Revenues

6 Months Ended

Dec. 31, 2020

Revenue From Contract With Customer [Abstract]

Revenues

3. Revenues

The Company accounts for revenues in accordance with ASU 2014-09, Revenue from Contracts from Customers (Topic 606), which the Company adopted on July 1, 2017.  The Company derives the majority of its revenues from sales of its networking equipment, with the remaining revenues generated from sales of services and subscriptions, which primarily includes maintenance contracts and software subscriptions delivered as software as a service (“SaaS”) and additional revenues from professional services, and training for its products. The Company sells its products and maintenance contracts direct to customers and to partners in two distribution channels, or tiers. The first tier consists of a limited number of independent distributors that stock its products and sell primarily to resellers.  The second tier of the distribution channel consists of non-stocking distributors and value-added resellers that sell directly to end-users.  Products and services may be sold separately or in bundled packages.  

Revenue Recognition         

Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Certain of the Company’s contracts have multiple performance obligations, as the promise to transfer individual goods or services is separately identifiable from other promises in the contracts and, therefore, is distinct.  For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on its relative standalone selling price. The stand-alone selling prices are determined based on the prices at which the Company separately sells these products. For items that are not sold separately, the Company estimates the stand-alone selling prices using other observable inputs.  

The Company’s performance obligations are satisfied at a point in time or over time as the customer receives and consumes the benefits provided. Substantially all of the Company’s product sales revenues are recognized at a point in time. Substantially all of the Company’s service, subscription, and SaaS revenues are recognized over time. For revenues recognized over time, the Company uses an input measure, days elapsed, to measure progress.  

On December 31, 2020, the Company had $309.1 million of remaining performance obligations, which are primarily comprised of deferred maintenance and SaaS revenues.  The Company expects to recognize approximately 40 percent of its deferred revenue as revenue in fiscal 2021, an additional 34 percent in fiscal 2022 and 26 percent of the balance thereafter.

Contract Balances. The timing of revenue recognition, billings and cash collections results in billed accounts receivable and deferred revenue in the condensed consolidated balance sheets. Services provided under renewable support arrangements of the Company are billed in accordance with agreed-upon contractual terms, which are either billed fully at the inception of contract or at periodic intervals (e.g., quarterly or annually).  The Company sometimes receives payments from its customers in advance of services being provided, resulting in deferred revenues.  These liabilities are reported on the condensed consolidated balance sheets on a contract-by-contract basis at the end of each reporting period.

Revenue recognized for the three months ended December 31, 2020 and 2019 that was included in the deferred revenue balance at the beginning of each period was $68.8 million and $67.2 million, respectively. Revenue recognized for the six months ended December 31, 2020 and 2019 that was included in the deferred revenue balance at the beginning of each period was $120.5 million and $90.9 million, respectively.

Contract Costs. The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less.  Management expects that commission fees paid to sales representatives as a result of obtaining service contracts and contract renewals are recoverable and therefore the Company’s condensed consolidated balance sheets included capitalized balances in the amount of $9.2 million and $8.1 million at December 31, 2020 and June 30, 2020, respectively. Capitalized commission fees are amortized on a straight-line basis over the average period of service contracts of approximately three years, and are included in “Sales and marketing” in the accompanying condensed consolidated statements of operations. Amortization recognized during the three months ended December 31, 2020 and 2019, was $1.2 million and $1.5 million, respectively. Amortization recognized during the six months ended December 31, 2020 and 2019, was $2.5 million and $3.0 million, respectively.  

Estimated Variable Consideration. There were no material changes in the current period to the estimated variable consideration for performance obligations which were satisfied or partially satisfied during previous periods. 

Revenues by Category

The following table sets forth the Company’s revenues disaggregated by sales channel and geographic region based on the customer’s ship-to locations (in thousands):

	Three Months Ended
	December 31, 2020						December 31, 2019
	Distributor		Direct		Total		Distributor		Direct		Total
Americas:
United States	$	46,506	$	58,744	$	105,250	$	60,111	$	61,622	$	121,733
Other		8,950		3,648		12,598		8,204		5,563		13,767
Total Americas		55,456		62,392		117,848		68,315		67,185		135,500
EMEA		69,602		34,220		103,822		64,717		44,257		108,974
APAC		2,793		17,665		20,458		6,007		16,991		22,998
Total net revenues	$	127,851	$	114,277	$	242,128	$	139,039	$	128,433	$	267,472

	Six Months Ended
	December 31, 2020						December 31, 2019
	Distributor		Direct		Total		Distributor		Direct		Total
Americas:
United States	$	107,176	$	116,091	$	223,267	$	130,089	$	123,967	$	254,056
Other		17,191		7,738		24,929		12,219		10,562		22,781
Total Americas		124,367		123,829		248,196		142,308		134,529		276,837
EMEA		117,131		67,796		184,927		123,846		73,891		197,737
APAC		7,844		36,963		44,807		15,120		33,284		48,404
Total net revenues	$	249,342	$	228,588	$	477,930	$	281,274	$	241,704	$	522,978

For the three months ended December 31, 2020 the Company reflected 11% of its revenues from the Netherlands and 11% of its revenues from Germany. For the six months ended December 31, 2020 the Company reflected 10% of its revenues from the Netherlands and 10% of its revenue from Germany. No other foreign country accounted for 10% or more of revenue for the three and six months ended December 31, 2020 or 2019.

Customer Concentrations

The Company performs ongoing credit evaluations of its customers and generally does not require collateral in exchange for credit.

The following table sets forth customers accounting for 10% or more of the Company’s net revenues for the periods indicated below:

	Three Months Ended		Six Months Ended
	December 31, 2020	December 31, 2019	December 31, 2020	December 31, 2019
Tech Data Corporation	21%	14%	24%	15%
Jenne Corporation	11%	18%	13%	16%
Westcon Group Inc.	19%	15%	16%	13%

The following table sets forth customers accounting for 10% or more of the Company’s accounts receivable balance:

	December 31, 2020	June 30, 2020
Tech Data Corporation	20%	23%
Jenne Corporation	16%	25%
Westcon Group Inc.	18%	*
* Less than 10% of accounts receivable.