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Business Combination | 3 Months Ended
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Sep. 30, 2021
Business Combinations [Abstract] |
Business Combination |
4. | Business Combination
Fiscal 2022 Acquisition Ipanema Acquisition On September 14, 2021 (the “Acquisition Date”), the Company completed its acquisition (the “Acquisition”) of Ipanematech SAS (“Ipanema”), the cloud-native enterprise Software-Defined Wide Area Network (“SD-WAN”) business unit of Infovista pursuant to a Sale and Purchase Agreement (“the Agreement”). Under the terms of the Acquisition, the net consideration paid by Extreme to Ipanema stockholders was $70.9 million which was funded from existing cash on hand. The primary reason for the acquisition was to acquire the talent and the technology which will allow us to expand our portfolio with new cloud-managed SD-WAN and security offerings to support our enterprise customers. The Acquisition has been accounted for using the acquisition method of accounting whereby the acquired assets and liabilities of Ipanema have been recorded at their respective fair values and added to those of the Company including an amount for goodwill calculated as the difference between the acquisition consideration and the fair value of the identifiable net assets. The purchase price has been preliminarily allocated to tangible and identifiable intangible assets acquired and liabilities assumed. The final purchase price allocation is pending the finalization of valuations primarily intangible assets and deferred revenue, which may result in an adjustment to the preliminary purchase price allocation. The estimated fair values were determined through established and generally accepted valuation techniques, including work performed by third-party valuation specialists. The fair value of working capital related items, such as accounts receivable, other current assets and accrued liabilities, approximated their book values at the date of acquisition. The fair value of the acquired deferred revenue was estimated using the cost build-up approach. The cost build-up approach determines fair value using estimates of the costs required to provide the contracted deliverables plus an assumed profit. The total costs including the assumed profit were adjusted to present value using a discount rate considered appropriate. The resulting fair value approximates the amount that the Company would be required to pay to a third party to assume the obligation. Valuations of the intangible assets were valued using income approaches based on management projections, which the Company considers to be Level 3 inputs. The Company also continues to analyze the tax implications of the acquisition of the intangible assets which may ultimately impact the overall level of goodwill associated with the acquisition. Results of operations of Ipanema have been included in the operations of the Company beginning with the Acquisition Date. The preliminary purchase price allocation is set forth in the table below and reflects estimated fair values (in thousands):
| Preliminary Allocation as of September 14, 2021 |
Cash and cash equivalents | $ | 1,364 |
Accounts receivable, net |  | 1,440 |
Inventories |  | 337 |
Prepaid expenses and other current assets |  | 1,841 |
Property and equipment |  | 46 |
Other assets |  | 21 |
Accounts payable |  | (1,220 | )
Accrued compensation and benefits |  | (2,304 | )
Accrued warranty |  | (41 | )
Other accrued liabilities |  | (71 | )
Deferred revenue |  | (2,758 | )
Other liabilities |  | (723 | )
Net tangible liabilities |  | (2,068 | )
Identifiable intangible assets |  | 16,300 |
Goodwill |  | 56,649 |
Total intangible assets acquired |  | 72,949 |
Total net assets acquired | $ | 70,881 |
The following table presents details of the identifiable intangible assets acquired as part of the acquisition (in thousands):
Intangible Assets |  | Weighted Average Estimated Useful Life (in years) |  |  | Amount |
Developed technologies |  |  | 6 |  |  | $ | 14,500 |
Customer relationships |  |  | 4 |  |  |  | 1,800 |
Total identifiable intangible assets |  |  |  |  |  | $ | 16,300 |
The amortization for the developed technologies is recorded in “Cost of revenues” for product and the amortization for the remaining intangibles is recorded in “Amortization of intangibles” in the accompanying condensed consolidated statements of operations. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Ipanema. The Company will not be entitled to amortization of the goodwill and intangible assets for tax purposes as this acquisition is a nontaxable stock acquisition. The results of operations of Ipanema are included in the accompanying condensed consolidated results of operations beginning September 15, 2021. The overall results of Operations of Ipanema were not material to the condensed consolidated financial statements of Extreme. In the quarter ended September 30, 2021, the Company incurred acquisition and integration related expenses of $1.5 million associated with the acquisition of Ipanema. Acquisition and integration costs consist primarily of professional fees for financial and legal advisory services. Such acquisition-related costs were expensed as incurred and are included in “Acquisition and integration costs” in the accompanying condensed consolidated statements of operations. Pro forma financial information The following unaudited pro forma results of operations are presented as though the Acquisition had occurred as of the beginning of the earliest period presented, July 1, 2020, the beginning of fiscal 2021, after giving effect to purchase accounting adjustments relating to deferred revenue, depreciation and amortization of intangibles and acquisition and integration costs. The pro forma results of operations are not necessarily indicative of the combined results that would have occurred had the acquisition been consummated as of the beginning of fiscal 2021, nor are they necessarily indicative of future operating results. The unaudited pro forma results do not include the impact of synergies, nor any potential impacts on current or future market conditions which could alter the unaudited pro forma results. The unaudited pro forma financial information for the three months ended September 30, 2020 combines the historical results for Extreme for such periods assuming the transaction closed on July 1, 2020, which include the results of Ipanema subsequent to the Acquisition Date, and Ipanema’s historical results up to the Acquisition Date. The following table summarizes the unaudited pro forma financial information (in thousands, except per share amounts):
|  | Three months ended |
|  | September 30, 2021 |  |  | September 30, 2020 |
Net revenues |  | $ | 270,051 |  |  | $ | 237,494 |
Net income (loss) |  | $ | 12,815 |  |  | $ | (14,298 | )
Net income (loss) per share - basic |  | $ | 0.10 |  |  | $ | (0.12 | )
Net income (loss) per share - diluted |  | $ | 0.10 |  |  | $ | (0.12 | )
Shares used in per share calculation - basic |  |  | 128,324 |  |  |  | 121,705 |
Shares used in per share calculation - diluted |  |  | 133,225 |  |  |  | 121,705 |

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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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