Creative accounting no match for AI

Market Updates

Published on 11 August 2022

By Tui Eruera, CEO and Founder of Jaaims

Shareholders of Aussie tech darling – Atlassian, must be pretty chuffed right now. After releasing its June quarter earnings results, the company’s stock jumped 16%. But is the rise justified?

Atlassian recently issued its earnings data for 2022. And if we dig into the detail, some interesting figures come to light.

Atlassian posted a net loss of $US614 million for fiscal year 2022 [1]. Not good, but an improvement on its 2021 loss of $US696 million. 

For the record, Atlassian also posted a loss in 2020 ($US350 million) and again in 2019 ($US637 million [2]) as well as in 2018 and 2017 [3].

Putting aside judgements about a company that hasn’t turned a profit since 2016 [4],  what is especially intriguing about Atlassian’s latest earnings release is that despite a solid loss, the company recorded positive operating cashflow of $US883 million.

Big loss. Healthy cashflow. What’s going on?

Part of the answer lies with a $US707 million ‘share-based payment expense’, which was added back into the company’s indirect cashflow statement when calculating operating cashflow.

So, what is the share-based payment all about?

The answer is easy. Atlassian is paying its staff in share options rather than cash. 

This is not illegal. In fact it’s common practice particularly in the tech sector.

Let’s be clear. There is no suggestion that Atlassian is not following generally accepted accounting principles. 

However, the reporting of Atlassian as ‘strongly cash flow positive’ doesn’t paint the full picture. It ignores the fact that the company’s employees are in effect a significant source of funding. 

What is equally clear is that plenty of investors would not pick up on this sort of detail. That matters right now as reporting season is seen as a chance for investors to look under the hood of listed companies.

This all highlights the value of a multi-strategy approach to valuing and determining ratings for stocks. The devil is always in the detail.

Any advice provided is general in nature and does not take into account the viewer’s specific needs and circumstances. You should consider your own financial position, objectives and requirements to determine the type of advice and products to best suit your needs. Jaaims Australia is an Authorised Representative of Jaaims Technologies, AFSL 519985.

[2] https://s28.q4cdn.com/541786762/files/doc_financials/2020/q4/TEAM-Q4-2020-Earnings-Release.pdf

[3] https://s28.q4cdn.com/541786762/files/doc_financials/2018/q4/TEAM-Q4FY18-earnings-release-(1).pdf

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