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Employee Benefit Plans | 12 Months Ended
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Jun. 30, 2024
Share-Based Payment Arrangement, Noncash Expense [Abstract] |
Employee Benefit Plans | 12. Employee Benefit Plans As of June 30, 2024, the Company has the following share-based compensation plans and the 401(k) Plan discussed below: 2013 Equity Incentive Plan The 2013 Equity Incentive Plan (the “2013 Plan”) was approved by stockholders on November 20, 2013. The 2013 Plan replaced the 2005 Equity Incentive Plan (the “2005 Plan”). Under the 2013 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units ("RSUs") (including performance-based or market-based RSUs), performance shares, and other share-based or cash-based awards to employees and consultants. The 2013 Plan also authorizes the grant of awards of stock options, stock appreciation rights, restricted stock and RSUs to non-employee members of the Board and deferred compensation awards to officers, directors and certain management or highly compensated employees. The 2013 Plan authorized the issuance of 9.0 million shares of the Company’s common stock. In addition, 6.6 million shares of the Company's common stock under the 2005 Plan were transferred to the 2013 Stock Plan and were added to the number of shares available for future grant under the 2013 Plan. Prior to fiscal 2024, stockholders approved the issuance of an additional 38.7 million shares of the Company's common stock. During the year ended June 30, 2024, an additional 5.0 million shares were authorized and made available for grant under the 2013 Plan. The 2013 Plan includes provisions upon the granting of certain awards defined by the 2013 Plan as Full Value Awards in which the shares available for grant under the 2013 Plan are decremented 1.5 shares for each such award granted. Upon forfeiture or cancellation of unvested awards, the same ratio is applied in returning shares to the 2013 Plan for future issuance as was applied upon granting. As of June 30, 2024, total options and awards to acquire 7.6 million shares were outstanding under the 2013 Plan and 13.4 million shares are available for grant under the 2013 Plan. Options granted under this plan have a contractual term of seven years. Aerohive 2014 Equity Incentive Plan Pursuant to the acquisition of Aerohive on August 9, 2019, the Company assumed the Aerohive 2014 Equity Incentive Plan (the “Aerohive Plan”). Stock awards outstanding under the Aerohive Plan were converted into awards for shares of the Company's common stock as of the date of the acquisition of Aerohive at a predetermined rate pursuant to the Merger Agreement entered into in connection with the acquisition of Aerohive. As of June 30, 2024, total awards to acquire 2,288 shares of the Company's common stock were outstanding under the Aerohive Plan. If a participant terminates employment prior to the vesting dates, the non-vested shares will be forfeited and retired. No future grants may be made from the Aerohive Plan. Shares Reserved for Issuance The Company had the following reserved shares of the Company's common stock for future issuance as of the dates noted (in thousands):
|  | June 30, 2024 |  |  | June 30, 2023 |
2013 Equity Incentive Plan shares available for grant |  |  | 13,414 |  |  |  | 9,995 |
Employee stock options and awards outstanding |  |  | 7,562 |  |  |  | 10,038 |
2014 Employee Stock Purchase Plan |  |  | 7,130 |  |  |  | 8,467 |
Total shares reserved for issuance |  |  | 28,106 |  |  |  | 28,500 |
Stock Options The following table summarizes stock option activity under all plans for the year ended June 30, 2024 (in thousands except per share amount and contractual term):
|  | Number of Shares |  |  | Weighted-Average Exercise Price Per Share |  |  | Weighted-Average Remaining Contractual Term (years) |  |  | Aggregate Intrinsic Value |
Options outstanding at June 30, 2023 |  |  | 1,187 |  |  | $ | 6.56 |  |  |  | 2.70 |  |  | $ | 23,136 |
Granted |  |  | — |  |  |  | — |  |  |  |  |  |  |
Exercised |  |  | (114 | ) |  |  | 6.40 |  |  |  |  |  |  |
Canceled |  |  | — |  |  |  | — |  |  |  |  |  |  |
Options outstanding at June 30, 2024 |  |  | 1,073 |  |  | $ | 6.58 |  |  |  | 1.75 |  |  | $ | 7,376 |
Vested and expected to vest at June 30, 2024 |  |  | 1,073 |  |  | $ | 6.58 |  |  |  | 1.75 |  |  | $ | 7,376 |
Exercisable at June 30, 2024 |  |  | 1,073 |  |  | $ | 6.58 |  |  |  | 1.75 |  |  | $ | 7,376 |
The total intrinsic value of options exercised in fiscal years 2024 and 2022 was $1.1 million and $4.9 million, respectively. There were no options exercised during the fiscal year 202 3. There were no stock options granted during the fiscal years 2024 and 2023. As of June 30, 2024, all outstanding options are fully vested and compensation cost related to stock options has been fully recognized. Stock Awards Stock awards may be granted under the 2013 Plan on terms approved by the Compensation Committee of the Board of Directors. Stock awards generally provide for the issuance of RSUs, including performance-based or market-based RSUs which vest over a fixed period of time or based upon the satisfaction of certain performance criteria or market conditions. The Company recognizes compensation expense on the awards over the vesting period based on the award’s fair value as of the date of grant. The Company does not estimate forfeitures, but accounts for them as incurred. The following table summarizes stock award activity for the year ended June 30, 2024 (in thousands, except grant date fair value):
|  | Number of Shares |  |  | Weighted- Average Grant Date Fair Value |  |  | Aggregate Fair Value |
Non-vested stock awards outstanding at June 30, 2023 |  |  | 8,851 |  |  | $ | 14.25 |  |  |  |
Granted |  |  | 4,038 |  |  |  | 27.37 |  |  |  |
Released |  |  | (5,365 | ) |  |  | 12.84 |  |  |  |
Canceled |  |  | (1,035 | ) |  |  | 20.04 |  |  |  |
Non-vested stock awards outstanding at June 30, 2024 |  |  | 6,489 |  |  | $ | 22.65 |  |  | $ | 87,276 |
Stock awards expected to vest at June 30, 2024 |  |  | 6,489 |  |  | $ | 22.65 |  |  | $ | 87,276 |
The RSUs granted under the 2013 plan vest over a period of time, generally one-to-three years, and are subject to participant's continued service to the Company. The aggregate fair value, as of the respective grant dates of awards granted during the fiscal years ended June 30, 2024, 2023 and 2022 was $110.5 million, $106.8 million and $50.7 million, respectively. For fiscal years ended June 30, 2024, 2023, and 2022, the Company withheld an aggregate of 1.9 million shares, 1.4 million shares, and 2.2 million shares, respectively, upon the vesting of awards, based upon the closing share price on the vesting date as settlement of the employees’ minimum statutory obligation for the applicable income and other employment taxes. For fiscal years ended June 30, 2024, 2023 and 2022, the Company remitted cash of $47.9 million, $21.9 million, $24.5 million, respectively, to the appropriate taxing authorities on behalf of the employees. The payment of the taxes by the Company reduced the number of shares that would have been issued on the vesting date and was recorded as a reduction of additional paid-in capital in the consolidated balance sheets and as a reduction of “Payments for tax withholdings, net of proceeds from issuance of common stock” in the financing activity within the consolidated statements of cash flows. As of June 30, 2024, there was $80.0 million in unrecognized compensation costs related to non-vested stock awards which includes the performance and market condition awards as discussed below. This cost is expected to be recognized over a weighted-average period of 1.6 years. Stock Awards – Officers and Directors RSUs granted during fiscal 2024, 2023 and 2022 to named executive officers and directors totaled 0.7 million awards, 1.8 million awards and 1.0 million awards, respectively which included awards with market-based conditions as discussed below. Stock Awards - Performance Awards During fiscal 2024 and 2023, the Compensation Committee of the Board granted 0.8 million and 1.2 million RSUs, respectively with vesting based on market conditions (“MSUs”) to certain of the Company’s executive officers. The MSUs granted during fiscal 2024 included 0.5 million MSUs subject to total shareholder return (“TSR”) and 0.3 million MSUs subject to certain stock price targets. The MSUs granted during fiscal 2023 were subject to TSR.
Level | Relative TSR | Shares Vested
Below Threshold | TSR is less than the Index by more than 37.5 percentage points | 0%
Threshold | TSR is less than the Index by 37.5 percentage points | 25%
Target | TSR equals the Index | 100%
Maximum | TSR is greater than the Index by 25 percentage points or more | 150%
TSR is calculated based on the average closing price for the 30-trading days prior to the beginning and end of the performance periods. Performance is measured based on three periods, with the ability for up to one-third of target shares to vest after years 1 and 2 and the ability for up to the maximum of the full award to vest based on the full 3-year TSR less any shares vested based on 1- and 2- year periods. Linear interpolation is used to determine the number of shares vested for achievement between target levels. The stock price target MSUs vest upon the achievement of a certain stock price target over the defined performance period. The stock price target shall be deemed as achieved if the average closing stock price over any thirty consecutive trading days during the period from grant date through the third anniversary of the grant date equals or exceeds the price target of $41.38 for the initial performance period. Upon satisfaction of the initial stock price target, 50% of the target shares will vest on the 3rd anniversary of the grant date and the remaining 50% will vest on the 4th anniversary of the grant date, subject to employees continued service through the applicable vesting dates. If the units are not earned on the last day of initial performance period, the units will remain outstanding and be eligible to be earned if the average closing stock price over any thirty consecutive trading days equals or exceeds the price target of $46.96. On February 14, 2024, the Company modified certain terms and conditions of the stock price target MSUs for certain executive officers. Under the modified agreement, the stock price target over the initial and fourth year performance periods were revised to $23.00 and $26.00, respectively. All other contractual terms remained unchanged. The incremental compensation cost recognized during fiscal 2024 and ratably over the remaining requisite service period is not material. The grant date fair value of each MSU was determined using the Monte Carlo simulation model. The weighted-average grant-date fair value of the TSR MSUs granted during fiscal 2024 was $32.66 per share. The weighted-average assumptions used in the Monte Carlo simulation included the expected volatility of 50%, risk-free interest rate of 4.43%, no expected dividend yield, expected term of three years and possible future stock prices over the performance period based on the historical stock and market prices. The weighted-average grant-date fair value of the MSUs granted during the year ended June 30, 2023 was $17.62 per share. The assumptions used in the Monte Carlo simulation included the expected volatility of 65%, risk-free rate of 3.27%, no expected dividend yield, expected term of three years and possible future stock prices over the performance period based on the historical stock and market prices. The weighted-average grant-date fair value of the MSUs granted during the year ended June 30, 2022 was $12.69 per share. The assumptions used in the Monte Carlo simulation included the expected volatility of 66%, risk-free rate of 0.44%, no expected dividend yield, expected term of three years and possible future stock prices over the performance period based on the historical stock and market prices. The Company recognizes the expense related to these MSUs on a graded-vesting method over the estimated term. The following table summarizes stock awards with market or performance-based conditions granted and the number of awards that have satisfied the relevant market or performance criteria in each period (in thousands):
|  | Fiscal Year 2024 |  |  | Fiscal Year 2023 |  |  | Fiscal Year 2022 |
Performance awards granted |  |  | 841 |  |  |  | 1,221 |  |  |  | 727 |
Performance awards earned |  |  | 846 |  |  |  | 400 |  |  |  | 158 |
2014 Employee Stock Purchase Plan On August 27, 2014, the Board approved the adoption of Extreme Network’s 2014 Employee Stock Purchase Plan (the “2014 ESPP”). On November 12, 2014, the stockholders approved the 2014 ESPP with the maximum number of shares of common stock that may be issued under the plan of 12.0 million shares. During the fiscal year ended June 30, 2022, the Board of Directors unanimously approved an amendment to the 2014 ESPP to increase the maximum number of shares that will be available for sale by 7.5 million shares, which was approved by the stockholders of the Company at the annual meeting of stockholders held on November 4, 2021. The 2014 ESPP allows eligible employees to acquire shares of the Company’s common stock through periodic payroll deductions of up to 15% of total compensation, subject to the terms of the specific offering periods outstanding. Each purchase period has a maximum duration of six months and the maximum shares issuable for each purchase period is 1.5 million shares. The price at which the common stock may be purchased is 85% of the lesser of the fair market value of the Company’s common stock on the first day of the applicable offering period or on the last day of the respective purchase period. During the fiscal years ended June 30, 2024 and 2023, there were 1.3 million and 1.5 million shares issued under the 2014 ESPP. As of June 30, 2024, there have been an aggregate 19.9 million shares issued under the 2014 ESPP. Share-Based Compensation Expense Share-based compensation expense recognized in the financial statements by line-item caption is as follows (in thousands):
|  | Year Ended |
|  | June 30, 2024 |  |  | June 30, 2023 |  |  | June 30, 2022 |
Cost of product revenues |  | $ | 1,899 |  |  | $ | 1,856 |  |  | $ | 1,186 |
Cost of subscription and support revenues |  |  | 2,994 |  |  |  | 3,513 |  |  |  | 1,421 |
Research and development |  |  | 16,686 |  |  |  | 14,824 |  |  |  | 9,995 |
Sales and marketing |  |  | 26,524 |  |  |  | 22,250 |  |  |  | 15,000 |
General and administrative |  |  | 28,660 |  |  |  | 21,029 |  |  |  | 15,760 |
Total share-based compensation expense |  | $ | 76,763 |  |  | $ | 63,472 |  |  | $ | 43,362 |
The Company uses the straight-line method for expense attribution, other than for the PSUs and MSUs, which may use the accelerated attribution method. The Company does not estimate forfeitures, but rather recognizes expense for those shares expected to vest and recognizes forfeitures when they occur. The fair value of each RSU grant with market-based vesting criteria under the 2013 Plan is estimated on the date of grant using the Monte-Carlo simulation model to determine the fair value and the derived service period of stock awards with market conditions, on the date of the grant. The fair value of each share purchase option under the Company's 2014 ESPP is estimated on the date of grant using the Black-Scholes-Merton option valuation model with the weighted average assumptions noted in the following table. The expected term of the 2014 ESPP shares is the offering period for each purchase. The risk-free rate is based upon the estimated life and is based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on the historical volatility of the Company’s stock. The weighted-average estimated per share fair value of shares under the 2014 ESPP in fiscal years 2024, 2023 and 2022, was $5.73, $4.87, $3.32, respectively.
|  | Employee Stock Purchase Plan |  |
|  | Year Ended |  |
|  | June 30, 2024 |  |  | June 30, 2023 |  |  | June 30, 2022 |  |
Expected term |  | 0.5 years |  |  | 0.5 years |  |  | 0.5 years |  |
Risk-free interest rate |  |  | 5.42 | % |  |  | 3.84 | % |  |  | 0.33 | % |
Volatility |  |  | 47 | % |  |  | 55 | % |  |  | 49 | % |
Dividend yield |  |  | — | % |  |  | — | % |  |  | — | % |
401(k) Plan The Company provides a tax-qualified employee savings and retirement plan, commonly known as a 401(k) plan (the “Plan”), which covers the Company’s eligible employees. Pursuant to the Plan, employees may elect to reduce their current compensation up to the IRS annual contribution limit of $23,000 for calendar year 2024. Employees aged 50 or over may elect to contribute an additional $7,500. The amount contributed to the Plan is on a pre-tax basis. The Company provides for discretionary matching contributions as determined by the Board for each calendar year. All matching contributions vest immediately. In addition, the Plan provides for discretionary contributions as determined by the Board each year. The program effective during fiscal 2024 was established to match $0.50 for every dollar contributed by the employee up to the first 6.0% of pay. The Company’s matching contributions to the Plan totaled $5.2 million, $5.2 million and $4.6 million, for fiscal years ended June 30, 2024, 2023 and 2022, respectively. No discretionary contributions were made in fiscal years ended June 30, 2024, 2023 and 2022.

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