5.5 million. For the three months ended September 30, 2019, there were no potentially anti-dilutive weighted-average shares excluded from the computation of net income per share.
15. Share-based Payments
The Group maintains three share-based employee compensation plans: the 2015 Share Incentive Plan (“2015 Plan”); the Atlassian Corporation Plc 2013 U.S. Share Option Plan (“2013 U.S. Option Plan”); and the Atlassian UK Employee Share Option Plan (together with the 2013 U.S. Option Plan, the “Option Plans”). In October 2015, the Company’s board of directors approved the 2015 Plan, and in November 2015, our shareholders adopted the 2015 Plan, effective on the date of our initial public offering (“IPO”), which serves as the successor to the Options Plans, and provides for the issuance of incentive and non-statutory share options, share appreciation rights, restricted share awards, RSUs, unrestricted share awards, cash-based awards, performance share awards, performance-based awards to covered employees, and dividend equivalent rights to qualified employees, directors and consultants. Under the 2015 Plan, a total of 20.7 million Class A ordinary shares were initially reserved for the issuance of awards, subject to automatic annual increases.
RSU grants generally vest over four years with 25% vesting on the one year anniversary of the date of grant and 1/12th of the remaining RSUs vest over the remaining three years, on a quarterly basis thereafter. Performance-based RSUs have non-market performance vesting conditions. Individuals must continue to provide services to a Group entity in order to vest.
The Option Plans allowed for the issuance of options to purchase restricted shares. Effective upon our IPO, the shares underlying the options converted to Class A ordinary shares. Although no future awards will be granted under the Option Plans, they will continue to govern outstanding awards granted thereunder.
Under the Option Plans, share options have a contractual life of seven to ten years and typically follow a standard vesting schedule over a four year period: 25% vest on the one year anniversary and 1/48th monthly vesting for the 36 months thereafter. Individuals must continue to provide services to a Group entity in order to vest. Upon termination, all unvested options are forfeited and vested options must generally be exercised within three months.
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RSU and Class A ordinary share option activity was as follows:
Share Options
Shares
Available
for Grant
OutstandingWeighted
Average
Exercise
Price
RSUs
Outstanding
Balance as of June 30, 202035,921,250 458,174 $2.65 7,371,743 
Increase in shares authorized:
RSUs granted(1,487,909)— — 1,487,909 
RSUs canceled200,481 — — (200,481)
RSUs settled— — — (858,370)
Share options exercised— (296,546)3.11 — 
Balance as of September 30, 202034,633,822 161,628 $1.80 7,800,801 
Share options vested and exercisable as of September 30, 2020161,628 $1.80 
Share options vested and exercisable as of June 30, 2020457,663 $2.65 
The weighted-average remaining contractual life for options outstanding as of September 30, 2020 and June 30, 2020 was 3.9 years and 3.6 years, respectively. Options vested and exercisable as of September 30, 2020 and June 30, 2020, had a weighted-average remaining contractual life of approximately 3.9 years and 3.6 years, respectively.
All share-based payments are measured based on the grant date fair value of the awards and recognized in the consolidated statements of operations over the period during which the employee is required to perform services in exchange for the award (generally the four-year vesting period of the award).
The weighted-average grant date fair value of the RSUs issued during the three months ended September 30, 2020 and 2019 was $170.97 per share and $139.2 per share, respectively.
As of September 30, 2020, the Group had an aggregate of $444.8 million of future period share-based payment expense related to all equity awards outstanding, net of estimated forfeitures, to be amortized over a weighted-average period of 1.4 years.
Restricted stock
The Group granted 65,081 shares of restricted stock during the three months ended September 30, 2020 that were subject to forfeiture. The weighted average grant fair value date of these restricted shares was $184.34. As of September 30, 2020 and June 30, 2020, there were 538,102 and 515,697 shares of restricted stock outstanding, respectively. These outstanding shares of restricted stock are subject to forfeiture or repurchase at the original exercise price during the repurchase period following employee termination, as applicable.
16. Related Party Transactions
During the reporting period, we had no related party transactions that had a material effect on our business, financial position or results in the reporting period.
17. Events after the reporting period
On October 28, 2020, Atlassian, Inc., a wholly-owned subsidiary of the Company, entered into a $1 billion senior unsecured delayed-draw term loan facility (the “Term Loan Facility”) that may be drawn within a 12-month period from the closing of the Term Loan Facility and a $500 million senior unsecured revolving credit facility (the “Revolving Credit Facility,” and together with the Term Loan Facility, the “Credit Facility”). We will use the net proceeds of the Credit Facility for general corporate purposes. The Credit Facility matures in October 2025 and bears interest, at our option, at a base rate plus a spread of 0.00% to 0.50% or an adjusted LIBOR rate plus a spread of 0.875% to 1.50%, in each case with such spread being determined by our consolidated leverage ratio. The Credit Facility requires compliance with various financial and non-financial covenants, including affirmative and negative covenants. As of November 3, 2020, no amounts have been drawn under the Credit Facility.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 
This quarterly report contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that articulate our expectations, strategy, plans or intentions. Forward-looking statements contained in this quarterly report include, but are not limited to, statements about:
Our future financial performance, including our revenues, cost of revenues, gross profit or gross margin and operating expenses; 
The sufficiency of our cash and cash equivalents to meet our liquidity needs; 
Our ability to increase the number of customers using our software; 
Our ability to attract and retain customers to use our products and solutions; 
Our ability to develop new products and enhancements to our existing products;
Our ability to successfully expand in our existing markets and into new markets; 
Our ability to effectively manage our growth and future expenses; 
Our ability to prevent security breaches and unauthorized access to customer data;
Our ability to maintain, protect and enhance our intellectual property; 
Our ability to grow our cloud offerings, including the impact of customers transitioning from perpetual licenses to subscription licenses;
Our future growth and profitability; 
Our ability to repay our outstanding long-term debt in a timely manner and on favorable terms;
Our ability to comply with modified or new laws and regulations applying to our business, including privacy and data security regulations; 
Our ability to attract and retain qualified employees and key personnel;
Future acquisitions of, or investments in, complementary companies, products, services or technologies; and
The impact of natural disasters, diseases and pandemics, such as COVID-19 pandemic, and any associated economic downturn, and political and social unrest on our results of operations and financial performance.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this quarterly report.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this quarterly report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in “Risk Factors” and elsewhere in this quarterly report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this quarterly report. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this quarterly report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this quarterly report to reflect events or circumstances after the date of this quarterly report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, or investments.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this quarterly report and our annual report on Form 20-F filed with the SEC on August 14, 2020. As discussed in the section titled “Special Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” in this quarterly report.
Overview
Our mission is to unleash the potential of every team.
Our products help teams organize, discuss and complete their work — delivering superior outcomes for their organizations.
Our products serve teams of all shapes and sizes, in virtually every industry. Our primary products include Jira for planning and project management, Confluence for content creation and sharing, Trello for capturing and adding structure to fluid, fast-forming work for teams, Jira Service Desk for team service and support applications, Opsgenie for incident management, Jira Align for enterprise agile planning, Bitbucket for code sharing and management, and Atlassian Access for enterprise-grade security and centralized administration. Together, our products form an integrated system for organizing, discussing and completing shared work, becoming deeply entrenched in how people collaborate and how organizations run.
We begin with a deep investment in product development to create and refine high-quality and versatile products that users love. By making our products affordable for organizations of all sizes and transparently sharing our pricing online for our products, we do not follow the practice of opaque pricing and discounting that is typical in the enterprise software industry. We pursue customer volume, targeting every organization, regardless of size, industry or geography. This allows us to operate at unusual scale for an enterprise software company, with more than 182,000 customers across virtually every industry sector in approximately 200 countries as of September 30, 2020. Our customers range from small organizations that have adopted one of our products for a small group of users, to over two-thirds of the Fortune 500, many of which use a combination of our products across thousands of users.
To reach this expansive market, we primarily distribute and sell our products online without traditional sales infrastructure where our customers can get started in minutes without the need for assistance. We focus on enabling a self-service, low-friction model that makes it easy for customers to try, adopt and use our products. By making our products simple, powerful, affordable and easy to adopt, we generate demand from word-of-mouth and viral expansion within organizations.
Our culture of innovation, transparency and dedication to customer service drives our success in implementing and refining this unique approach. We believe this approach creates a self-reinforcing effect that fosters innovation, quality, customer happiness, scale and profitability. As a result of this strategy, we invest significantly more in research and development activities than in traditional sales activities relative to other enterprise software companies.
A substantial majority of our sales are automated through our website, including sales of our products through our solution partners and resellers. Our solution partners and resellers primarily focus on customers in regions that require local language support and other customized needs. We plan to continue to invest in our partner programs to help us enter and grow in new markets, complementing our automated, low-touch approach.
We generate revenues primarily in the form of subscriptions, maintenance, perpetual licenses and other sources. Subscription revenues consist primarily of fees earned from subscription-based arrangements for providing customers the right to use our software in a cloud-based-infrastructure that we provide. Subscription revenues also include the sale of on-premises term licenses, consisting of software licensed for a specified period and support and maintenance service that is bundled with the license for the term of the license period. From time to time, we make changes to our prices and pricing plans for our products which may impact the growth rate of our revenue, our deferred revenue balances, and customer retention.
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Maintenance provides our customers with access to unspecified future updates, upgrades and enhancements and technical product support for perpetual license products on an if and when available basis. Maintenance revenue combined with our subscription revenue business, through our cloud and data center products, results in a large recurring revenue base. In each of the past three fiscal years, more than 80% of our total revenues have been of a recurring nature from either maintenance fees or subscriptions.
Customers typically pay us 100% of the initial perpetual license fee as maintenance revenue annually, beginning in the first year. We typically recognize revenue on the license portion of perpetual license arrangements and term license agreements once the customer obtains control of the license, which is generally upon delivery of the license, and for maintenance and subscriptions, revenue is recognized ratably over the term of the contract. Any invoice amounts or payments received in advance of revenue recognition from subscriptions or maintenance are included in our deferred revenue balance. The deferred revenue balance is influenced by several factors, including customer decisions around the timing of renewals, length of contracts and invoice timing within the period.
We have made and will continue to make significant investments in our business to support future growth, including a sizeable increase in our global employee base. For example, as of September 30, 2020 and 2019 we had 5,285 and 3,927 employees, respectively.
In July 2020, we acquired Mindville AB, an asset and configuration management company based in Sweden. With the acquisition of Mindville, Atlassian brings critical configuration management database capabilities to Jira Service Desk to better meet the needs of its IT customers. The consideration is comprised of approximately $36.4 million in cash.
In October 2020, we announced that beginning in February 2021, we will no longer sell new perpetual licenses for our products, or upgrades to these products starting in February 2022, and plan to end maintenance and support for these products in February 2024. We will proactively help our customers transition to other versions of our products with our migration tools and programs, customer support teams, and pricing and packaging options.
The COVID-19 outbreak has continued to rapidly spread across the world and has significantly impacted global economic activity, worldwide financial markets and social practices. The related adverse public health developments, including orders to shelter-in-place, travel restrictions, and mandated business closures, have adversely affected workforces, organizations, customers, economies, and financial markets globally, leading to an economic downturn and increased market volatility. It has also disrupted the normal operations of many businesses, including ours. The COVID-19 pandemic may prevent us from conducting business operations at full capacity for an indefinite period of time. For example, we have taken precautionary measures intended to help minimize the risk of the virus to our employees which may disrupt our operations, including temporarily closing our offices worldwide, requiring all employees to work remotely, and suspending all travel worldwide for our employees. While these disruptions did not have a material adverse impact on our financial condition or results of operations during the quarter ended September 30, 2020, the extent to which COVID-19 ultimately impacts our business, results of operations, and financial position will depend on future developments, which are uncertain and cannot be predicted at this time, including, but not limited to, the duration and spread of the outbreak, its severity, the actions taken by governments and authorities to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. For example, while our diverse customer base is a competitive advantage for us and helps fuel our low-friction flywheel sales model, we have revenue exposure to customers who are small- and medium-sized businesses and to industries that may be disproportionately impacted by COVID-19. Also, a majority of our cloud customers choose to be billed on a monthly basis and many of these customers are small and medium-sized businesses that may be adversely impacted by COVID-19. In addition, we may experience elongated sales cycles and extended payment terms and concessions as the economic and social impacts of COVID-19 become more fully realized. For these reasons, the current level of uncertainty over the economic and operational effects of COVID-19 means the impact on our business, results of operations, and financial position cannot be reasonably estimated at this time.
Key Metrics
We utilize the following key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
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Customers
We have successfully demonstrated a history of growing both our customer base and spend per customer through growth in users, purchase of new licenses and adoption of new products. We believe that our ability to attract new customers and grow our customer base drives our success as a business.
As of September 30, 2020, we had 182,717 customers. With these customers using our software today, we are able to reach a vast number of users, gather insights to refine our offerings and generate growing revenue by expanding within our customer base. No single customer contributed more than 5% of our total revenues during the three months ended September 30, 2020.
We define the number of customers at the end of any particular period as the number of organizations with unique domains that have at least one active and paid license or subscription of our products for which they paid approximately $10 or more per month. While a single customer may have distinct departments, operating segments, or subsidiaries with multiple active licenses or subscriptions of our products, if the product deployments share a unique domain name, we only include the customer once for purposes of calculating this metric. We define active licenses as those licenses that are under an active maintenance or subscription contract as of period end.
Our customers, as defined in this metric, have generated substantially all of our revenue in each of the periods presented. Including organizations who have only adopted our free or starter products, the active use of our products extends well beyond our 182,717 customers.
The following table sets forth our number of customers:
As of
 September 30, 2019December 31, 2019March 31, 2020June 30, 2020September 30, 2020
Customers159,787 164,790 171,051 174,097 182,717 
Free cash flow
Free cash flow is a non-IFRS financial measure that we calculate as net cash provided by operating activities less net cash used in investing activities for capital expenditures, and net cash used in financing activities for payments of lease obligations.
 Three Months Ended September 30,
 20202019
 (U.S. $ in thousands)
Net cash provided by operating activities$79,465 $76,191 
Less: Capital expenditures(7,817)(6,113)
Less: Payments of lease obligations(11,096)(7,670)
Free cash flow$60,552 $62,408 
Free cash flow increased $1.9 million during the three months ended September 30, 2020 as compared to the three months ended September 30, 2019 primarily as a result of an increase of $3.3 million in net cash provided by operating activities, offset by an increase of payment of lease obligations of $3.4 million.
For more information about net cash provided by operating activities, please see “Liquidity and Capital Resources.”
Components of Results of Operations
Sources of Revenues
Subscription revenues
Subscription revenues consist primarily of fees earned from subscription-based arrangements for providing customers the right to use our software in a cloud-based-infrastructure that we provide. We also sell on-premises term license agreements for our data center products, which are software licensed for a specified period, and includes support and maintenance service that is bundled with the license for the term of the license period. Subscription revenues are driven primarily by the number and size of active licenses, the type of product and the price of the licenses. Our subscription-based arrangements generally have a contractual term of one to twelve
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months, with a majority being one month. For cloud-based services, subscription revenue is recognized ratably as services are performed, commencing with the date the service is made available to customers. For data center products, we recognize revenue upfront for the portion that relates to the delivery of the term license and the support and related revenue is recognized ratably as the services are delivered over the term of the arrangement.
Maintenance revenues
Maintenance revenues represent fees earned from providing customers unspecified future updates, upgrades and enhancements and technical product support for perpetual license products on an if and when available basis. Maintenance revenue is recognized ratably over the term of the support period.
Perpetual license revenues
Perpetual license revenues represent fees earned from the perpetual licenses of software to customers for use on the customer’s premises. Software is licensed on a perpetual basis. Perpetual license revenues consist of the revenues recognized from sales of licenses to new customers and additional licenses to existing customers. We typically recognize revenue on the license portion of perpetual license arrangements once the customer obtains control of the license, which is generally upon delivery of the license.
Other revenues
Other revenues include primarily fees received for sales of third-party apps in the Atlassian Marketplace. Technical account management, consulting and training services are also included in other revenues. Revenue from the sale of third-party apps via Atlassian Marketplace is recognized at the date of product delivery given that all of our obligations have been met at that time and on a net basis as we function as the agent in the relationship. Revenue from technical account management is recognized over the time period that the customer has access to the service. Revenue from consulting and training is recognized over time as the services are performed.
Cost of Revenues
Cost of revenues primarily consists of expenses related to hosting our cloud infrastructure, which includes third-party hosting fees and depreciation associated with computer equipment and software; compensation expenses for our employees, including share-based payment expense, consulting and contractors costs, associated with our customer support and infrastructure service teams; payment processing fees; amortization of product technologies; certain IT program fees; and facilities and related overhead costs. To support our cloud-based infrastructure, we utilize third-party managed hosting facilities and self-managed data centers. We allocate share-based payment expense to personnel costs based on the expense category in which the employee works. We allocate overhead such as information technology infrastructure, rent and occupancy charges in each expense category based on headcount in that category. As such, general overhead expenses are reflected in cost of revenues and operating expense categories.
Our cost of revenues also includes amortization of acquired intangible assets, such as the amortization of the cost associated with an acquired company’s developed technology.
Gross Profit and Gross Margin
Gross profit is total revenues less total cost of revenues. Gross margin is gross profit expressed as a percentage of total revenues. Gross margin can fluctuate from period to period as a result of changes in product and services mix.
Operating Expenses
Our operating expenses are classified as research and development, marketing and sales, and general and administrative. For each functional category, the largest component is compensation expenses, which include salaries and bonuses, share-based payment expense, employee benefit costs, and consulting and contractor costs. We allocate overhead such as information technology infrastructure, certain IT program expenses, rent, and occupancy charges in each expense category based on headcount in that category.
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Research and development
Research and development expenses consist primarily of compensation expense for our employees, including share-based payment expense, consulting and contractors costs, contract software development costs, certain IT program expenses, and facilities and related overhead costs. We continue to focus our research and development efforts on building new products, adding new features and services, integrating acquired technologies, increasing functionality, enhancing our cloud infrastructure and developing our mobile capabilities.
Marketing and sales
Marketing and sales expenses consist primarily of compensation expense for our employees, including share-based payment expense, consulting and contractors costs, for our marketing and sales employees, marketing and sales programs, certain IT program expenses, and facilities and related overhead costs. Marketing programs consist of advertising, promotional events, corporate communications, brand building and product marketing activities such as online lead generation. Sales programs consist of activities and teams focused on supporting our solution partners and resellers, tracking channel sales activity, supporting and servicing our customers by helping them optimize their experience and expand the use of our products across their organizations and helping product evaluators learn how they can use our tools most effectively.
General and administrative
General and administrative expenses consist primarily of compensation expense for our employees, including share-based payment expense, consulting and contractors costs, for finance, legal, human resources and information technology personnel, as well as external legal, accounting and other, professional fees, certain IT program expenses, other corporate expenses and facilities and related overhead costs.
Share-based payment expense
We allocate share-based payment expense to personnel costs based on the functional category in which the employee works. We recognize our share-based payments as an expense in the consolidated statements of operations based on their grant date fair values and vesting periods.
We adhere to the accelerated method of expense recognition for share-based awards subject to graded vesting (i.e., when portions of the award vest at different dates throughout the vesting period). For example, for a grant vesting over four years, we treat the grant as multiple awards (sometimes referred to as “tranches”) and recognize the cost on a straight-line basis separately for each tranche. This results in the majority of the grant’s share-based payment expense being recognized in the first year of the grant rather than equally per year under a straight-line expense methodology.
During the three months ended September 30, 2020 and 2019, we recognized share-based payment expense of $85.7 million and $77.3 million, respectively. As of September 30, 2020, the aggregate share-based payment expense remaining to be amortized to cost of revenues and operating expenses, over a weighted-average period of 1.4 years, were $444.8 million. We expect this share-based payment expense balance to be amortized as follows: $245.7 million during the remaining fiscal 2021; $138.3 million during fiscal 2022; $48.8 million during fiscal 2023; and $12.0 million thereafter. The expected amortization reflects only outstanding share awards as of September 30, 2020. We expect to continue to issue share-based awards to our employees in future periods.
Income taxes
Income taxes primarily consist of income taxes in the United Kingdom, Australia and the United States, as well as income taxes in certain other foreign jurisdictions.
We generally conduct our international operations through wholly-owned subsidiaries and report our taxable income in various jurisdictions.
Net income (loss)
We incurred a net loss during the three months ended September 30, 2020 on an IFRS basis primarily due to the marking to fair value of the Exchange and Capped Call Derivatives. Please refer to Note 13, “Exchangeable Senior Notes,” to the notes to our consolidated financial statements for details of our Notes and capped call. Our significant investments in research and development and technology infrastructure for our cloud-based offerings, expanding our operations globally, and developing new products and features for, and enhancements of, our existing products were also contributing factors.
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Results of Operations
The following table sets forth our results of operations for the periods indicated:
 Three Months Ended September 30,
 20202019
 (U.S. $ in thousands)
Revenues:  
Subscription$277,964 $201,095 
Maintenance127,694 110,071 
Perpetual license22,137 24,744 
Other31,711 27,480 
Total revenues459,506 363,390 
Cost of revenues (1) (2)73,684 62,279 
Gross profit385,822 301,111 
Operating expenses:
Research and development (1) (2)232,235 175,882 
Marketing and sales (1) (2)70,286 68,043 
General and administrative (1)71,369 61,741 
Total operating expenses373,890 305,666 
Operating income (loss)11,932 (4,555)
Other non-operating income (expense), net(26,271)82,235 
Finance income2,590 9,112 
Finance costs(12,575)(12,327)
Income (loss) before income tax benefit (expense)(24,324)74,465 
Income tax benefit (expense)2,770 (5,145)
Net income (loss)$(21,554)$69,320 

(1)    Amounts include share-based payment expense, as follows:
Cost of revenues$5,256 $4,712 
Research and development61,451 48,939 
Marketing and sales6,784 10,631 
General and administrative12,240 13,014 

(2)    Amounts include amortization of acquired intangible assets, as follows:
Cost of revenues$5,419 $8,488 
Research and development41 41 
Marketing and sales2,299 3,686 
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The following table sets forth our results of operations data for the periods indicated as a percentage of total revenues:
 Three Months Ended September 30,
 20202019
Revenues:  
Subscription60 %55 %
Maintenance28 30 
Perpetual license5