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Revenues | 12 Months Ended
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Jun. 30, 2018
Revenue From Contract With Customer [Abstract] |
Revenues | 3. Revenues Adoption of ASC Topic 606 – Revenue from Contracts with Customers In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods or services and is recognized at an amount that reflects the consideration expected to be received in exchange for such goods or services. In addition, ASU 2014-09 requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted Topic 606 on July 1, 2017, using the full retrospective method. This adoption primarily affected the Company’s accounting for distributor and resellers revenues from a primarily “sell-through” model, where revenue is recognized upon the sale from the distribution channel to the end customer, to the “sell-in” method where revenue is recognized upon transfer of control to the Company’s customers. Under the sell-in method, the Company is required to make estimates at the time of transfer of control to its distributors for variable consideration including estimated returns under stock rotation rights granted to stocking distributors and rebate claims. Additionally, the Company capitalizes contract acquisition costs such as commissions paid for maintenance services contracts in excess of one year. Following the adoption of ASU 2014-09, the revenue recognition for the Company’s other sales arrangements remained materially consistent with its historical practice. Upon adoption of Topic 606, the Company applied certain permissible practical expedients that allows a) an entity to use the transaction price at the date the contract was completed rather than estimating variable consideration amounts in the comparative reporting periods, b) that permits the omission of prior-period information about its performance obligations, and c) that allows the Company to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction price to the satisfied and unsatisfied performance obligations. Revenue Recognition The Company accounts for revenue in accordance with Topic 606, Revenue from Contracts with Customers, which the Company adopted on July 1, 2017, using the full retrospective method. The Company derives the majority of its revenue from sales of its networking equipment, with the remaining revenue generated from service fees relating to maintenance contracts, professional services, and training for its products. The Company sells its products and maintenance contracts direct to customers and to partners in two distribution channels, or tiers. The first tier consists of a limited number of independent distributors that stock its products and sell primarily to resellers. The second tier of the distribution channel consists of a non-stocking distributors and value-added resellers that sell directly to end-users. Products and services may be sold separately or in bundled packages. The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. For each contract, the Company considers the promise to transfer products and services, each of which are distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. For all of the Company’s sales and distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment for product sales. Revenue from maintenance contracts is recognized over time as the Company’s performance obligations are satisfied. This is typically the contractual service period, which ranges from one to three years. For product sales to value-added resellers of the Company, non-stocking distributors and end-user customers, the Company generally does not grant return privileges, except for defective products during the warranty period, nor does the Company grant pricing credits. Sales taxes collected from customers are excluded from revenues. Shipping costs are included in cost of product revenues. Sales incentives and other programs that the Company may make available to these customers are considered to be a form of variable consideration and the Company maintains estimated accruals and allowances using the expected value method. There were no material changes in the current period to the estimated transaction price for performance obligations which were satisfied or partially satisfied during previous periods. Sales to stocking distributors are made under terms allowing certain price adjustments and limited rights of return (known as “stock rotation”) of the Company’s products held in their inventory. Stock rotation rights grant the distributor the ability to return certain specified amounts of inventory. Stock rotation adjustments are an additional form of variable consideration and are estimated using the expected value method based on historical return rates. Frequently, distributors need to sell at a price lower than the contractual distribution price in order to win business, and submit rebate requests for the Company’s pre-approval prior to selling the product to a customer at the discounted price. At the time the distributor invoices its customer or soon thereafter, the distributor submits a rebate claim to the Company to adjust the distributor’s cost from the contractual price to the pre-approved lower price. After the Company verifies that the claim was pre-approved, a credit memo is issued to the distributor for the rebate claim. In determining the transaction price, the Company considers these rebate adjustments to be variable consideration. Such price adjustments are estimated using the expected value method based on an analysis of actual claims, at the distributor level over a period of time considered adequate to account for current pricing and business trends. There were no material changes in the current period to the estimated variable consideration for performance obligations which were satisfied or partially satisfied during previous periods. Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Certain of the Company’s contracts have multiple performance obligations, as the promise to transfer individual goods or services is separately identifiable from other promises in the contracts and, therefore, is distinct. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on its relative standalone selling price. The stand-alone selling prices are determined based on the prices at which the Company separately sells these products. For items that are not sold separately, the Company estimates the stand-alone selling prices using the best estimated selling price approach. The Company’s performance obligations are satisfied at a point in time or over time as work progresses. Substantially all of the Company’s product revenues as reflected on the consolidated statements of operations for the years ended June 30, 2018, 2017 and 2016 are recognized at a point in time. Substantially all of the Company’s service revenue is recognized over time. For revenue recognized over time, the Company uses an input measure, days elapsed, to measure satisfaction of the performance obligation. At June 30, 2018, the Company had $174.5 million of remaining performance obligations, which is comprised of deferred maintenance revenue and services not yet delivered. The Company expects to recognize approximately 75 percent of its remaining performance obligations as revenue in fiscal 2019, an additional 15 percent by fiscal 2020 and 10 percent of the balance thereafter. Contract Balances. The timing of revenue recognition, billings and cash collections results in billed accounts receivable and deferred revenue in the consolidated balance sheets. Services provided under renewable support arrangements of the Company are billed in accordance with agreed-upon contractual terms, which are typically at periodic intervals (e.g., quarterly or annually). The Company sometimes receives payments from its customers in advance of services being provided, resulting in deferred revenues. These liabilities are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period. Revenue recognized for the years ended June 30, 2018 and 2017, that was included in the deferred revenue balance at the beginning of each period was $76.6 million and $70.5 million, respectively. Contract Costs. The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. Management expects that commission fees paid to sales representative as a result of obtaining service contracts and contract renewals, in excess of one year, are recoverable and therefore the Company capitalized them as contract costs in the amount of $4.3 million and $2.5 million at June 30, 2018 and 2017, respectively, in “Other assets” in the accompanying consolidated balance sheets. Capitalized commission fees are amortized on a straight-line basis over the average period of service contracts of approximately three years, and are included in “Sales and marketing” in the accompanying consolidated statements of operations. Amortization recognized during the years ended June 30, 2018, 2017 and 2016 was $2.1 million, $1.5 million and $0.9 million, respectively. Revenue by Category: The following tables set forth the Company’s revenue disaggregated by sales channel and geographic region based on the billing addresses of its customers (in thousands):
|  | Year Ended June 30, 2018 |
Net Revenues |  | Distributor |  |  | Direct |  |  | Total |
Americas: |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | 271,975 |  |  | $ | 219,642 |  |  | $ | 491,617 |
Other |  |  | 19,414 |  |  |  | 25,274 |  |  |  | 44,688 |
Total Americas |  |  | 291,389 |  |  |  | 244,916 |  |  |  | 536,305 |
EMEA: |  |  | 218,682 |  |  |  | 136,064 |  |  |  | 354,746 |
APAC: |  |  | 15,621 |  |  |  | 76,470 |  |  |  | 92,091 |
Total net revenues |  | $ | 525,692 |  |  | $ | 457,450 |  |  | $ | 983,142 |
|  | Year Ended June 30, 2017 (As adjusted) |
Net Revenues |  | Distributor |  |  | Direct |  |  | Total |
Americas: |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | 146,805 |  |  | $ | 161,175 |  |  | $ | 307,980 |
Other |  |  | 11,861 |  |  |  | 13,022 |  |  |  | 24,883 |
Total Americas |  |  | 158,666 |  |  |  | 174,197 |  |  |  | 332,863 |
EMEA: |  |  | 135,414 |  |  |  | 84,658 |  |  |  | 220,072 |
APAC: |  |  | 8,953 |  |  |  | 45,196 |  |  |  | 54,149 |
Total net revenues |  | $ | 303,033 |  |  | $ | 304,051 |  |  | $ | 607,084 |
|  | Year Ended June 30, 2016 (As adjusted) |
Net Revenues |  | Distributor |  |  | Direct |  |  | Total |
Americas: |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | 113,715 |  |  | $ | 120,313 |  |  | $ | 234,028 |
Other |  |  | 21,246 |  |  |  | 22,479 |  |  |  | 43,725 |
Total Americas |  |  | 134,961 |  |  |  | 142,792 |  |  |  | 277,753 |
EMEA: |  |  | 106,853 |  |  |  | 86,064 |  |  |  | 192,917 |
APAC: |  |  | 7,251 |  |  |  | 41,913 |  |  |  | 49,164 |
Total net revenues |  | $ | 249,065 |  |  | $ | 270,769 |  |  | $ | 519,834 |
Adjustments to Previously Reported Financial Statements from the Adoption of Accounting Pronouncements The following table presents the effect of the adoption of ASU 2014-09 on the Company’s consolidated balance sheet as of June 30, 2017, (in thousands):
| As of June 30, 2017 |
| As Reported |  |  | Adjustment |  |  | As Adjusted |
Accounts receivable, net | $ | 120,770 |  |  | $ | (27,655 | ) |  | $ | 93,115 |
Inventories |  | 45,880 |  |  |  | 1,530 |  |  |  | 47,410 |
Total current assets |  | 324,967 |  |  |  | (26,125 | ) |  |  | 298,842 |
Other assets |  | 22,586 |  |  |  | 2,479 |  |  |  | 25,065 |
Total assets | $ | 483,346 |  |  | $ | (23,646 | ) |  | $ | 459,700 |
Accrued warranty | $ | 10,007 |  |  | $ | 577 |  |  | $ | 10,584 |
Other accrued liabilities |  | 36,713 |  |  |  | 331 |  |  |  | 37,044 |
Deferred distributors revenue, net of cost of sales to distributors |  | 43,525 |  |  |  | (43,525 | ) |  |  | — |
Total current liabilities |  | 255,822 |  |  |  | (42,617 | ) |  |  | 213,205 |
Accumulated deficit |  | (800,257 | ) |  |  | 18,971 |  |  |  | (781,286 | )
Total stockholders’ equity |  | 106,707 |  |  |  | 18,971 |  |  |  | 125,678 |
Total liabilities and stockholders’ equity | $ | 483,346 |  |  | $ | (23,646 | ) |  | $ | 459,700 |
The following tables present the effect of the adoption of ASU 2014-09 on the Company’s consolidated statements of operations for the years ended June 30, 2017 and 2016 (in thousands, except per share amounts):
| Year Ended June 30, 2017 |
| As Reported |  |  | Adjustment |  |  | As Adjusted |
Net revenues |  |  |  |  |  |  |  |  |  |  |
Product | $ | 451,459 |  |  | $ | 8,966 |  |  | $ | 460,425 |
Service |  | 146,659 |  |  |  | — |  |  |  | 146,659 |
Total net revenues |  | 598,118 |  |  |  | 8,966 |  |  |  | 607,084 |
Cost of revenues |  |  |  |  |  |  |  |  |  |  |
Product |  | 217,727 |  |  |  | 2,494 |  |  |  | 220,221 |
Service |  | 55,906 |  |  |  | — |  |  |  | 55,906 |
Total cost of revenues |  | 273,633 |  |  |  | 2,494 |  |  |  | 276,127 |
Gross profit |  |  |  |  |  |  |  |  |  |  |
Product |  | 233,732 |  |  |  | 6,472 |  |  |  | 240,204 |
Service |  | 90,753 |  |  |  | — |  |  |  | 90,753 |
Total Gross profit |  | 324,485 |  |  |  | 6,472 |  |  |  | 330,957 |
Sales and marketing expenses |  | 167,927 |  |  |  | (301 | ) |  |  | 162,626 |
Operating loss |  | (733 | ) |  |  | 6,773 |  |  |  | 6,040 |
Net income (loss) before tax |  | (4,177 | ) |  |  | 6,773 |  |  |  | 2,596 |
Net income (loss) | $ | (8,517 | ) |  | $ | 6,773 |  |  | $ | (1,744 | )
Basic and diluted net loss per share |  |  |  |  |  |  |  |  |  |  |
Net loss per share - basic | $ | (0.08 | ) |  | $ | 0.06 |  |  | $ | (0.02 | )
Net loss per share - diluted | $ | (0.08 | ) |  | $ | 0.06 |  |  | $ | (0.02 | )
Shares used in per share calculation - basic |  | 108,273 |  |  |  | 108,273 |  |  |  | 108,273 |
Shares used in per share calculation - diluted |  | 108,273 |  |  |  | 108,273 |  |  |  | 108,273 |
| Year Ended June 30, 2016 |
| As Reported |  |  | Adjustment |  |  | As Adjusted |
Net revenues |  |  |  |  |  |  |  |  |  |  |
Product | $ | 395,464 |  |  | $ | (8,555 | ) |  | $ | 386,909 |
Service |  | 132,925 |  |  |  | — |  |  |  | 132,925 |
Total net revenues |  | 528,389 |  |  |  | (8,555 | ) |  |  | 519,834 |
Cost of revenues |  |  |  |  |  |  |  |  |  |  |
Product |  | 208,739 |  |  |  | (3,170 | ) |  |  | 205,569 |
Service |  | 48,862 |  |  |  | — |  |  |  | 48,862 |
Total cost of revenues |  | 257,601 |  |  |  | (3,170 | ) |  |  | 254,431 |
Gross profit |  |  |  |  |  |  |  |  |  |  |
Product |  | 186,725 |  |  |  | (5,385 | ) |  |  | 181,340 |
Service |  | 84,063 |  |  |  | — |  |  |  | 84,063 |
Total Gross profit |  | 270,788 |  |  |  | (5,385 | ) |  |  | 265,403 |
Sales and marketing expenses |  | 150,806 |  |  |  | (906 | ) |  |  | 149,900 |
Operating loss |  | (25,550 | ) |  |  | (4,479 | ) |  |  | (30,029 | )
Net loss before tax |  | (27,548 | ) |  |  | (4,479 | ) |  |  | (32,027 | )
Net loss | $ | (31,884 | ) |  | $ | (4,479 | ) |  | $ | (36,363 | )
Basic and diluted net loss per share |  |  |  |  |  |  |  |  |  |  |
Net loss per share - basic | $ | (0.31 | ) |  | $ | (0.04 | ) |  | $ | (0.35 | )
Net loss per share - diluted | $ | (0.31 | ) |  | $ | (0.04 | ) |  | $ | (0.35 | )
Shares used in per share calculation - basic |  | 103,074 |  |  |  | 103,074 |  |  |  | 103,074 |
Shares used in per share calculation - diluted |  | 103,074 |  |  |  | 103,074 |  |  |  | 103,074 |
The following tables present the effect of the adoption of ASU 2014-09 on the Company’s consolidated statement of cash flows for the years ended June 30, 2017 and 2016 (in thousands):
| Year Ended June 30, 2017 |
| As Reported |  |  | Adjustment |  |  | As Adjusted |
Cash flows from operating activities |  |  |  |  |  |  |  |  |  |  |
Net loss | $ | (8,517 | ) |  | $ | 6,773 |  |  | $ | (1,744 | )
Changes in operating assets and liabilities, net |  |  |  |  |  |  |  |  |  |  |
Accounts receivable |  | (25,050 | ) |  |  | 11,099 |  |  |  | (13,951 | )
Inventories |  | 8,587 |  |  |  | (1,174 | ) |  |  | 7,413 |
Prepaid expenses and other assets |  | 8,018 |  |  |  | (301 | ) |  |  | 7,717 |
Deferred distributors revenue, net of cost of sales to distributors |  | 16,708 |  |  |  | (16,708 | ) |  |  | — |
Other current and long-term liabilities |  | 5,419 |  |  |  | 311 |  |  |  | 5,730 |
Net cash provided by operating activities |  | 59,283 |  |  |  | — |  |  |  | 59,283 |
Net cash used in investing activities |  | (71,752 | ) |  |  | — |  |  |  | (71,752 | )
Net cash provided by financing activities |  | 48,708 |  |  |  | — |  |  |  | 48,708 |
Foreign currency effect on cash |  | 89 |  |  |  | — |  |  |  | 89 |
Net increase in cash and cash equivalents | $ | 36,328 |  |  | $ | — |  |  | $ | 36,328 |
| Year Ended June 30, 2016 |
| As Reported |  |  | Adjustment |  |  | As Adjusted |
Cash flows from operating activities |  |  |  |  |  |  |  |  |  |  |
Net loss | $ | (31,884 | ) |  | $ | (4,479 | ) |  | $ | (36,363 | )
Changes in operating assets and liabilities, net |  |  |  |  |  |  |  |  |  |  |
Accounts receivable |  | 10,178 |  |  |  | (9,552 | ) |  |  | 626 |
Inventories |  | 17,025 |  |  |  | 1,171 |  |  |  | 18,196 |
Prepaid expenses and other assets |  | 100 |  |  |  | (906 | ) |  |  | (806 | )
Deferred distributors revenue, net of cost of sales to distributors |  | (14,058 | ) |  |  | 14,058 |  |  |  | — |
Other current and long-term liabilities |  | (3,047 | ) |  |  | (292 | ) |  |  | (3,339 | )
Net cash provided by operating activities |  | 30,366 |  |  |  | — |  |  |  | 30,366 |
Net cash used in investing activities |  | (5,327 | ) |  |  | — |  |  |  | (5,327 | )
Net cash used in financing activities |  | (6,738 | ) |  |  | — |  |  |  | (6,738 | )
Foreign currency effect on cash |  | (404 | ) |  |  | — |  |  |  | (404 | )
Net increase in cash and cash equivalents | $ | 17,897 |  |  | $ | — |  |  | $ | 17,897 |

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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