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BUSINESS COMBINATIONS | 12 Months Ended
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Jul. 31, 2018
Business Combinations [Abstract] |
BUSINESS COMBINATIONS | BUSINESS COMBINATIONS We completed two acquisitions in each of fiscal 2017 and fiscal 2018. The purchase price allocation for these acquisitions, discussed in detail below, reflects various preliminary fair value estimates and analyses, including certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, income taxes, and goodwill, which are subject to change within the measurement period as preliminary valuations are finalized. Measurement period adjustments are recorded in the reporting period in which the estimates are finalized and adjustment amounts are determined. We determined the fair values of the intangible assets with the assistance of a valuation firm. The estimation of the fair value of the intangible assets required the use of valuation techniques and entailed consideration of all the relevant factors that might affect the fair value, such as present value factors and estimates of future revenues and costs. Our consolidated financial statements for the fiscal years ended July 31, 2017 and 2018 include the operations of the acquired companies from the dates the deals closed. Pro forma results of operations have not been presented because they are not material to our consolidated financial statements, either individually or in the aggregate. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The goodwill recognized in these acquisitions is primarily attributable to the synergies expected from the expanded market opportunities with our offerings and the knowledgeable and experienced workforce that joined us as part of the acquisitions. Goodwill will not be amortized, but will instead be tested for impairment annually, or more frequently if certain indicators of impairment are present. Fiscal 2017 Acquisitions Calm Acquisition On August 22, 2016, we completed the acquisition of all outstanding shares of Calm.io Pte. Ltd. ("Calm"), a company based in Singapore, which specialized in container and DevOps automation, for an aggregate purchase price of approximately $7.7 million, net of cash acquired ("Calm Acquisition"). Total consideration consisted of 528,517 shares of our common stock and approximately $1.4 million of cash. The purchase price allocation primarily included approximately $4.8 million of goodwill and approximately $4.0 million of intangible assets, which primarily consisted of developed technology, to be amortized over an estimated economic life of approximately 4.8 years. Goodwill is not expected to be deductible for income tax purposes. We incurred approximately $0.6 million of acquisition-related costs. PernixData Acquisition On September 6, 2016, we completed the acquisition of PernixData, Inc. ("PernixData"), a company based in the U.S., which specialized in scale-out data acceleration and analytics, for an aggregate purchase price of $23.0 million, net of cash acquired ("PernixData Acquisition"). Total consideration consisted of 1,711,019 shares of our common stock and contingent consideration. Total potential contingent payments amounted to $19.0 million and may be payable over the next three years upon the achievement of certain operating milestones. Up to $7.5 million of the contingent payments were deemed to be part of the purchase price, which were limited based on certain closing conditions, including PernixData’s working capital upon completion of the acquisition. Up to $11.5 million of the contingent payments also required future services to be provided to us by the related employees and are being recorded as compensation expense over the service period. The fair value of the contingent consideration considered to be part of the purchase price was $2.4 million as of the acquisition date and was net of expected limitations of $1.8 million due to closing conditions. We incurred approximately $0.7 million of acquisition-related costs. The purchase price allocation primarily included $11.9 million of goodwill, which is expected to be deductible for income tax purposes, and intangible assets, consisting of $16.1 million related to IPR&D, $3.6 million related to developed technology, which will be amortized over an estimated economic life of five years, and $4.6 million related to customer relationships, which will be amortized over an estimated economic life of six years. During the first quarter of fiscal 2018, the technology related to the IPR&D was completed and made generally available. As such, we started amortizing the IPR&D during the first quarter of fiscal 2018. We are amortizing developed technology using the straight-line method over a useful life of five years. Fiscal 2018 Acquisitions Minjar Acquisition On March 16, 2018, we completed the acquisition of Minjar, Inc. ("Minjar"), a privately held Delaware corporation with its offices in Bangalore, India ("Minjar Acquisition"). Minjar was a cloud technology solutions company, and the acquisition will complement and enhance our products, allowing us to offer customers new capabilities to better manage their multi-cloud deployments. At the close of the acquisition, all outstanding shares of Minjar capital stock and all in-the-money options and warrants to purchase Minjar capital stock were purchased or canceled in exchange for an aggregate purchase price of approximately $19.3 million, consisting of $18.8 million in cash and approximately $0.5 million of holdback liability. The holdback liability represents deferred payments to Minjar's former key employees to be released in installments during the two years following the date of acquisition. As the release of these deferred payments is not contingent upon the future and continued service, the $0.5 million holdback liability, which approximated fair value, was considered as part of the purchase price. Certain portions of the consideration for the acquisition had been placed in escrow to secure the indemnification obligations of certain Minjar security holders. In addition to the $19.3 million purchase price, we also entered into employee holdback or deferred payment arrangements with former employees of Minjar who joined us after the acquisition, totaling approximately $4.4 million. As payment of these deferred payments is contingent upon the continuous service of the employees, they are being accounted for as compensation over the required service period of two years. The preliminary purchase price allocation primarily includes approximately $18.0 million of goodwill, $7.0 million of intangible assets, which primarily consists of approximately $5.6 million related to developed technology and $1.4 million related to customer relationships, both of which will be amortized over an estimated economic life of five years, and $5.7 million of deferred income tax and other tax liabilities. Goodwill is not expected to be deductible for income tax purposes. We recognized approximately $0.6 million of acquisition-related costs, which were expensed as incurred, as general and administrative expenses in the consolidated statement of operations during the fiscal year ended July 31, 2018. Netsil Acquisition On March 22, 2018, we completed the acquisition of Netsil Inc. ("Netsil"), a privately held Delaware corporation headquartered in San Francisco, California ("Netsil Acquisition"). This acquisition represents an opportunity for us to accelerate our ability to deliver native multi-cloud operations with the addition of application discovery and operations management. The aggregate purchase price of approximately $67.5 million consisted of approximately $3.7 million in cash and 1,206,364 unregistered shares of our Class A common stock with an aggregate fair value of approximately $63.8 million. The fair value of the shares of common stock issued was determined to be $52.87 per share, the closing price of our stock on March 22, 2018. Certain portions of the consideration for the acquisition, both cash and shares of our Class A common stock, have been placed in escrow to secure the indemnification obligations of certain Netsil security holders. We also entered into employee holdback or deferred payment arrangements with the founders of Netsil who joined us after the acquisition, whereby we issued 104,426 unregistered shares of our Class A common stock to the founders subject to their continuous employment with us for two years. The fair value of the Class A common stock issued pursuant to the holdback arrangements was approximately $5.5 million, or $52.87 per share, the closing price of our Class A common stock on March 22, 2018. This holdback is being accounted for as stock-based compensation over the required two-year service period. The preliminary purchase price allocation primarily includes approximately $53.1 million of goodwill, $19.0 million of intangible assets, primarily related to developed technology, which will be amortized over an estimated economic life of seven years, $2.6 million of deferred income tax liabilities, and $1.4 million of assumed debt. Goodwill is not expected to be deductible for income tax purposes. We recognized approximately $0.4 million of acquisition-related costs, which were expensed as incurred, as general and administrative expenses in the consolidated statement of operations during the fiscal year ended July 31, 2018. The following table presents the preliminary aggregate purchase price allocation related to the acquisitions completed during fiscal 2017 and fiscal 2018:
| As of July 31,
| 2017 |  | 2018
| (in thousands)
Goodwill | $ | 16,672 |  |  | $ | 71,087 |
Amortizable intangible assets | 28,230 |  |  | 25,920 |
Tangible assets acquired | 2,884 |  |  | 842 |
Liabilities assumed | (16,988 | ) |  | (11,041 | )
Total consideration | $ | 30,798 |  |  | $ | 86,808 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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