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Business Combinations | 12 Months Ended
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Jun. 30, 2022
Business Combinations [Abstract] |
Business Combinations | 4. Business Combinations The Company completed one acquisition during the fiscal year ended June 30, 2022 and one acquisition during the fiscal year ended June 30, 2020. The acquisitions were accounted for using the acquisition method of accounting. The estimated fair values were determined through established and generally accepted valuation techniques, including work performed by third-party valuation specialists. The purchase price of each acquisition has been allocated to tangible and identifiable intangible assets acquired and liabilities assumed. The fair value of working capital related items, such as other current assets and accrued liabilities, approximated their book values at the date of acquisition. Inventories were valued at fair value using the net realizable value approach. The fair value of property and equipment was determined using a cost approach. 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 the Company would be required to pay to a third party to assume the obligation. Intangible assets were valued using income approaches based on management projections, which the Company considers to be Level 3 inputs. Results of operations of the acquired entity is included in the Company’s operations beginning with the closing date of each acquisition. 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. 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 to allow the Company to expand its portfolio with new cloud-managed SD-WAN and security offerings to support its enterprise customers. 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 fair value of the acquired deferred revenue was estimated using the cost build-up approach which was subsequently remeasured in accordance with ASC Topic 606 based on the recently issued and adopted guidance ASU 2021-08. The Company has completed its analysis of the tax implications of the acquisition of the intangible assets and a deferred tax liability has been established for the non-deductible intangible amortization, increasing the overall level of goodwill associated with the Acquisition. All valuations are finalized as of June 30, 2022. Results of operations of Ipanema have been included in the operations of the Company beginning with the Acquisition Date. The purchase price allocation is set forth in the table below and reflects estimated fair values (in thousands):
| Preliminary Allocation as of September 14, 2021 |  |  |  |  | Adjustments |  |  | Final Allocation as of June 30, 2022 |
Cash and cash equivalents | $ | 1,364 |  |  |  |  | $ | — |  |  | $ | 1,364 |
Accounts receivable, net |  | 1,440 |  |  |  |  |  | (6 | ) | a |  | 1,434 |
Inventories |  | 337 |  |  |  |  |  | (63 | ) | a |  | 274 |
Prepaid expenses and other current assets |  | 1,841 |  |  |  |  |  | (1,231 | ) | a |  | 610 |
Property and equipment |  | 46 |  |  |  |  |  | — |  |  |  | 46 |
Other assets |  | 21 |  |  |  |  |  | — |  |  |  | 21 |
Accounts payable |  | (1,220 | ) |  |  |  |  | 244 |  | a |  | (976 | )
Accrued compensation and benefits |  | (2,304 | ) |  |  |  |  | 467 |  | a |  | (1,837 | )
Accrued warranty |  | (41 | ) |  |  |  |  | — |  |  |  | (41 | )
Other accrued liabilities |  | (71 | ) |  |  |  |  | (51 | ) | a |  | (122 | )
Deferred revenue |  | (2,758 | ) |  |  |  |  | (7,376 | ) | a,b |  | (10,134 | )
Deferred taxes |  | - |  |  |  |  |  | (4,320 | ) | c |  | (4,320 | )
Other liabilities |  | (723 | ) |  |  |  |  | — |  |  |  | (723 | )
Net tangible liabilities |  | (2,068 | ) |  |  |  |  | (12,336 | ) |  |  | (14,404 | )
Identifiable intangible assets |  | 16,300 |  |  |  |  |  | — |  |  |  | 16,300 |
Goodwill |  | 56,649 |  |  |  |  |  | 12,336 |  | a,b,c |  | 68,985 |
Total intangible assets acquired |  | 72,949 |  |  |  |  |  | 12,336 |  |  |  | 85,285 |
Total net assets acquired | $ | 70,881 |  |  |  |  | $ | — |  |  | $ | 70,881 |
The changes made during the period in the table above include: (a) measurement period adjustments attributable to the Company’s review of the additional information being obtained on preacquisition assets and liabilities, (b) the increase in deferred revenue (and the corresponding increase to Goodwill by the same amount) is the result of the adoption of ASU 2021-08 in the period ended December 31, 2021, and (c) establishment of deferred tax liability. 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 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 consolidated results of operations beginning September 15, 2021. The overall results of Operations of Ipanema were not material to the consolidated financial statements of Extreme. For the period ended June 30, 2022, the Company incurred acquisition and integration related expenses of $7.0 million associated with the acquisition of Ipanema. Acquisition and integration costs consisted 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 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 year ended June 30, 2022 combines the 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 unaudited pro forma financial information for the year ended June 30, 2021 combines the historical results of operations for Extreme assuming the transaction closed on July 1, 2020 and historical results for Ipanema. The following table summarizes the unaudited pro forma financial information (in thousands, except per share amounts):
| Year Ended |
| June 30, 2022 |  |  | June 30, 2021 |
Net revenues | $ | 1,115,942 |  |  | $ | 1,031,825 |
Net income (loss) | $ | 53,659 |  |  | $ | (6,755 | )
Net income (loss) per share - basic | $ | 0.41 |  |  | $ | (0.05 | )
Net income (loss) per share - diluted | $ | 0.40 |  |  | $ | (0.05 | )
Shares used in per share calculation - basic |  | 129,437 |  |  |  | 124,019 |
Shares used in per share calculation - diluted |  | 133,494 |  |  |  | 124,019 |
Fiscal 2020 Acquisition Aerohive Acquisition On August 9, 2019, the Company consummated its acquisition of all of the outstanding common stock of Aerohive Networks, Inc. (“Aerohive”) pursuant to that certain Agreement and Plan of Merger entered into as of June 26, 2019. Under the terms of the Aerohive acquisition, the net consideration paid by Extreme to Aerohive stockholders was $267.1 million. The acquired assets and liabilities of Aerohive were 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 components of aggregate purchase consideration are as follows (in thousands):
Purchase consideration |  | August 9, 2019 |
Cash paid to acquire outstanding shares |  | $ | 263,616 |
Replacement of stock-based awards |  |  | 3,530 |
Aggregate purchase consideration |  | $ | 267,146 |
The purchase price allocation is set forth in the table below and reflects estimated fair values (in thousands).
| Final Allocation as of June 30, 2020 |
Cash and cash equivalents | $ | 44,158 |
Short-term investments |  | 45,148 |
Accounts receivable, net |  | 11,753 |
Inventories |  | 19,232 |
Prepaid expenses and other current assets |  | 3,924 |
Property and equipment |  | 2,364 |
Operating lease right-of-use assets |  | 6,336 |
Other assets |  | 2,195 |
Debt |  | (20,000 | )
Accounts payable |  | (9,737 | )
Accrued compensation and benefits |  | (7,129 | )
Accrued warranty |  | (570 | )
Other accrued liabilities |  | (1,960 | )
Operating lease liabilities |  | (4,752 | )
Deferred revenue |  | (68,415 | )
Other liabilities |  | (483 | )
Net tangible assets |  | 22,064 |
Identifiable intangible assets |  | 52,500 |
Goodwill |  | 192,582 |
Total intangible assets acquired |  | 245,082 |
Total net assets acquired | $ | 267,146 |
The following table presents details of the identifiable intangible assets acquired as part of the Aerohive acquisition (dollars in thousands):
Intangible Assets |  | Estimated Useful Life (in years) |  |  | Amount |
Developed technology |  |  | 4 |  |  | $ | 39,100 |
Backlog |  |  | 1 |  |  |  | 400 |
Customer relationships |  |  | 7 |  |  |  | 11,400 |
Trade names |  |  | 1 |  |  |  | 1,600 |
Total identifiable intangible assets |  |  |  |  |  | $ | 52,500 |
The amortization for the developed technology and backlog is recorded in “Cost of revenues” for product and service and the amortization for the remaining intangibles is recorded in “Amortization of intangibles” in the accompanying consolidated statements of operations. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Aerohive along with the future potential of the technology. The Company will not be entitled to amortization of the goodwill and intangible assets for tax purposes as the Acquisition is a nontaxable stock acquisition. The results of operations of Aerohive are included in the accompanying consolidated statements of operations beginning August 9, 2019. The Aerohive revenues for the year ended June 30, 2020 were $125.1 million and were incorporated into the revenues of the Company. Certain associated expenses of Aerohive were incorporated with the results of operations of the Company and, therefore, stand-alone operating results are not available for the year ended June 30, 2020. In the year ended June 30, 2020, the Company incurred acquisition and integration related expenses of $32.1 million associated with the Aerohive acquisition, including a $6.8 million compensation charge for certain Aerohive Executive stock awards which were accelerated due to change-in-control and termination provisions included in the Executives’ employment contracts. Other acquisition and integration costs consist primarily of professional fees for financial and legal advisory services and severance charges for terminated Aerohive employees. Such acquisition-related costs were expensed as incurred and are included in “Acquisition and integration costs” in the accompanying consolidated statements of operations.

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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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