Balance Sheet Accounts

9 Months Ended

Mar. 31, 2016

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Balance Sheet Accounts

4. Balance Sheet Accounts

Cash and Cash Equivalents

The following is a summary of cash and available-for-sale securities (in thousands):

	March 31, 2016		June 30, 2015
Cash	$	83,564	$	71,455
Cash equivalents	$	4,770	$	4,770
Total available-for-sale	$	4,770	$	4,770
Total cash, cash equivalents and available for sale securities	$	88,334	$	76,225

The Company considers highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Investments with original maturities of greater than three months, but less than one year at the balance sheet date are classified as short-term investments.

Inventory Valuation

The Company’s inventory balances as of March 31, 2016 and June 30, 2015 were $$52.8 million and $58.0 million, respectively. The Company values its inventory at lower of cost or market. 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by the age of inventory or when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand.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.

The following is a summary of our inventory by category (in thousands):

	March 31, 2016		June 30, 2015
Finished goods	$	50,027	$	55,301
Raw materials		2,728		2,713
Total Inventory	$	52,755	$	58,014

Property and Equipment, Net

Property and equipment consist of the following (in thousands):

	March 31, 2016			June 30, 2015
Computer equipment	$	33,983		$	32,753
Purchased software		5,941			5,425
Office equipment, furniture and fixtures		10,827			10,908
Leasehold improvements		19,110			24,293
Total property and equipment		69,861			73,379
Less: accumulated depreciation and amortization		(39,422	)		(33,517	)
Property and equipment, net	$	30,439		$	39,862

Intangibles

The following tables summarize the components of gross and net intangible asset balances (dollars in thousands):

	Weighted Average
	Remaining Amortization	GrossCarrying		Accumulated		Net Carrying
	Period	Amount		Amortization		Amount
March 31, 2016
Developed technology	0.40 years	$	48,000	$	39,611	$	8,389
Customer relationships	0.50 years		37,000		29,806		7,194
Maintenance contracts	2.50 years		17,000		8,217		8,783
Trademarks	0.50 years		2,500		2,014		486
License agreements	9.80 years		3,596		1,583		2,013
Other intangibles	3.92 years		1,426		866		560
Total intangibles, net		$	109,522	$	82,097	$	27,425

	Weighted Average
	Remaining Amortization	Gross Carrying		Accumulated		Net Carrying
	Period	Amount		Amortization		Amount
June 30, 2015
Developed technology	1.20 years	$	48,000	$	28,194	$	19,806
Customer relationships	1.30 years		37,000		20,556		16,444
Maintenance contracts	3.30 years		17,000		5,667		11,333
Trademarks	1.30 years		2,500		1,389		1,111
Order backlog	0.30 years		7,400		6,967		433
License agreements	10.20 years		10,924		8,620		2,304
Other intangibles	3.80 years		2,684		1,983		701
Total intangibles, net		$	125,508	$	73,376	$	52,132

The following table summarizes the amortization expense of intangibles for the periods presented (in thousands):

	Three Months Ended				Nine Months Ended
	March 31, 2016		March 31, 2015		March 31, 2016		March 31, 2015
Amortization in "Cost of revenue for products"	$	3,572	$	4,513	$	11,847	$	13,575
Amortization of intangibles		4,142		4,467		12,860		13,402
Total amortization	$	7,714	$	8,980	$	24,707	$	26,977

 The amortization expense that is recognized in “Cost of revenues for products” is comprised of amortization for developed technology, license agreements and other intangibles.

Other Accrued Liabilities

The following are the components of other accrued liabilities (in thousands): 

	March 31, 2016		June 30, 2015
Accrued general and administrative costs	$	4,287	$	1,204
Restructuring		2,199		5,854
Other accrued liabilities		23,696		25,565
Total other accrued liabilities	$	30,182	$	32,623

Deferred Revenue, Net

Deferred revenue, net represents amounts for (i) deferred services revenue (support arrangements, professional services and training), and (ii) deferred product revenue net of the related cost of revenue when the revenue recognition criteria have not been met.

The following table summarizes deferred revenue, net (in thousands): 

	March 31, 2016		June 30, 2015
Deferred services	$	85,069	$	87,441
Deferred product and other revenue		13,870		12,341
Total deferred revenue		98,939		99,782
Less: current portion		76,712		76,551
Non-current deferred revenue, net	$	22,227	$	23,231

The Company offers for sale to its customers, renewable support arrangements that range from one to five years. Deferred support revenue is included within deferred revenue, net within the services category above. The change in the Company’s deferred support revenue balance in relation to these arrangements was as follows (in thousands):

	Three Months Ended						Nine Months Ended
	March 31, 2016			March 31, 2015			March 31, 2016			March 31, 2015
Balance beginning of period	$	84,706		$	91,373		$	87,441		$	89,657
New support arrangements		27,683			27,198			84,502			91,254
Recognition of support revenue		(27,320	)		(29,834	)		(86,874	)		(92,174	)
Balance end of period		85,069			88,737			85,069			88,737
Less: current portion		62,842			65,596			62,842			65,596
Non-current deferred revenue	$	22,227		$	23,141		$	22,227		$	23,141

Deferred Distributors Revenue, Net of Cost of Sales to Distributors

The Company records revenue from its distributors on a sell-through basis, recording deferred revenue and deferred cost of sales associated with all sales transactions to its distributors in “Deferred distributors revenue, net of cost of sales to distributors” in the liability section of its condensed consolidated balance sheets. The amount shown as “Deferred distributors revenue, net of cost of sales to distributors” represents the deferred gross profit on sales to distributors based on contractual pricing.

The following table summarizes deferred distributors revenue, net of cost of sales to distributors (in thousands):

	March 31, 2016			June 30, 2015
Deferred distributors revenue	$	31,367		$	53,366
Deferred cost of sales to distributors		(7,434	)		(12,491	)
Deferred distributors revenue, net of cost of sales to distributors	$	23,933		$	40,875

Debt

The Company’s debt is comprised of the following (in thousands):

	March 31, 2016		June 30, 2015
Current portion of long-term debt:
Term Loan	$	16,250	$	11,375
Current portion of long-term debt	$	16,250	$	11,375
Long-term debt, less current portion:
Term Loan	$	32,500	$	45,500
Revolving Facility		10,000		10,000
Total long-term debt, less current portion		42,500		55,500
Total debt	$	58,750	$	66,875

During fiscal 2015, the Company amended its credit agreement which provides for a five-year revolving credit facility for up to $50.0 million (the “Revolving Facility”) and a $65.0 million five-year term loan (the “Term Loan”) and together with the Revolving Facility the (“Senior Secured Credit Facilities, as amended”). 

The Senior Secured Credit Facilities, as amended contains, among others, certain financial covenants that require the Company to maintain defined minimum financial ratios which may limit the Company’s availability to borrowings under the Revolving Facility. As of  March 31, 2016, the Company had $39.0 million of availability under the Revolving Facility and is in compliance with its covenants.

The Company had $1.0 million of outstanding letters of credit as of March 31, 2016      

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. In the past, we had experienced such errors in connection with products and product updates. 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, 2016 and 2015 (in thousands):

	Three Months Ended						Nine Months Ended
	March 31, 2016			March 31, 2015			March 31, 2016			March 31, 2015
Balance beginning of period	$	10,415		$	7,845		$	8,676		$	7,551
New warranties issued		1,638			1,751			7,158			5,699
Warranty expenditures		(1,773	)		(1,717	)		(5,554	)		(5,371	)
Balance end of period	$	10,280		$	7,879		$	10,280		$	7,879

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 claims made against certain parties. 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.

Advertising

Cooperative advertising expenses are recorded as marketing expenses to the extent that an advertising benefit separate from the revenue transaction can be identified and the cash paid does not exceed the fair value of that advertising benefit received. Cooperative advertising obligations with customers are accrued and the costs expensed at the time the related revenue is recognized. If the Company does not meet the criteria for recognizing such cooperative advertising obligations as marketing expense, the costs are recorded as a reduction of revenue. All other advertising costs are expensed as incurred.  Advertising expenses for three and nine months ended March 31, 2016 and 2015, 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 short-term investments. 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 revenue:

	Three Months Ended				Nine Months Ended
	March 31, 2016		March 31, 2015		March 31, 2016		March 31, 2015
Jenne		17%	*			13%	*
Tech Data Corporation		16%	*			16%		12%
Westcon Group Inc.		13%		16%		15%		13%
Scansource, Inc.	*			13%	*		*

* Less than 10% of net revenue

     The following customers account for more than 10% of our accounts receivable outstanding as of March 31, 2016, Westcon Group Inc. 17% and Tech Data Corporation 11%.