GOODWILL AND PURCHASED INTANGIBLE ASSETS

9 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND PURCHASED INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in business combinations. We have three reportable segments and five operating segments. The operating segments are determined to be the same as reporting units. For additional details, refer to Note 18 “Segment Reporting and Geographic Information” to our Condensed Consolidated Financial Statements. The following table presents changes in goodwill carrying value during the nine months ended March 31, 2023:


(In thousands)	Wafer Inspection and Patterning		Global Service and Support (“GSS”)		Specialty Semiconductor Process		Printed Circuit Board (“PCB”) and Display		Component Inspection		Total
Balance as of June 30, 2022	$	725,737	$	25,908	$	681,858	$	872,971	$	13,575	$	2,320,049
Acquired goodwill	6,776		—		—		—		—		6,776
Goodwill disposal from sale of business (1)	—		—		—		(42,622)		—		(42,622)
Goodwill adjustments	(5,337)		—		—		—		—		(5,337)

Foreign currency adjustments	(49)		—		—		—		—		(49)
Balance as of March 31, 2023	$	727,127	$	25,908	$	681,858	$	830,349	$	13,575	$	2,278,817

(1) Refer to the “Business Dispositions” section of Note 6 “Business Combinations and Dispositions” for more information on the sale of Orbograph.

Goodwill is not subject to amortization but is tested for impairment annually during the third fiscal quarter, as well as whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In testing goodwill for impairment, we utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. When performing the qualitative assessment, we consider the following factors: stock price or market capitalization, changes in the industry and competitive environment, budget-to-actual revenue and profitability performance from the prior year and projected revenue and profitability trends for future years at our reporting units. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform a quantitative assessment by comparing the carrying value to the fair value of the reporting units. If the fair value is determined to be less than the carrying value, the amount of impairment is computed as the excess of the carrying value over the estimated fair value, not to exceed the carrying value of goodwill. Any impairment charges could have a material adverse effect on our operating results and net asset value in the quarter in which we recognize the impairment charge.

We performed the required annual goodwill impairment testing for all reporting units as of February 28, 2023, and concluded that goodwill was not impaired. As a result of our qualitative assessment, we determined that it was not necessary to perform the quantitative assessment. The next annual goodwill impairment assessment by reporting unit is scheduled to be performed in the third quarter of the fiscal year ending June 30, 2024.

Purchased Intangible Assets

The components of purchased intangible assets as of the dates indicated below were as follows:


(In thousands)		As of March 31, 2023						As of June 30, 2022
Category	Range of Useful Lives (in years)	Gross Carrying Amount		Accumulated Amortization and Impairment		Net Amount		Gross Carrying Amount		Accumulated Amortization and Impairment		Net Amount
Existing technology	4-8	$	1,536,826	$	796,369	$	740,457	$	1,523,691	$	668,175	$	855,516
Customer relationships	4-9	358,567		195,461		163,106		366,567		167,819		198,748
Trade name / Trademark	4-7	116,583		75,043		41,540		121,083		68,194		52,889
Order backlog and other	<1-7	85,836		76,337		9,499		87,836		58,970		28,866
Intangible assets subject to amortization(1)		2,097,812		1,143,210		954,602		2,099,177		963,158		1,136,019
In-process research and development		61,322		15,966		45,356		64,457		6,062		58,395
Total		$	2,159,134	$	1,159,176	$	999,958	$	2,163,634	$	969,220	$	1,194,414

(1) The disposition of Orbograph during the three months ended September 30, 2022 resulted in a decrease in the gross amount of intangible assets subject to amortization of $34.5 million, a decrease in accumulated amortization of $15.9 million, and a decrease in the net amount of intangible assets of $18.6 million. Refer to the “Business Dispositions” section of Note 6 “Business Combinations and Dispositions” for more information on the sale of Orbograph.

Purchased intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. Impairment indicators primarily include declines in our operating cash flows from the use of these assets. If impairment indicators are present, we are required to perform a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to these long-lived assets to their carrying value.

As of March 31, 2023, there were no impairment indicators for purchased intangible assets.

Amortization expense for purchased intangible assets for the periods indicated below was as follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2023		2022		2023		2022
Amortization expense - Costs of revenues	$	45,446	$	42,586	$	135,958	$	124,834
Amortization expense - SG&A	19,656		15,102		59,912		39,880
Amortization expense - Research and development	31		31		93		93
Total	$	65,133	$	57,719	$	195,963	$	164,807

Based on the purchased intangible assets gross carrying amount recorded as of March 31, 2023, the remaining estimated annual amortization expense is expected to be as follows:


Fiscal year ending June 30:	Amortization (In thousands)
2023 (remaining three months)	$	64,655
2024	238,575
2025	222,123
2026	206,211
2027	129,630
2028 and thereafter	93,408
Total	$	954,602