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Balance Sheet Accounts | 3 Months Ended
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Sep. 30, 2017
Organization Consolidation And Presentation Of Financial Statements [Abstract] |
Balance Sheet Accounts |
5. | Balance Sheet Accounts
Cash, Cash Equivalents and Short-term Investments The following is a summary of cash, cash equivalents and short-term investments (in thousands):
|  | September 30, 2017 |  |  | June 30, 2017 |
Cash |  | $ | 148,514 |  |  | $ | 126,159 |
Cash equivalents (consisting of available-sale-securities) |  |  | 4,500 |  |  |  | 4,291 |
Total cash and cash equivalents |  |  | 153,014 |  |  |  | 130,450 |
Short-term investments |  |  | 1,050 |  |  |  | — |
Total cash, cash equivalents and short-term investments |  | $ | 154,064 |  |  | $ | 130,450 |
The Company considers highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Investments with original maturities greater than three months, but less than one year at the balance sheet date are classified as short-term investments. Short-term investments are recorded in “Prepaid expenses and other current assets” in the accompanying condensed consolidated balance sheets. Inventories The Company values its inventory at lower of cost or net realizable value. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis. The Company has established inventory allowances primarily determined by the demand of inventory or when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand. At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. Any written down or obsolete inventory subsequently sold has not had a material impact on gross margin for any of the periods disclosed. Inventories consist of the following (in thousands):
|  | September 30, 2017 |  |  | June 30, 2017 |
|  |  |  |  |  | (As Adjusted) |
Finished goods |  | $ | 57,515 |  |  | $ | 46,620 |
Raw materials |  |  | 585 |  |  |  | 790 |
Total Inventories |  | $ | 58,100 |  |  | $ | 47,410 |
Property and Equipment, Net Property and equipment consist of the following (in thousands):
|  | September 30, 2017 |  |  | June 30, 2017 |
Computer equipment |  | $ | 40,209 |  |  | $ | 34,716 |
Purchased software |  |  | 12,961 |  |  |  | 11,785 |
Office equipment, furniture and fixtures |  |  | 11,464 |  |  |  | 10,852 |
Leasehold improvements |  |  | 27,167 |  |  |  | 23,046 |
Total property and equipment |  |  | 91,801 |  |  |  | 80,399 |
Less: accumulated depreciation and amortization |  |  | (53,174 | ) |  |  | (50,159 | )
Property and equipment, net |  | $ | 38,627 |  |  | $ | 30,240 |
Intangibles The following tables summarize the components of gross and net intangible asset balances (dollars in thousands):
|  | Weighted Average |  |  |  |  |  |  |  |  |  |  |  |
|  | Remaining Amortization |  | Gross Carrying |  |  | Accumulated |  |  | Net Carrying |
|  | Period |  | Amount |  |  | Amortization |  |  | Amount |
September 30, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Developed technology |  | 5.3 years |  | $ | 91,600 |  |  | $ | 44,395 |  |  | $ | 47,205 |
Customer relationships |  | 2.9 years |  |  | 45,600 |  |  |  | 38,051 |  |  |  | 7,549 |
Maintenance contracts |  | 1.1 years |  |  | 17,000 |  |  |  | 13,317 |  |  |  | 3,683 |
Trademarks |  | 4.7 years |  |  | 7,500 |  |  |  | 3,057 |  |  |  | 4,443 |
Backlogs |  | 0.2 years |  |  | 1,500 |  |  |  | 892 |  |  |  | 608 |
License agreements |  | 6.2 years |  |  | 2,445 |  |  |  | 1,187 |  |  |  | 1,258 |
Other intangibles |  | 2.4 years |  |  | 1,382 |  |  |  | 1,100 |  |  |  | 282 |
Total intangibles, net with finite lives |  |  |  |  | 167,027 |  |  |  | 101,999 |  |  |  | 65,028 |
In-process research and development, with indefinite life |  |  |  |  | 2,300 |  |  |  | — |  |  |  | 2,300 |
Total intangibles, net |  |  |  | $ | 169,327 |  |  | $ | 101,999 |  |  | $ | 67,328 |
|  | Weighted Average |  |  |  |  |  |  |  |  |  |  |  |
|  | Remaining Amortization |  | Gross Carrying |  |  | Accumulated |  |  | Net Carrying |
|  | Period |  | Amount |  |  | Amortization |  |  | Amount |
June 30, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Developed technology |  | 5.3 years |  | $ | 55,400 |  |  | $ | 42,689 |  |  | $ | 12,711 |
Customer relationships |  | 3.3 years |  |  | 40,300 |  |  |  | 37,567 |  |  |  | 2,733 |
Maintenance contracts |  | 1.3 years |  |  | 17,000 |  |  |  | 12,467 |  |  |  | 4,533 |
Trademarks |  | 4.3 years |  |  | 5,100 |  |  |  | 2,846 |  |  |  | 2,254 |
License agreements |  | 6.4 years |  |  | 2,445 |  |  |  | 1,120 |  |  |  | 1,325 |
Other intangibles |  | 2.7 years |  |  | 1,382 |  |  |  | 1,001 |  |  |  | 381 |
Total intangibles, net with finite lives |  |  |  |  | 121,627 |  |  |  | 97,690 |  |  |  | 23,937 |
In-process research and development, with indefinite life |  |  |  |  | 1,400 |  |  |  | — |  |  |  | 1,400 |
Total intangibles, net |  |  |  | $ | 123,027 |  |  | $ | 97,690 |  |  | $ | 25,337 |
During the three months ended September 30, 2017, in-process research and development of $1.4 million was reclassified to developed technology upon completion of the project and is being amortized over its estimated useful life. The amortization expense of intangibles for the periods presented is summarized below (in thousands):
|  | Three Months Ended |
|  | September 30, 2017 |  |  | September 30, 2016 |
Amortization in “Cost of revenues: Product” |  | $ | 2,695 |  |  | $ | 3,498 |
Amortization of intangibles |  |  | 1,614 |  |  |  | 4,142 |
Total amortization |  | $ | 4,309 |  |  | $ | 7,640 |
The amortization expense that is recognized in “Cost of revenues: Product” is comprised of amortization for developed technology, license agreements and other intangibles. Goodwill The following table summarizes goodwill for the periods presented (in thousands):
|  | September 30, 2017 |
Balance as of June 30, 2017 |  | $ | 80,216 |
Additions due to acquisition |  |  | 38,338 |
Balance at end of period |  | $ | 118,554 |
During the three months ended September 30, 2017, the Company completed the acquisition of certain assets and liabilities from Avaya resulting in an additional $38.3 million of goodwill. See Note 2 for additional information related to the acquisition. Deferred Revenue The Company offers for sale to its customers, renewable support arrangements that range from one to five years as well as deferred revenue for professional and training services. Debt The Company’s debt is comprised of the following (in thousands):
|  | September 30, 2017 |  |  | June 30, 2017 |
Current portion of long-term debt: |  |  |  |  |  |  |  |
Term Loan |  | $ | 18,418 |  |  | $ | 12,444 |
Less: unamortized debt issuance costs |  |  | (555 | ) |  |  | (164 | )
Current portion of long-term debt |  | $ | 17,863 |  |  | $ | 12,280 |
Long-term debt, less current portion: |  |  |  |  |  |  |  |
Term Loan |  | $ | 141,202 |  |  | $ | 71,268 |
Revolver |  |  | 10,000 |  |  |  | 10,000 |
Less: unamortized debt issuance costs |  |  | (1,473 | ) |  |  | (846 | )
Total long-term debt, less current portion |  |  | 149,729 |  |  |  | 80,422 |
Total debt |  | $ | 167,592 |  |  | $ | 92,702 |
In connection with the closing of Avaya Networking discussed in Note 2, the Company entered into the Second Amendment to the Amended and Restated Credit Agreement (“Second Amendment”), which amended the Amended and Restated Credit Agreement, dated as of October 28, 2016 (the “Credit Facility, as amended”), by and among the Company, as borrower, Silicon Valley Bank, as administrative agent and collateral agent, and lenders. Among other things, the Second Amendment (i) increased the amount of the available borrowing under the Credit Facility from $140.5 million to $243.7 million, composed of (a) the five-year term loan (“Term Loan”) in a principal amount of up to $183.7 million and (b) the five-year revolving credit facility (“Revolver”) in a principal amount of up to $60.0 million, (ii) extends the maturity date under the existing Term Loan and the termination date under the existing Revolver, (iii) provides for an uncommitted additional incremental loan facility in the principal amount of up to $50.0 million (“Incremental Facility”), and (iv) joins certain additional banks, financial institutions and institutional lenders as lenders pursuant to the terms of the Credit Facility, as amended. On July 14, 2017, the Company borrowed an additional $80.0 million under the Term Loan which was used to fund the purchase of Avaya Networking. Borrowings under the Term Loan bear interest, at our option, at a rate equal to either the LIBOR rate (subject to a 0.0% LIBOR floor), plus an applicable margin (currently 3.25% per annum based on a stated consolidated leverage ratio) or the adjusted base rate, plus an applicable margin (currently 1.25% per annum based on the Company’s consolidated leverage ratio). Borrowings under the Revolver bear interest, at the Company’s option, at a rate equal to either the LIBOR rate (subject to a 0.0% LIBOR floor), plus an applicable margin (currently 3.25% per annum based on a stated consolidated leverage ratio) or the adjusted base rate, plus an applicable margin (currently 1.25% per annum based on a stated consolidated leverage ratio). The Revolver has a commitment fee payable on the undrawn amount ranging from 0.375% to 0.50% per annum based upon a stated consolidated leverage ratio. The Company had $0.9 million of outstanding letters of credit and $49.1 million of availability under the Revolver as of September 30, 2017. Guarantees and Product Warranties Networking products may contain undetected hardware or software errors when new products or new versions or updates of existing products are released to the marketplace. The Company’s standard hardware warranty period is typically 12 months from the date of shipment to end-users and 90 days for software. For certain access products, the Company offers a limited lifetime hardware warranty commencing on the date of shipment from the Company and ending five (5) years following the Company’s announcement of the end of sale of such product. Upon shipment of products to its customers, the Company estimates expenses for the cost to repair or replace products that may be returned under warranty and accrue a liability in cost of product revenue for this amount. The determination of the Company’s warranty requirements is based on actual historical experience with the product or product family, estimates of repair and replacement costs and any product warranty problems that are identified after shipment. The Company estimates and adjusts these accruals at each balance sheet date in accordance with changes in these factors. Upon issuance of a standard product warranty, the Company discloses and recognizes a liability for the obligations it assumes under the product warranty. The following table summarizes the activity related to the Company’s product warranty liability during the three months ended September 30, 2017 and 2016 (in thousands):
|  | Three Months Ended |
|  | September 30, 2017 |  |  | September 30, 2016 |
|  |  |  |  |  | (as adjusted) |
Balance beginning of period |  | $ | 10,584 |  |  | $ | 9,998 |
Warranties assumed due to acquisition |  |  | 3,156 |  |  |  | — |
New warranties issued |  |  | 2,272 |  |  |  | 928 |
Warranty expenditures |  |  | (2,513 | ) |  |  | (1,909 | )
Balance end of period |  | $ | 13,499 |  |  | $ | 9,017 |
To facilitate sales of its products in the normal course of business, the Company indemnifies its resellers and end-user customers with respect to certain matters. The Company has agreed to hold the customer harmless against losses arising from a breach of intellectual property infringement or other. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. It is not possible to estimate the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements have not had a material impact on its operating results or financial position. Advertising All advertising costs are expensed as incurred. Advertising expenses for three months ended September 30, 2017 and 2016, were immaterial. Concentrations The Company may be subject to concentration of credit risk as a result of certain financial instruments consisting of accounts receivable and short-term investments. The Company does not invest an amount exceeding 10% of its combined cash or cash equivalents in the securities of any one obligor or maker, except for obligations of the United States government, obligations of United States government agencies and money market accounts. The Company performs ongoing credit evaluations of its customers and generally does not require collateral in exchange for credit. The following table sets forth major customers accounting for 10% or more of our net revenue:
|  | Three Months Ended |
|  | September 30, 2017 |  |  | September 30, 2016 |
|  |  |  |  |  | (As adjusted) |
Westcon Group Inc. |  |  | 15% |  |  |  | 11% |
Jenne Corporation |  |  | 14% |  |  |  | 16% |
Tech Data Corporation |  |  | 11% |  |  |  | 17% |
The following customers account for more than 10% of the Company’s accounts receivable outstanding as of September 30, 2017, Jenne Corporation 17%, Westcon Group 15% and Tech Data 13%.

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