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Balance Sheet Accounts | 9 Months Ended
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Mar. 31, 2018
Organization Consolidation And Presentation Of Financial Statements [Abstract] |
Balance Sheet Accounts |
5. | Balance Sheet Accounts
Cash, Cash Equivalents and Marketable Securities The following is a summary of cash, cash equivalents and marketable securities (in thousands):
|  | March 31, 2018 |  |  | June 30, 2017 |
Cash |  | $ | 98,677 |  |  | $ | 126,159 |
Cash equivalents |  |  | 4,500 |  |  |  | 4,291 |
Total cash and cash equivalents |  |  | 103,177 |  |  |  | 130,450 |
Marketable securities (consisting of available-for-sale securities) |  |  | 2,091 |  |  |  | — |
Total cash, cash equivalents and marketable securities |  | $ | 105,268 |  |  | $ | 130,450 |
The Company considers highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Marketable securities are recorded in “Prepaid expense and other current assets” in the accompanying condensed consolidated balance sheet as these are publicly-traded equity securities. Marketable securities are classified as available-for-sale and reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive loss” 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the demand of inventory or when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand.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):
|  | March 31, 2018 |  |  | June 30, 2017 |
|  |  |  |  |  | (As Adjusted) |
Finished goods |  | $ | 63,306 |  |  | $ | 46,620 |
Raw materials |  |  | 14,450 |  |  |  | 790 |
Total Inventories |  | $ | 77,756 |  |  | $ | 47,410 |
Property and Equipment, Net Property and equipment consist of the following (in thousands):
|  | March 31, 2018 |  |  | June 30, 2017 |
Computers and equipment |  | $ | 69,712 |  |  | $ | 34,716 |
Purchased software |  |  | 16,908 |  |  |  | 11,785 |
Office equipment, furniture and fixtures |  |  | 18,143 |  |  |  | 10,852 |
Leasehold improvements |  |  | 47,039 |  |  |  | 23,046 |
Total property and equipment |  |  | 151,802 |  |  |  | 80,399 |
Less: accumulated depreciation and amortization |  |  | (65,315 | ) |  |  | (50,159 | )
Property and equipment, net |  | $ | 86,487 |  |  | $ | 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 |
March 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Developed technology |  | 3.8 years |  | $ | 117,500 |  |  | $ | 52,860 |  |  | $ | 64,640 |
Customer relationships |  | 3.7 years |  |  | 51,639 |  |  |  | 39,577 |  |  |  | 12,062 |
Maintenance contracts |  | 0.6 years |  |  | 17,000 |  |  |  | 15,016 |  |  |  | 1,984 |
Trade names |  | 3.7 years |  |  | 9,100 |  |  |  | 3,776 |  |  |  | 5,324 |
Backlogs |  | — years |  |  | 1,800 |  |  |  | 1,800 |  |  |  | — |
License agreements |  | 5.9 years |  |  | 2,445 |  |  |  | 1,323 |  |  |  | 1,122 |
Other intangibles |  | 1.9 years |  |  | 1,382 |  |  |  | 1,108 |  |  |  | 274 |
Total intangibles, net |  |  |  | $ | 200,866 |  |  | $ | 115,460 |  |  | $ | 85,406 |
|  | 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 |
Trade names |  | 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 included in the above table 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 |  |  | Nine Months Ended |
|  | March 31, 2018 |  |  | March 31, 2017 |  |  | March 31, 2018 |  |  | March 31, 2017 |
Amortization in “Cost of revenues: Product” |  | $ | 4,647 |  |  | $ | 995 |  |  | $ | 11,310 |  |  | $ | 6,271 |
Amortization of intangibles |  |  | 2,101 |  |  |  | 1,193 |  |  |  | 6,461 |  |  |  | 7,510 |
Total amortization |  | $ | 6,748 |  |  | $ | 2,188 |  |  | $ | 17,771 |  |  | $ | 13,781 |
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):
|  | March 31, 2018 |
Balance as of June 30, 2017 |  | $ | 80,216 |
Additions due to acquisitions |  |  | 49,028 |
Balance at end of period |  | $ | 129,244 |
During the nine months ended March 31, 2018, the Company completed acquisitions of the Campus Fabric Business and the Data Center Business, resulting in an additional goodwill of $36.4 million and $12.6 million, respectively. See Note 2 for additional information related to the acquisitions. Deferred Revenue The Company offers for sale to its customers, renewable support arrangements that range from one to five years as well as professional and training services, which results in deferred revenue. Debt The Company’s debt is comprised of the following (in thousands):
|  | March 31, 2018 |  |  | June 30, 2017 |
Current portion of long-term debt: |  |  |  |  |  |  |  |
Term Loan |  | $ | 25,260 |  |  | $ | 12,444 |
Less: unamortized debt issuance costs |  |  | (540 | ) |  |  | (164 | )
Current portion of long-term debt |  | $ | 24,720 |  |  | $ | 12,280 |
Long-term debt, less current portion: |  |  |  |  |  |  |  |
Term Loan |  | $ | 145,173 |  |  | $ | 71,268 |
Revolver |  |  | 10,000 |  |  |  | 10,000 |
Less: unamortized debt issuance costs |  |  | (1,215 | ) |  |  | (846 | )
Total long-term debt, less current portion |  |  | 153,958 |  |  |  | 80,422 |
Total debt |  | $ | 178,678 |  |  | $ | 92,702 |
In connection with the closing of Campus Fabric Business 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”), 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. On July 14, 2017, the Company borrowed $80.0 million under the Term Loan which was used to fund the purchase of Campus Fabric Business. In connection with the closing of the acquisition of the Data Center Business discussed in Note 2, the Company entered into the Third Amendment to the Credit Facility (the “Third Amendment”) on October 26, 2017. Among other things, the Third Amendment (i) amends the negative covenant governing dispositions to increase the general dispositions basket for the fiscal year of the Company ending June 30, 2018, and (ii) amends certain definitions and provisions to update certain references to the Data Center Business Purchase Agreement (as defined above). On the Data Center Business Closing Date, the Company borrowed $20.0 million on the Term Loan to partially fund the acquisition of the Data Center Business. 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 $1.2 million of outstanding letters of credit and $48.8 million of availability under the Revolver as of March 31, 2018. On May 1, 2018, the Company terminated the Credit Facility. On May 1, 2018, the Company entered into a Credit Agreement (the “New Credit Agreement”), by and among the Company, as borrower, BMO Harris Bank N.A., as an issuing lender and swingline lender, Bank of Montreal, as administrative and collateral agent, and the financial institutions or entities that are a party thereto as lenders. The New Credit Agreement provides for a $40 million five-year revolving credit facility (the “New Revolver”) and a $190 million five-year term loan (the “New Term Loan” and together with the New Revolver, the “New Senior Secured Credit Facilities”). On May 1, 2018, the Company borrowed $200 million under the New Senior Secured Credit Facilities in order to pay off existing debt and for general corporate purposes. See Note 14 (Subsequent Events) to the condensed consolidated financial statements for more information on the New Credit Agreement. 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 and nine months ended March 31, 2018 and 2017 (in thousands):
|  | Three Months Ended |  |  | Nine Months Ended |
|  | March 31, 2018 |  |  | March 31, 2017 |  |  | March 31, 2018 |  |  | March 31, 2017 |
|  |  |  |  |  | (As adjusted) |  |  |  |  |  |  | (As adjusted) |
Balance beginning of period |  | $ | 13,010 |  |  | $ | 10,790 |  |  | $ | 10,584 |  |  | $ | 9,998 |
Warranties assumed due to acquisitions |  |  | — |  |  |  | — |  |  |  | 3,682 |  |  |  | 2,034 |
New warranties issued |  |  | 2,872 |  |  |  | 1,893 |  |  |  | 6,801 |  |  |  | 3,997 |
Warranty expenditures |  |  | (3,070 | ) |  |  | (2,080 | ) |  |  | (8,255 | ) |  |  | (5,426 | )
Balance end of period |  | $ | 12,812 |  |  | $ | 10,603 |  |  | $ | 12,812 |  |  | $ | 10,603 |
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. Other long-term liabilities The following is a summary of long-term liabilities (in thousands):
|  | March 31, 2018 |  |  | June 30, 2017 |
Acquisition related deferred payments, less current portion |  | $ | 14,147 |  |  | $ | — |
Acquisition-related contingent consideration obligations, less current portion |  |  | 33,256 |  |  |  | — |
Other |  |  | 18,037 |  |  |  | 8,526 |
Total other long-term liabilities |  | $ | 65,440 |  |  | $ | 8,526 |
Advertising All advertising costs are expensed as incurred. Advertising expenses for three and nine months ended March 31, 2018 and 2017, 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 marketable securities. 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 revenues:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | March 31, 2018 |  |  | March 31, 2017 |  |  | March 31, 2018 |  |  | March 31, 2017 |
|  |  |  |  |  | (As adjusted) |  |  |  |  |  |  | (As adjusted) |
Westcon Group Inc. |  | 14% |  |  | 10% |  |  | 14% |  |  | 11% |
Tech Data Corporation |  | 14% |  |  | 13% |  |  | 13% |  |  | 15% |
Jenne Corporation |  | 13% |  |  | 14% |  |  | 11% |  |  | 14% |
The following customers account for more than 10% of the Company’s accounts receivable outstanding as of March 31, 2018, Tech Data 18% and Westcon Group 14%

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