Revenues

6 Months Ended

Dec. 31, 2022

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). 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, maintenance contracts and SaaS 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, 2022, the Company had $445.6 million of remaining performance obligations, which are primarily comprised of deferred maintenance and SaaS revenues. The Company expects to recognize approximately 36% of its deferred revenue as revenue in the remainder of fiscal 2023, an additional 34% in fiscal 2024 and 30% 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, 2022 and 2021 that was included in the deferred revenue balance at the beginning of each period was $83.9 million and $81.9 million, respectively. Revenue recognized for the six months ended December 31, 2022 and 2021 that was included in the deferred revenue balance at the beginning of each period was $145.7 million and $132.5 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 and subscription contracts and contract renewals are recoverable and therefore the Company’s condensed consolidated balance sheets included capitalized balances in the amount of $17.5 million and $16.3 million at December 31, 2022 and June 30, 2022, respectively. Capitalized commissions are included within other assets in the condensed consolidated balance sheets. 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, 2022 and 2021, was $ 2.2 million and $1.8 million, respectively. Amortization recognized during the six months ended December 31, 2022 and 2021, was $4.3 million and $3.6 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 Company operates in three geographic regions: Americas, EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific). The following table sets forth the Company’s revenues disaggregated by sales channel and geographic region based on the billing addresses of its customers (in thousands):

	Three Months Ended
	December 31, 2022						December 31, 2021
	Distributor		Direct		Total		Distributor		Direct		Total
Americas:
United States	$	70,963	$	66,630	$	137,593	$	68,565	$	68,585	$	137,150
Other		10,807		4,614		15,421		3,865		4,955		8,820
Total Americas		81,770		71,244		153,014		72,430		73,540		145,970
EMEA		97,147		40,903		138,050		68,934		42,128		111,062
APAC		7,403		19,881		27,284		5,034		18,867		23,901
Total net revenues	$	186,320	$	132,028	$	318,348	$	146,398	$	134,535	$	280,933

	Six Months Ended
	December 31, 2022						December 31, 2021
	Distributor		Direct		Total		Distributor		Direct		Total
Americas:
United States	$	144,277	$	130,942	$	275,219	$	124,633	$	135,916	$	260,549
Other		26,832		8,712		35,544		11,664		8,322		19,986
Total Americas		171,109		139,654		310,763		136,297		144,238		280,535
EMEA		173,403		80,156		253,559		146,832		77,859		224,691
APAC		9,441		42,274		51,715		9,369		34,022		43,391
Total net revenues	$	353,953	$	262,084	$	616,037	$	292,498	$	256,119	$	548,617

For three months ended December 31, 2022 the Company generated 11% and 10% of its revenues from the Netherlands and Germany, respectively. For the six months ended December 31, 2022 the Company generated 10% each of its revenues from the Netherlands and Germany. For the six months ended December 31, 2021 the Company generated 10% of its revenues from the Netherlands. No other foreign country accounted for 10% or more of revenue for the three and six months ended December 31, 2022 and 2021.

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, 2022	December 31, 2021	December 31, 2022	December 31, 2021
Westcon Group, Inc.	19%	11%	17%	15%
TD Synnex Corporation	17%	21%	18%	22%
Jenne, Inc.	13%	18%	13%	16%
ScanSource, Inc.	11%	*	*	*
*    Less than 10% of revenue

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

	December 31, 2022	June 30, 2022
Jenne, Inc.	16%	28%
ScanSource, Inc.	10%	*
TD Synnex Corporation	10%	11%
*    Less than 10% of accounts receivable.