☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware
|
77-0443568
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
960 Stewart Drive, Sunnyvale, California
|
94085-3913
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer ☐
|
Accelerated filer ☒
|
Non-accelerated filer ☐ (Do not check if a smaller reporting company)
|
Smaller reporting company ☐
|
Page
|
||
PART I: Financial Information
|
||
Item 1
|
3
|
|
3
|
||
4
|
||
5
|
||
6
|
||
7
|
||
Item 2
|
19
|
|
Item 3
|
30
|
|
Item 4
|
30
|
|
PART II: Other Information
|
||
Item 1
|
31
|
|
Item 1A
|
31
|
|
Item 2
|
31
|
|
Item 3
|
31
|
|
Item 4
|
31
|
|
Item 5
|
31
|
|
Item 6
|
31
|
|
32
|
||
33
|
December 31,
2015
|
June 30,
2015
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
96,905
|
$
|
82,162
|
||||
Short-term investments
|
10,020
|
8,025
|
||||||
Accounts receivable, net of allowances of $638 and $631 as of December 31, 2015 and June 30, 2015, respectively
|
28,793
|
36,494
|
||||||
Inventories
|
14,387
|
15,053
|
||||||
Prepaid expenses and other current assets
|
13,198
|
14,315
|
||||||
Total current assets
|
163,303
|
156,049
|
||||||
Property and equipment, net
|
19,049
|
20,419
|
||||||
Goodwill
|
127,960
|
122,750
|
||||||
Intangible assets, net
|
19,573
|
22,217
|
||||||
Other assets
|
5,238
|
5,021
|
||||||
Total assets
|
$
|
335,123
|
$
|
326,456
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
13,346
|
$
|
16,452
|
||||
Accrued liabilities and other
|
17,553
|
19,374
|
||||||
Accrued employee compensation
|
17,041
|
15,311
|
||||||
Accrued taxes and surcharges
|
4,294
|
9,902
|
||||||
Deferred revenue
|
52,461
|
50,616
|
||||||
Total current liabilities
|
104,695
|
111,655
|
||||||
Long-term deferred revenue
|
20,865
|
20,659
|
||||||
Other long-term liabilities
|
4,600
|
4,014
|
||||||
Total liabilities
|
130,160
|
136,328
|
||||||
Commitments and contingencies (Note 13)
|
||||||||
Stockholders' equity:
|
||||||||
Preferred stock, par value $.001 per share, authorized 5,000 shares; no shares issued and outstanding
|
-
|
-
|
||||||
Common stock and additional paid-in capital, par value $.001 per share, authorized 500,000; issued and outstanding, 66,603 and 65,055 shares as of December 31, 2015 and June 30, 2015, respectively
|
371,892
|
361,691
|
||||||
Accumulated other comprehensive income (loss)
|
(21
|
)
|
4
|
|||||
Accumulated deficit
|
(166,908
|
)
|
(171,567
|
)
|
||||
Total stockholders’ equity
|
204,963
|
190,128
|
||||||
Total liabilities and stockholders’ equity
|
$
|
335,123
|
$
|
326,456
|
Three Months Ended
December 31,
|
Six Months Ended
December 31,
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
Revenue:
|
||||||||||||||||
Product
|
$
|
41,048
|
$
|
46,913
|
$
|
82,581
|
$
|
94,620
|
||||||||
Hosted and related services
|
30,484
|
25,503
|
59,886
|
50,115
|
||||||||||||
Support and services
|
18,899
|
18,191
|
37,989
|
36,024
|
||||||||||||
Total revenue
|
90,431
|
90,607
|
180,456
|
180,759
|
||||||||||||
Cost of revenue:
|
||||||||||||||||
Product
|
13,692
|
15,613
|
27,173
|
32,392
|
||||||||||||
Hosted and related services
|
14,119
|
15,423
|
27,946
|
30,751
|
||||||||||||
Support and services
|
4,735
|
4,301
|
9,440
|
8,582
|
||||||||||||
Total cost of revenue
|
32,546
|
35,337
|
64,559
|
71,725
|
||||||||||||
Gross profit
|
57,885
|
55,270
|
115,897
|
109,034
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
13,793
|
13,272
|
27,630
|
26,933
|
||||||||||||
Sales and marketing
|
30,272
|
29,301
|
61,115
|
58,317
|
||||||||||||
General and administrative
|
9,703
|
10,562
|
19,818
|
20,553
|
||||||||||||
Settlements and defense fees
|
-
|
8,422
|
-
|
8,422
|
||||||||||||
Acquisition-related costs
|
534
|
-
|
534
|
-
|
||||||||||||
Total operating expenses
|
54,302
|
61,557
|
109,097
|
114,225
|
||||||||||||
Income (loss) from operations
|
3,583
|
(6,287
|
)
|
6,800
|
(5,191
|
)
|
||||||||||
Other income (expense):
|
||||||||||||||||
Interest expense
|
(115
|
)
|
(107
|
)
|
(238
|
)
|
(260
|
)
|
||||||||
Interest income and other (expense), net
|
(560
|
)
|
(343
|
)
|
(1,137
|
)
|
(556
|
)
|
||||||||
Total other expense
|
(675
|
)
|
(450
|
)
|
(1,375
|
)
|
(816
|
)
|
||||||||
Income (loss) before provision for income taxes
|
2,908
|
(6,737
|
)
|
5,425
|
(6,007
|
)
|
||||||||||
Provision for income taxes
|
363
|
125
|
766
|
503
|
||||||||||||
Net income (loss)
|
$
|
2,545
|
$
|
(6,862
|
)
|
$
|
4,659
|
$
|
(6,510
|
)
|
||||||
Net income (loss) per share - basic
|
$
|
0.04
|
$
|
(0.11
|
)
|
$
|
0.07
|
$
|
(0.10
|
)
|
||||||
Net income (loss) per share - diluted
|
$
|
0.04
|
$
|
(0.11
|
)
|
$
|
0.07
|
$
|
(0.10
|
)
|
||||||
Shares used in computing net income (loss) per share - basic
|
66,184
|
63,728
|
65,725
|
63,348
|
||||||||||||
Shares used in computing net income (loss) per share - diluted
|
68,074
|
63,728
|
67,471
|
63,348
|
Three Months Ended
December 31,
|
Six Months Ended
December 31,
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
Net income (loss)
|
$
|
2,545
|
$
|
(6,862
|
)
|
$
|
4,659
|
$
|
(6,510
|
)
|
||||||
Other comprehensive loss, net of tax:
|
||||||||||||||||
Unrealized loss on short-term investments
|
(20
|
)
|
(1
|
)
|
(25
|
)
|
(8
|
)
|
||||||||
Other comprehensive loss
|
(20
|
)
|
(1
|
)
|
(25
|
)
|
(8
|
)
|
||||||||
Comprehensive income (loss)
|
$
|
2,525
|
$
|
(6,863
|
)
|
$
|
4,634
|
$
|
(6,518
|
)
|
Six Months Ended
December 31,
|
||||||||
2015
|
2014
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net income (loss)
|
$
|
4,659
|
$
|
(6,510
|
)
|
|||
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
9,769
|
9,663
|
||||||
Stock-based compensation expense
|
4,932
|
4,585
|
||||||
Amortization of premium on investments
|
70
|
49
|
||||||
Loss on disposal of property and equipment
|
-
|
12
|
||||||
Provision for doubtful accounts receivable
|
102
|
25
|
||||||
Impairment of indemnification asset
|
-
|
3,584
|
||||||
Fair value of escrow settlement modification
|
-
|
611
|
||||||
Changes in assets and liabilities, net of the effect of acquisitions:
|
||||||||
Accounts receivable
|
7,815
|
2,306
|
||||||
Inventories
|
1,010
|
7,309
|
||||||
Indemnification asset
|
-
|
(53
|
)
|
|||||
Prepaid expenses and other current assets
|
1,548
|
(3,627
|
)
|
|||||
Other assets
|
(76
|
)
|
140
|
|||||
Accounts payable
|
(2,175
|
)
|
(2,952
|
)
|
||||
Accrued liabilities and other
|
(1,844
|
)
|
6,426
|
|||||
Accrued employee compensation
|
1,217
|
(1,086
|
)
|
|||||
Accrued taxes and surcharges
|
(5,608
|
)
|
(2,071
|
)
|
||||
Deferred revenue
|
1,791
|
4,474
|
||||||
Net cash provided by operating activities
|
23,210
|
22,885
|
||||||
CASH FLOWS FROM INVESTING ACTIVITES:
|
||||||||
Purchases of property and equipment
|
(5,736
|
)
|
(5,503
|
)
|
||||
Purchases of investments
|
(7,776
|
)
|
(7,896
|
)
|
||||
Proceeds from sales/maturities of investments
|
5,686
|
2,257
|
||||||
Cost of acquisition of businesses, net of cash acquired
|
(5,886
|
)
|
-
|
|||||
Purchases of patents, technology and internally developed software
|
-
|
(1,077
|
)
|
|||||
Net cash used in investing activities
|
(13,712
|
)
|
(12,219
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds from issuance of common stock
|
6,352
|
5,191
|
||||||
Taxes paid on vested and released stock awards
|
(1,083
|
)
|
(953
|
)
|
||||
Debt issuance costs
|
-
|
(622
|
)
|
|||||
Payments made under capital leases
|
(24
|
)
|
(327
|
)
|
||||
Net cash provided by financing activities
|
5,245
|
3,289
|
||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
14,743
|
13,955
|
||||||
CASH AND CASH EQUIVALENTS - Beginning of period
|
82,162
|
53,472
|
||||||
CASH AND CASH EQUIVALENTS - End of period
|
$
|
96,905
|
$
|
67,427
|
||||
SUPPLEMENTAL CASH FLOW DISCLOSURE:
|
||||||||
Cash paid for interest
|
$
|
14
|
$
|
201
|
||||
Cash paid for taxes
|
$
|
804
|
$
|
496
|
||||
NONCASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||
Unpaid portion of property and equipment purchases included in period-end accruals
|
$
|
211
|
$
|
1,718
|
Estimated useful lives
(in years) |
||||||||
Cash acquired
|
$
|
224
|
||||||
Other current assets
|
386
|
|||||||
Intangible assets:
|
||||||||
Customer relationships
|
1,300
|
5
|
||||||
Goodwill
|
5,210
|
|||||||
Other long-term assets
|
164
|
|||||||
Other liabilities assumed
|
(1,174
|
)
|
||||||
$
|
6,110
|
December 31,
|
June 30,
|
|||||||
2015
|
2015
|
|||||||
(in thousands)
|
||||||||
Inventories:
|
||||||||
Raw materials
|
$
|
63
|
$
|
92
|
||||
Distributor inventory
|
1,062
|
965
|
||||||
Finished goods
|
13,262
|
13,996
|
||||||
Total inventories
|
$
|
14,387
|
$
|
15,053
|
||||
Property and equipment:
|
||||||||
Computer equipment and tooling
|
$
|
45,439
|
$
|
41,532
|
||||
Software
|
5,467
|
5,211
|
||||||
Furniture and fixtures
|
3,513
|
3,421
|
||||||
Leasehold improvements and others
|
8,067
|
8,149
|
||||||
Total property and equipment
|
62,486
|
58,313
|
||||||
Less accumulated depreciation and amortization
|
(43,437
|
)
|
(37,894
|
)
|
||||
Property and equipment, net
|
$
|
19,049
|
$
|
20,419
|
||||
Deferred revenue:
|
||||||||
Product
|
$
|
3,503
|
$
|
2,912
|
||||
Support and services
|
58,620
|
57,967
|
||||||
Hosted and related services
|
11,203
|
10,396
|
||||||
Total deferred revenue
|
$
|
73,326
|
$
|
71,275
|
December 31, 2015
|
June 30, 2015
|
|||||||||||||||||||||||
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net Carrying
Amount
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net Carrying
Amount
|
|||||||||||||||||||
Patents
|
$
|
4,446
|
$
|
(3,793
|
)
|
$
|
653
|
$
|
4,446
|
$
|
(3,640
|
)
|
$
|
806
|
||||||||||
Technology
|
28,034
|
(20,994
|
)
|
7,040
|
26,644
|
(18,874
|
)
|
7,770
|
||||||||||||||||
Customer relationships
|
24,600
|
(12,720
|
)
|
11,880
|
23,300
|
(11,049
|
)
|
12,251
|
||||||||||||||||
Intangible assets in process and other
|
-
|
-
|
-
|
1,390
|
-
|
1,390
|
||||||||||||||||||
Intangible assets
|
$
|
57,080
|
$
|
(37,507
|
)
|
$
|
19,573
|
$
|
55,780
|
$
|
(33,563
|
)
|
$
|
22,217
|
Years Ending June 30,
|
||||
2016 (remaining 6 months)
|
$
|
4,080
|
||
2017
|
6,731
|
|||
2018
|
4,736
|
|||
2019
|
3,248
|
|||
2020
|
523
|
|||
Thereafter
|
255
|
|||
Total
|
$
|
19,573
|
Total
|
||||
As of June 30, 2015
|
$
|
122,750
|
||
Addition (See Note 3)
|
5,210
|
|||
As of December 31, 2015
|
$
|
127,960
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair Value
|
|||||||||||||
As of December 31, 2015
|
||||||||||||||||
Corporate notes and commercial paper
|
$
|
8,942
|
$
|
-
|
$
|
(21
|
)
|
$
|
8,921
|
|||||||
U.S. Government agency securities
|
1,099
|
-
|
-
|
1,099
|
||||||||||||
Total short-term investments
|
$
|
10,041
|
$
|
-
|
$
|
(21
|
)
|
$
|
10,020
|
|||||||
As of June 30, 2015
|
||||||||||||||||
Corporate notes and commercial paper
|
$
|
8,021
|
$
|
4
|
$
|
-
|
$
|
8,025
|
||||||||
Total short-term investments
|
$
|
8,021
|
$
|
4
|
$
|
-
|
$
|
8,025
|
Amortized
Cost
|
Fair Value
|
|||||||
As of December 31, 2015
|
||||||||
Less than 1 year
|
$
|
6,774
|
$
|
6,763
|
||||
Due in 1 to 3 years
|
3,267
|
3,257
|
||||||
Total
|
$
|
10,041
|
$
|
10,020
|
Amortized
Cost
|
Fair Value
|
|||||||
As of June 30, 2015
|
||||||||
Less than 1 year
|
$
|
6,696
|
$
|
6,702
|
||||
Due in 1 to 3 years
|
1,325
|
1,323
|
||||||
$
|
8,021
|
$
|
8,025
|
•
|
Level 1 — Quoted prices in active markets for identical assets or liabilities.
|
• | Level 2 — Observable inputs other than quoted prices included within Level 1, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs other than quoted prices that are observable or are derived principally from, or corroborated by, observable market data by correlation or other means. |
• | Level 3 — Unobservable inputs that are supported by little or no market activity, are significant to the fair value of the assets or liabilities, and reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. |
December 31, 2015
|
||||||||||||||||
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Cash and cash equivalents:
|
||||||||||||||||
Money market funds
|
$
|
1,999
|
$
|
1,999
|
$
|
-
|
$
|
-
|
||||||||
Short-term investments:
|
||||||||||||||||
Corporate notes and commercial paper
|
10,020
|
-
|
10,020
|
-
|
||||||||||||
Total assets measured and recorded at fair value
|
$
|
12,019
|
$
|
1,999
|
$
|
10,020
|
$
|
-
|
June 30, 2015
|
||||||||||||||||
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Cash and cash equivalents:
|
||||||||||||||||
Money market funds
|
$
|
4,025
|
$
|
4,025
|
$
|
-
|
$
|
-
|
||||||||
Short-term investments:
|
||||||||||||||||
Corporate notes and commercial paper
|
8,025
|
-
|
8,025
|
-
|
||||||||||||
Total assets measured and recorded at fair value
|
$
|
12,050
|
$
|
4,025
|
$
|
8,025
|
$
|
-
|
Reserved under stock option plans
|
25,036
|
|||
Reserved under employee stock purchase plan
|
369
|
|||
Total
|
25,405
|
Three Months Ended
December 31,
|
Six Months Ended
December 31,
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
Cost of product revenue
|
$
|
12
|
$
|
13
|
$
|
41
|
$
|
49
|
||||||||
Cost of hosted and related services revenue
|
283
|
293
|
667
|
636
|
||||||||||||
Cost of support and services revenue
|
135
|
118
|
347
|
298
|
||||||||||||
Research and development
|
433
|
461
|
920
|
1,119
|
||||||||||||
Sales and marketing
|
569
|
585
|
1,431
|
1,296
|
||||||||||||
General and administrative
|
728
|
576
|
1,526
|
1,187
|
||||||||||||
$
|
2,160
|
$
|
2,046
|
$
|
4,932
|
$
|
4,585
|
Three Months Ended
December 31,
|
Six Months Ended
December 31,
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
Expected life from grant date of option (in years)
|
5.09
|
5.05
|
5.09 - 5.13
|
5.05 - 5.09
|
||||||||||||
Expected life from grant date of ESPP (in years)
|
0.50
|
0.50
|
0.50
|
0.50
|
||||||||||||
Risk free interest rate for options
|
1.59%
|
|
1.60%
|
|
1.55% - 1.59%
|
|
1.60% - 1.70%
|
|
||||||||
Risk free interest rate for ESPP
|
0.41%
|
|
0.09%
|
|
0.14% - 0.41%
|
|
0.06% - 0.09%
|
|
||||||||
Expected volatility for options
|
47%
|
|
50%
|
|
47% - 48%
|
|
50%
|
|
||||||||
Expected volatility for ESPP
|
29%
|
|
43%
|
|
29% - 35%
|
|
43%
|
|
||||||||
Expected dividend yield
|
0%
|
|
0%
|
|
0%
|
|
0%
|
|
Options Outstanding
|
||||||||||||||||
Shares
Subject to
Options
Outstanding
|
Weighted-
Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Term
(in years) |
Aggregate
Intrinsic
Value
|
|||||||||||||
Balance at July 1, 2015
|
6,263
|
$
|
5.72
|
|||||||||||||
Options granted (weighted average fair value $3.25 per share)
|
1,537
|
7.47
|
||||||||||||||
Options exercised
|
(857
|
)
|
5.01
|
|||||||||||||
Options cancelled/forfeited
|
(210
|
)
|
6.31
|
|||||||||||||
Balance at December 31, 2015
|
6,733
|
$
|
6.19
|
6.89
|
$
|
18,459
|
||||||||||
Vested and expected to vest at December 31, 2015
|
5,620
|
$
|
6.05
|
6.45
|
$
|
16,259
|
||||||||||
Options exercisable at December 31, 2015
|
3,597
|
$
|
5.82
|
5.18
|
$
|
11,375
|
Six Months Ended
December 31, |
||||||||
2015
|
2014
|
|||||||
Beginning outstanding
|
1,452
|
1,394
|
||||||
Awarded
|
970
|
762
|
||||||
Released
|
(479
|
)
|
(486
|
)
|
||||
Forfeited
|
(111
|
)
|
(101
|
)
|
||||
Ending outstanding
|
1,832
|
1,569
|
Number of Shares
(thousands)
|
Weighted Average
Remaining
Contractual Lives
|
Aggregate Intrinsic
Value
(thousands) |
||||||||||
Shares outstanding
|
1,832
|
1.74
|
$
|
16,213
|
||||||||
Shares expected to vest
|
1,066
|
1.40
|
$
|
9,436
|
Years Ending June 30,
|
Operating
Leases
|
Capital
Leases
|
||||||
2016 (remaining 6 months)
|
$
|
3,320
|
24
|
|||||
2017
|
6,423
|
12
|
||||||
2018
|
5,808
|
-
|
||||||
2019
|
4,479
|
-
|
||||||
2020
|
3,035
|
-
|
||||||
Therafter
|
2,682
|
-
|
||||||
Total minimum lease payments
|
$
|
25,747
|
36
|
|||||
Less: amount representing interest
|
-
|
|||||||
Present value of total minimum lease payments
|
36
|
|||||||
Less: current portion liability
|
(34
|
)
|
||||||
Capital lease obligation, net of current portion
|
$
|
2
|
Three Months Ended
December 31,
|
Six Months Ended
December 31,
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
United States of America
|
$
|
82,711
|
$
|
82,912
|
$
|
165,382
|
$
|
166,100
|
||||||||
International
|
7,720
|
7,695
|
15,074
|
14,659
|
||||||||||||
Total
|
$
|
90,431
|
$
|
90,607
|
$
|
180,456
|
$
|
180,759
|
December 31,
2015 |
June 30,
2015 |
|||||||
United States of America
|
$
|
18,072
|
$
|
19,505
|
||||
International
|
977
|
914
|
||||||
Total
|
$
|
19,049
|
$
|
20,419
|
December 31, 2015
|
||||||||
Local Currency
Amount
|
Notional Contract
Amount (USD)
|
|||||||
Australian dollar
|
$
|
1,860
|
$
|
1,340
|
||||
British pound
|
£
|
1,540
|
2,249
|
|||||
Canadian dollar
|
$
|
1,110
|
793
|
|||||
Euro
|
€
|
1,330
|
1,437
|
|||||
Total
|
$
|
5,819
|
June 30, 2015
|
||||||||
Local Currency
Amount
|
Notional Contract
Amount (USD)
|
|||||||
Australian dollar
|
$
|
2,420
|
$
|
1,840
|
||||
British pound
|
£
|
910
|
1,429
|
|||||
Canadian dollar
|
$
|
750
|
596
|
|||||
Euro
|
€
|
1,550
|
1,708
|
|||||
Total
|
$
|
5,573
|
Three Months Ended
December 31,
|
Six Months Ended
December 31,
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
Revenue:
|
||||||||||||||||
Product
|
$
|
41,048
|
$
|
46,913
|
$
|
82,581
|
$
|
94,620
|
||||||||
Hosted and related services
|
30,484
|
25,503
|
59,886
|
50,115
|
||||||||||||
Support and services
|
18,899
|
18,191
|
37,989
|
36,024
|
||||||||||||
Total revenue
|
90,431
|
90,607
|
180,456
|
180,759
|
||||||||||||
Cost of revenue:
|
||||||||||||||||
Product
|
13,692
|
15,613
|
27,173
|
32,392
|
||||||||||||
Hosted and related services
|
14,119
|
15,423
|
27,946
|
30,751
|
||||||||||||
Support and services
|
4,735
|
4,301
|
9,440
|
8,582
|
||||||||||||
Total cost of revenue
|
32,546
|
35,337
|
64,559
|
71,725
|
||||||||||||
Gross profit
|
57,885
|
55,270
|
115,897
|
109,034
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
13,793
|
13,272
|
27,630
|
26,933
|
||||||||||||
Sales and marketing
|
30,272
|
29,301
|
61,115
|
58,317
|
||||||||||||
General and administrative
|
9,703
|
10,562
|
19,818
|
20,553
|
||||||||||||
Settlements and defense fees
|
-
|
8,422
|
-
|
8,422
|
||||||||||||
Acquisition-related costs
|
534
|
-
|
534
|
-
|
||||||||||||
Total operating expenses
|
54,302
|
61,557
|
109,097
|
114,225
|
||||||||||||
Income (loss) from operations
|
3,583
|
(6,287
|
)
|
6,800
|
(5,191
|
)
|
||||||||||
Other income (expense):
|
||||||||||||||||
Interest expense
|
(115
|
)
|
(107
|
)
|
(238
|
)
|
(260
|
)
|
||||||||
Interest income and other (expense), net
|
(560
|
)
|
(343
|
)
|
(1,137
|
)
|
(556
|
)
|
||||||||
Total other expense
|
(675
|
)
|
(450
|
)
|
(1,375
|
)
|
(816
|
)
|
||||||||
Income (loss) before provision for income taxes
|
2,908
|
(6,737
|
)
|
5,425
|
(6,007
|
)
|
||||||||||
Provision for income taxes
|
363
|
125
|
766
|
503
|
||||||||||||
Net income (loss)
|
$
|
2,545
|
$
|
(6,862
|
)
|
$
|
4,659
|
$
|
(6,510
|
)
|
||||||
Net income (loss) per share - basic
|
$
|
0.04
|
$
|
(0.11
|
)
|
$
|
0.07
|
$
|
(0.10
|
)
|
||||||
Net income (loss) per share - diluted
|
$
|
0.04
|
$
|
(0.11
|
)
|
$
|
0.07
|
$
|
(0.10
|
)
|
||||||
Shares used in computing net income (loss) per share - basic
|
66,184
|
63,728
|
65,725
|
63,348
|
||||||||||||
Shares used in computing net income (loss) per share - diluted
|
68,074
|
63,728
|
67,471
|
63,348
|
Three Months Ended
December 31,
|
Six Months Ended
December 31,
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
Revenue:
|
||||||||||||||||
Product
|
45
|
%
|
52
|
%
|
46
|
%
|
52
|
%
|
||||||||
Hosted and related services
|
34
|
%
|
28
|
%
|
33
|
%
|
28
|
%
|
||||||||
Support and services
|
21
|
%
|
20
|
%
|
21
|
%
|
20
|
%
|
||||||||
Total revenue
|
100
|
%
|
100
|
%
|
100
|
%
|
100
|
%
|
||||||||
Cost of revenue:
|
||||||||||||||||
Product
|
15
|
%
|
17
|
%
|
15
|
%
|
18
|
%
|
||||||||
Hosted and related services
|
16
|
%
|
17
|
%
|
16
|
%
|
17
|
%
|
||||||||
Support and services
|
5
|
%
|
5
|
%
|
5
|
%
|
5
|
%
|
||||||||
Total cost of revenue
|
36
|
%
|
39
|
%
|
36
|
%
|
40
|
%
|
||||||||
Gross profit
|
64
|
%
|
61
|
%
|
64
|
%
|
60
|
%
|
||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
15
|
%
|
15
|
%
|
15
|
%
|
15
|
%
|
||||||||
Sales and marketing
|
33
|
%
|
32
|
%
|
34
|
%
|
32
|
%
|
||||||||
General and administrative
|
11
|
%
|
12
|
%
|
11
|
%
|
11
|
%
|
||||||||
Settlements and defense fees
|
-
|
9
|
%
|
-
|
5
|
%
|
||||||||||
Acquisition-related costs
|
1
|
%
|
-
|
-
|
-
|
|||||||||||
Total operating expenses
|
60
|
%
|
68
|
%
|
60
|
%
|
63
|
%
|
||||||||
Income (loss) from operations
|
4
|
%
|
(7
|
%)
|
4
|
%
|
(3
|
%)
|
||||||||
Other income (expense):
|
||||||||||||||||
Interest expense
|
-
|
-
|
-
|
-
|
||||||||||||
Interest income and other (expense), net
|
(1
|
%)
|
-
|
(1
|
%)
|
(1
|
%)
|
|||||||||
Total other expense
|
(1
|
%)
|
-
|
(1
|
%)
|
(1
|
%)
|
|||||||||
Income (loss) before provision for income taxes
|
3
|
%
|
(7
|
%)
|
3
|
%
|
(4
|
%)
|
||||||||
Provision for income taxes
|
-
|
-
|
-
|
-
|
||||||||||||
Net income (loss)
|
3
|
%
|
(7
|
%)
|
3
|
%
|
(4
|
%)
|
Three Months Ended
December 31,
|
Six Months Ended
December 31,
|
|||||||||||||||||||||||||||||||
2015
|
2014
|
Change $
|
Change %
|
2015
|
2014
|
Change $
|
Change %
|
|||||||||||||||||||||||||
(in thousands, except percentages)
|
||||||||||||||||||||||||||||||||
Product revenue
|
$
|
41,048
|
$
|
46,913
|
$
|
(5,865
|
)
|
(13
|
%)
|
$
|
82,581
|
$
|
94,620
|
$
|
(12,039
|
)
|
(13
|
%)
|
||||||||||||||
Hosted and related services revenue
|
30,484
|
25,503
|
4,981
|
20
|
%
|
59,886
|
50,115
|
9,771
|
19
|
%
|
||||||||||||||||||||||
Support and services revenue
|
18,899
|
18,191
|
708
|
4
|
%
|
37,989
|
36,024
|
1,965
|
5
|
%
|
||||||||||||||||||||||
Total revenue
|
$
|
90,431
|
$
|
90,607
|
$
|
(176
|
)
|
-
|
$
|
180,456
|
$
|
180,759
|
$
|
(303
|
)
|
-
|
Three Months Ended
December 31,
|
Six Months Ended
December 31,
|
|||||||||||||||||||||||||||||||
2015
|
2014
|
Change $
|
Change %
|
2015
|
2014
|
Change $
|
Change %
|
|||||||||||||||||||||||||
(in thousands, except percentages)
|
||||||||||||||||||||||||||||||||
Product cost of revenue
|
$
|
13,692
|
$
|
15,613
|
$
|
(1,921
|
)
|
(12
|
%)
|
$
|
27,173
|
$
|
32,392
|
$
|
(5,219
|
)
|
(16
|
%)
|
||||||||||||||
Hosted and related services cost of revenue
|
14,119
|
15,423
|
(1,304
|
)
|
(8
|
%)
|
27,946
|
30,751
|
(2,805
|
)
|
(9
|
%)
|
||||||||||||||||||||
Support and services cost of revenue
|
4,735
|
4,301
|
434
|
10
|
%
|
9,440
|
8,582
|
858
|
10
|
%
|
||||||||||||||||||||||
Total cost of revenue
|
$
|
32,546
|
$
|
35,337
|
$
|
(2,791
|
)
|
(8
|
%)
|
$
|
64,559
|
$
|
71,725
|
$
|
(7,166
|
)
|
(10
|
%)
|
||||||||||||||
Product gross profit
|
$
|
27,356
|
$
|
31,300
|
$
|
(3,944
|
)
|
(13
|
%)
|
$
|
55,408
|
$
|
62,228
|
$
|
(6,820
|
)
|
(11
|
%)
|
||||||||||||||
Hosted and related services gross profit
|
16,365
|
10,080
|
6,285
|
62
|
%
|
31,940
|
19,364
|
12,576
|
65
|
%
|
||||||||||||||||||||||
Support and services gross profit
|
14,164
|
13,890
|
274
|
2
|
%
|
28,549
|
27,442
|
1,107
|
4
|
%
|
||||||||||||||||||||||
Total gross profit
|
$
|
57,885
|
$
|
55,270
|
$
|
2,615
|
5
|
%
|
$
|
115,897
|
$
|
109,034
|
$
|
6,863
|
6
|
%
|
Three Months Ended
December 31,
|
Six Months Ended
December 31,
|
|||||||||||||||||||||||
2015
|
2014
|
Net
Change
|
2015
|
2014
|
Net
Change
|
|||||||||||||||||||
Product gross margin
|
67
|
%
|
67
|
%
|
-
|
67
|
%
|
66
|
%
|
1
|
%
|
|||||||||||||
Hosted and related services gross margin
|
54
|
%
|
40
|
%
|
14
|
%
|
53
|
%
|
39
|
%
|
14
|
%
|
||||||||||||
Support and services gross margin
|
75
|
%
|
76
|
%
|
(1
|
%)
|
75
|
%
|
76
|
%
|
(1
|
%)
|
||||||||||||
Total gross margin
|
64
|
%
|
61
|
%
|
3
|
%
|
64
|
%
|
60
|
%
|
4
|
%
|
Three Months Ended
December 31,
|
Six Months Ended
December 31,
|
|||||||||||||||||||||||||||||||
2015
|
2014
|
Change $
|
Change %
|
2015
|
2014
|
Change $
|
Change %
|
|||||||||||||||||||||||||
(in thousands, except percentages)
|
||||||||||||||||||||||||||||||||
Research and development
|
$
|
13,793
|
$
|
13,272
|
$
|
521
|
4
|
%
|
$
|
27,630
|
$
|
26,933
|
$
|
697
|
3
|
%
|
||||||||||||||||
Sales and marketing
|
30,272
|
29,301
|
971
|
3
|
%
|
61,115
|
58,317
|
2,798
|
5
|
%
|
||||||||||||||||||||||
General and administration
|
9,703
|
10,562
|
(859
|
)
|
(8
|
%)
|
19,818
|
20,553
|
(735
|
)
|
(4
|
%)
|
||||||||||||||||||||
Settlements and defense fees
|
-
|
8,422
|
(8,422
|
)
|
(100
|
%)
|
-
|
8,422
|
(8,422
|
)
|
(100
|
%)
|
||||||||||||||||||||
Acquisition-related costs
|
534
|
-
|
534
|
N/A
|
|
534
|
-
|
534
|
N/A
|
|
Three Months Ended
December 31,
|
Six Months Ended
December 31,
|
|||||||||||||||||||||||||||||||
2015
|
2014
|
Change $
|
Change %
|
2015
|
2014
|
Change $
|
Change %
|
|||||||||||||||||||||||||
(in thousands, except percentages)
|
||||||||||||||||||||||||||||||||
Interest expense
|
$
|
(115
|
)
|
$
|
(107
|
)
|
$
|
8
|
7
|
%
|
$
|
(238
|
)
|
$
|
(260
|
)
|
$
|
(22
|
)
|
(8
|
%)
|
|||||||||||
Interest income and other (expense), net
|
(560
|
)
|
(343
|
)
|
217
|
63
|
%
|
(1,137
|
)
|
(556
|
)
|
581
|
104
|
%
|
Three Months Ended
December 31,
|
Six Months Ended
December 31,
|
|||||||||||||||||||||||||||||||
2015
|
2014
|
Change $
|
Change %
|
2015
|
2014
|
Change $
|
Change %
|
|||||||||||||||||||||||||
(in thousands, except percentages)
|
||||||||||||||||||||||||||||||||
Provision for income tax
|
$
|
363
|
$
|
125
|
$
|
238
|
190
|
%
|
$
|
766
|
$
|
503
|
$
|
263
|
52
|
%
|
December 31,
2015 |
June 30,
2015 |
Increase/
(Decrease) |
||||||||||
Cash and cash equivalents
|
$
|
96,905
|
$
|
82,162
|
$
|
14,743
|
||||||
Short-term investments
|
10,020
|
8,025
|
1,995
|
|||||||||
Total
|
$
|
106,925
|
$
|
90,187
|
$
|
16,738
|
Six Months Ended
December 31,
|
||||||||
2015
|
2014
|
|||||||
Cash provided by operating activities
|
$
|
23,210
|
$
|
22,885
|
||||
Cash used in investing activities
|
(13,712
|
)
|
(12,219
|
)
|
||||
Cash provided by financing activities
|
5,245
|
3,289
|
||||||
Net increase in cash and cash equivalents
|
$
|
14,743
|
$
|
13,955
|
Payments Due by Period
|
||||||||||||||||||||
Total
|
Less Than
1 Year
|
1-3 Years
|
3-5 Years
|
Thereafter
|
||||||||||||||||
(In thousands)
|
||||||||||||||||||||
Operating lease obligations
|
$
|
25,747
|
$
|
6,612
|
$
|
11,232
|
$
|
6,963
|
$
|
940
|
||||||||||
Capital lease obligations
|
36
|
24
|
12
|
-
|
-
|
|||||||||||||||
Line of credit
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Non-cancellable purchase commitments (inventory and software licenses)
|
14,408
|
14,408
|
-
|
-
|
-
|
|||||||||||||||
Outstanding letters of credit
|
635
|
635
|
-
|
-
|
-
|
|||||||||||||||
Total
|
$
|
40,826
|
$
|
21,679
|
$
|
11,244
|
$
|
6,963
|
$
|
940
|
ShoreTel, Inc.
|
||
By:
|
/s/ MICHAEL E. HEALY
|
|
Michael E. Healy
|
||
Chief Financial Officer
|
||
(Principal Financial Officer)
|
Exhibit
Number
|
Exhibit Title
|
2.1
|
Membership Interest Purchase Agreement by and among ShoreTel, Inc., Corvisa Services LLC and Novation Companies, Inc., dated as of December 21, 2015 (incorporated by reference to Exhibit 2.1 of the Company’s Form 8-K filed on January 8, 2016)
|
10.1 +
|
2015 Equity Incentive Plan and forms of restricted stock unit award agreement and stock option award agreement (incorporated by reference to Exhibit 4.04 of the Company’s Registration Statement on Form S-8 filed on December 29, 2015)
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
|
|
Section 1350 Certification of Chief Executive Officer.
|
|
Section 1350 Certification of Chief Financial Officer.
|
|
101.INS
|
XBRL Instance Document
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase
|
+
|
Management Compensatory Plan or Arrangement
|
(1)
|
This certification accompanying this report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of ShoreTel, Inc.;
|
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: February 9, 2016
|
|
/s/ Don H. Joos
|
|
Don H. Joos
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of ShoreTel, Inc.;
|
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: February 9, 2016
|
|
/s/ Michael E. Healy
|
|
Michael E. Healy
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
Date: February 9, 2016
|
||
By:
|
/s/ Don H. Joos
|
|
Name:
|
Don H. Joos
|
|
Title:
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
Date: February 9, 2016
|
||
By:
|
/s/ Michael E. Healy
|
|
Name:
|
Michael E. Healy
|
|
Title:
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Jan. 22, 2016 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | ShoreTel Inc | |
Entity Central Index Key | 0001388133 | |
Current Fiscal Year End Date | --06-30 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 66,687,899 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q2 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Dec. 31, 2015 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) shares in Thousands, $ in Thousands |
Dec. 31, 2015 |
Jun. 30, 2015 |
---|---|---|
Current assets: | ||
Accounts receivable, allowances | $ 638 | $ 631 |
Stockholders' equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized (in shares) | 5,000 | 5,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 500,000 | 500,000 |
Common stock, issued (in shares) | 66,603 | 65,055 |
Common stock, outstanding (in shares) | 66,603 | 65,055 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Revenue: | ||||
Product | $ 41,048 | $ 46,913 | $ 82,581 | $ 94,620 |
Hosted and related services | 30,484 | 25,503 | 59,886 | 50,115 |
Support and services | 18,899 | 18,191 | 37,989 | 36,024 |
Total revenue | 90,431 | 90,607 | 180,456 | 180,759 |
Cost of revenue: | ||||
Product | 13,692 | 15,613 | 27,173 | 32,392 |
Hosted and related services | 14,119 | 15,423 | 27,946 | 30,751 |
Support and services | 4,735 | 4,301 | 9,440 | 8,582 |
Total cost of revenue | 32,546 | 35,337 | 64,559 | 71,725 |
Gross profit | 57,885 | 55,270 | 115,897 | 109,034 |
Operating expenses: | ||||
Research and development | 13,793 | 13,272 | 27,630 | 26,933 |
Sales and marketing | 30,272 | 29,301 | 61,115 | 58,317 |
General and administrative | 9,703 | 10,562 | 19,818 | 20,553 |
Settlements and defense fees | 0 | 8,422 | 0 | 8,422 |
Acquisition-related costs | 534 | 0 | 534 | 0 |
Total operating expenses | 54,302 | 61,557 | 109,097 | 114,225 |
Income (loss) from operations | 3,583 | (6,287) | 6,800 | (5,191) |
Other income (expense): | ||||
Interest expense | (115) | (107) | (238) | (260) |
Interest income and other (expense), net | (560) | (343) | (1,137) | (556) |
Total other expense | (675) | (450) | (1,375) | (816) |
Income (loss) before provision for income taxes | 2,908 | (6,737) | 5,425 | (6,007) |
Provision for income taxes | 363 | 125 | 766 | 503 |
Net income (loss) | $ 2,545 | $ (6,862) | $ 4,659 | $ (6,510) |
Net income (loss) per share - basic (in dollars per share) | $ 0.04 | $ (0.11) | $ 0.07 | $ (0.10) |
Net income (loss) per share - diluted (in dollars per share) | $ 0.04 | $ (0.11) | $ 0.07 | $ (0.10) |
Shares used in computing net income (loss) per share - basic (in shares) | 66,184 | 63,728 | 65,725 | 63,348 |
Shares used in computing net income (loss) per share - diluted (in shares) | 68,074 | 63,728 | 67,471 | 63,348 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) [Abstract] | ||||
Net income (loss) | $ 2,545 | $ (6,862) | $ 4,659 | $ (6,510) |
Other comprehensive loss, net of tax: | ||||
Unrealized loss on short-term investments | (20) | (1) | (25) | (8) |
Other comprehensive loss | (20) | (1) | (25) | (8) |
Comprehensive income (loss) | $ 2,525 | $ (6,863) | $ 4,634 | $ (6,518) |
Description of Business |
6 Months Ended |
---|---|
Dec. 31, 2015 | |
Description of Business [Abstract] | |
Description of Business | 1. Description of Business ShoreTel, Inc. was incorporated in California on September 17, 1996 and reincorporated in Delaware on June 22, 2007. ShoreTel, Inc. and its subsidiaries (referred to herein as “ShoreTel” or “the Company”) is a leading provider of brilliantly simple business communication solutions, comprised of integrated voice, video, data and mobile applications based on Internet Protocol (“IP”) technologies. The Company focuses on the small and medium sized businesses (less than 5,000 users), with a Unified Communications (“UC”) platform so that they can communicate anytime, anyplace, and through any device that they chose. The Company’s strategy is to provide customers with a flexible choice of deployment options: subscribing to our cloud-based communication services, operating our ShoreTel solution in their own premise-based data centers or a hybrid combination of both. |
Basis of Presentation and Significant Accounting Policies |
6 Months Ended |
---|---|
Dec. 31, 2015 | |
Basis of Presentation and Significant Accounting Policies [Abstract] | |
Basis of Presentation and Significant Accounting Policies | 2. Basis of Presentation and Significant Accounting Policies The accompanying condensed consolidated financial statements as of December 31, 2015, and for the three and six months ended December 31, 2015 and 2014 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2015. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement have been included. The condensed consolidated balance sheet as of June 30, 2015 has been derived from the audited consolidated financial statements as of that date but does not include all of the information and footnotes included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2015. The results of operations for the three and six months ended December 31, 2015 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future periods. Correction of Prior Period Error Subsequent to the issuance of the condensed consolidated financial statements as of and for the three months ended September 30, 2015, the Company determined installation revenue and related cost of revenue was being deferred and recognized over the contractual life for certain contracts that should have been recognized over the customer life. Accordingly, the accompanying condensed consolidated financial statements reflect the Company’s correction of the statement of operations impact of the error for the three and six months ended December 31, 2014, the six months ended December 31, 2015 and the condensed consolidated balance sheet impact as of June 30, 2015. As a result, hosted and related services revenue and cost of revenue were decreased by $0.2 million and $0.5 million for the three and six months ended December 31, 2014, respectively. Hosted and related services revenue and cost of revenue were decreased by $0.1 million for the six months ended December 31, 2015. Prepaid expense and other current assets was increased by $2.7 million, other assets was increased by $1.2 million, deferred revenue was increased by $1.0 million and long-term deferred revenue was increased by $3.0 million as of June 30, 2015. The cumulative impact of the correction on preceding period earnings is an increase to accumulated deficit of $0.1 million as of June 30, 2015. The correction did not affect the net cash provided by operating activities, net cash used in investing activities or net cash provided by financing activities for the six months ended December 31, 2014 and 2015. The correction did not affect the earnings per share for the three and six months ended December 31, 2014 or the six months ended December 31, 2015. The foregoing corrections are not considered material by the Company. Computation of Net Income (Loss) per Share Basic net income per share is determined by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is determined by dividing net income by the weighted average number of common shares used in the basic income per share calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding under the treasury stock method. Dilutive securities of 1.9 million weighted shares and 2.2 million weighted shares were not included in the computation of diluted net income per share for the three and six months ended December 31, 2015, respectively because such securities were anti-dilutive. Dilutive securities of 4.0 million weighted shares and 3.7 million weighted shares were not included in the computation of diluted net loss per share for the three and six months ended December 31, 2014, respectively because such securities were anti-dilutive. Concentration of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash, cash equivalents, short-term investments and accounts receivable. As of December 31, 2015, all of the Company’s cash, cash equivalents and short-term investments were managed by several financial institutions. Accounts receivable are typically unsecured and are derived from revenue earned from customers. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. Accounts receivable from one value-added distributor accounted for 37% of total accounts receivable at December 31, 2015. At June 30, 2015 the same value-added distributor accounted for 33% of the total accounts receivable. Significant Accounting Policies The Company’s significant accounting policies are included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2015. Recent Accounting Pronouncements New Accounting Updates Recently Adopted In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (Topic 805). The guidance requires that adjustments to provisional amounts recognized in a business combination be recorded during the measurement period in the period in which the adjustment amounts are determined. This also applies to the effect on earnings of changes in depreciation, amortization or other income effects, if any; as a result to the change in the provisional amounts as if the accounting had been completed at the acquisition date. This accounting guidance is effective for the Company in the financial reporting periods beginning after December 15, 2015, with early adoption permitted. This accounting standard was adopted by the Company beginning October 1, 2015 and it did not have an impact on the Company’s consolidated financial statements. Recent Accounting Standards or Updates Not Yet Effective In May 2014, the FASB issued ASU No. 2014-9 Revenue from Contracts with Customers (Topic 606) - an accounting standard that supersedes the revenue recognition requirements in Topic 605, Revenue Recognition. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. The effective date of the new standard was deferred by one year by ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) Deferral of Effective Date. This accounting guidance is effective for the Company in annual financial reporting periods beginning after December 15, 2017; early adoption is permitted for periods beginning after December 15, 2016. ASU No. 2014-9 may be applied retrospectively (a) to each reporting period presented or (b) with the cumulative effect in retained earnings at the beginning of the adoption period. The Company is currently evaluating the method of adoption and the impact that the adoption of this accounting guidance may have on its Consolidated Financial Statements. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (Topic 330). Under this ASU, inventory will be measured at the “lower of cost and net realizable value” and options that currently exist for “market value” will be eliminated. The ASU defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” No other changes were made to the current guidance on inventory measurement. This accounting guidance is effective for the Company in financial reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this accounting guidance may have on its Consolidated Financial Statements. In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes (Topic740), which simplifies the presentation of deferred income taxes. This ASU requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. The standard is effective in the annual reporting periods beginning after December 15, 2018. Early adoption is permitted for any interim and annual financial statements that have not yet been issued. The Company is currently evaluating the new standard, but does not expect the adoption of this guidance to have a material impact on the Consolidated Financial Statements as the application of this guidance effects balance sheet classification only. |
Business Combination |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination | 3. Business Combination M5 Networks Australia Pty Ltd Acquisition On November 16, 2015, the Company acquired all outstanding common stock of M5 Networks Australia Pty Ltd. (“M5 Australia”), a privately-held company based in Australia and a provider of hosted unified communications solutions, for total cash consideration of $6.1 million (8.5 million Australian dollars). The acquisition accelerates the Company’s growth and expansion of providing hosted unified communications services in Australia. In accordance with ASC 805, Business Combinations, the acquisition of M5 Australia was recorded as a purchase acquisition. Under the purchase method of accounting, the fair value of the consideration was allocated to assets and liabilities assumed at their fair values. The excess of the preliminary fair value of consideration paid over the preliminary fair values of net assets and liabilities acquired and identifiable intangible assets resulted in recognition of goodwill of approximately $5.2 million. The goodwill consists largely of expected expansion of the customer base and share within the Australian hosted communications industry. The goodwill recorded is not deductible for income tax purposes. Preliminary Purchase Price Allocation The total purchase price was preliminarily allocated to M5 Australia’s net tangible and identifiable intangible assets based on their estimated fair values as of November 16, 2015 as set forth below. The primary areas of the purchase price allocation that are not yet finalized relate to property and equipment, contingency accruals, deferred taxes and goodwill. The following is the preliminary purchase price allocation (in thousands):
Valuing certain components of the acquisition, including intangible assets required us to make estimates that may be adjusted in the future, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date. Consequently, the purchase price allocation is considered preliminary. Final determination of these estimates could result in an adjustment to the preliminary purchase price allocation, with an offsetting adjustment to goodwill. The Company expensed $0.2 million for legal, accounting, consulting and other costs directly related to the acquisition during the three months ended December 31, 2015. The results of operations of M5 Australia have been included in our consolidated statements of operations from the acquisition date, though revenue and net income from M5 Australia were not material for the three and six months December 31, 2015. Pro forma results of operations have not been presented because the acquisition was not material to our results of operations. |
Balance Sheet Details |
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Balance Sheet Details | 4. Balance Sheet Details Balance sheet components consist of the following:
Depreciation expense for the three months ended December 31, 2015 and 2014 was $2.8 million and $2.6 million, respectively. Depreciation expense for the six months ended December 31, 2015 and 2014 was $5.7 million and $5.2 million, respectively. Intangible Assets: Intangible assets consist of the following (in thousands):
The intangible assets that are amortizable have estimated useful lives of two to eight years. Research and development costs are expensed as incurred. In accordance with ASC 985-20, Costs of Computer Software to be Sold, Leased, or Marketed, development costs of computer software to be sold, leased, or otherwise marketed are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Company’s products are released soon after technological feasibility has been established; therefore, costs incurred subsequent to achievement of technological feasibility are usually not significant. However, during the three and six months ended December 31, 2014, the Company capitalized $0.5 million and $0.9 million, respectively, of such software related to ongoing development of a product that had yet to be released to the market. The Company did not capitalize any software development costs for the three and six months ended December 31, 2015. Such costs are amortized using the straight-line method over the estimated economic life of the product. The Company will evaluate the realizability of the assets and the related periods of amortization on a regular basis. Judgment is required in determining when technological feasibility of a product is established as well as its economic life. Certain internally developed software became available for general release to customers during the six months ended December 31, 2015; at which time, an aggregate of $1.4 million in software development costs were transferred from intangible assets in process technology in the table above, and the amortization expense is being recognized related to these capitalized software costs. Amortization of intangible assets for the three months ended December 31, 2015 and 2014 was $2.0 million and $2.1 million, respectively. Amortization of intangible assets for the six months ended December 31, 2015 and 2014 was $3.9 million and $4.3 million, respectively. The estimated amortization expenses for intangible assets as of December 31, 2015 for the next five years and thereafter are as follows (in thousands):
The following presents the changes in the carrying value of goodwill (in thousands):
Short-Term Investments: The following tables summarize the Company’s short-term investments (in thousands):
The following table summarizes the maturities of the Company’s fixed income securities (in thousands):
Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations. |
Fair Value Disclosure |
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Fair Value Disclosure | 5. Fair Value Disclosure Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal market (or most advantageous market, in the absence of a principal market) for the asset or liability in an orderly transaction between market participants at the measurement date. Further, entities are required to maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value, and to utilize a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:
The tables below set forth the Company’s financial instruments and liabilities measured at fair value on a recurring basis (in thousands):
The above table excludes $94.9 million of cash balances on deposit at banks.
The above table excludes $78.1 million of cash balances on deposit at banks. Money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. Short-term investments are classified within Level 2 of the fair value hierarchy because they are valued based on other observable inputs, including broker or dealer quotations, or alternative pricing sources. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes from independent pricing services. Non-binding quotes are based on proprietary valuation models prepared by independent pricing services. These models use algorithms based on inputs such as observable market data, quoted market prices for similar instruments, historical pricing trends of a security as relative to its peers, internal assumptions of the independent pricing service and statistically supported models. The Company corroborates the reasonableness of non-binding quotes received from the independent pricing service by comparing them to the (a) actual experience gained from the purchases and redemption of investment securities, (b) quotes received on similar securities obtained when purchasing securities and (c) monitoring changes in ratings of similar securities and the related impact on the fair value. The types of instruments valued based on other observable inputs include corporate notes and commercial paper and U.S. Government agency securities. The Company reviewed financial and non-financial assets and liabilities and concluded that there were no other-than-temporary impairment charges during the three and six months ended December 31, 2015 and 2014, respectively. The Company reviews the fair value hierarchy on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels of certain securities within the fair value hierarchy. The Company recognizes transfers into and out of levels within the fair value hierarchy as of the date in which the actual event or change in circumstances that caused the transfer occurs. There were no transfers between Level 1 and Level 2 of the fair value hierarchy for any of the periods presented. Assets and Liabilities That Are Measured at Fair Value on a Nonrecurring Basis Non-financial assets such as goodwill, intangible assets, and property, plant, and equipment are evaluated for impairment and adjusted to fair value using Level 3 inputs, only when impairment is recognized. Fair values are considered Level 3 when management makes significant assumptions in developing a discounted cash flow model based upon a number of considerations including projections of revenues, earnings and a discount rate. In addition, in evaluating the fair value of goodwill impairment, further corroboration is obtained using the Company’s market capitalization. There were no indicators of impairment in the three and six months ended December 31, 2015 that required a nonrecurring fair value analysis to be performed on non-financial assets. |
Line of Credit |
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Dec. 31, 2015 | |
Line of Credit [Abstract] | |
Line of Credit | 6. Line of Credit On October 22, 2014 the Company entered into an Amended and Restated Credit Agreement which was further amended on December 1, 2014 and again on August 5, 2015 (“New Credit Facility”). This New Credit Facility replaces the Company’s previous credit facility. The New Credit Facility includes a revolving loan facility for an aggregate principal amount not exceeding $100.0 million. The New Credit Facility matures on the fifth anniversary of its closing (October 22, 2019) and is payable in full upon maturity. The amounts borrowed and repaid under the New Credit Facility are available for future borrowings. The borrowings under the New Credit Facility accrue interest (at the election of the Company) either at (i) the London interbank offered rate then in effect, plus a margin of between 1.50% and 2.25%, which is based on the Company’s consolidated EBITDA (as defined in the New Credit Facility), or (ii) the higher of (a) the bank’s publicly-announced prime rate then in effect and (b) the federal funds rate plus 0.50%, in each case of (a) or (b), plus a margin of between 0.00% and 0.50%, which will be based upon the Company’s consolidated EBITDA. The Company also pays annual commitment fees during the term of the New Credit Facility which varies depending on the Company’s consolidated EBITDA. The New Credit Facility is secured by substantially all of the Company’s assets. As of December 31, 2015, the Company had $99.4 million available for borrowing under the New Credit Facility. The New Credit Facility contains customary affirmative and negative covenants, including compliance with financial ratios and metrics. The New Credit Facility and the related amendment requires the Company to maintain a minimum ratio of liquidity to its indebtedness (each as defined in the New Credit Facility) and varying amounts of Liquidity and Consolidated EBITDA specified in the New Credit Facility throughout the term of the agreement. The Company was in compliance with all such covenants as of December 31, 2015. As of December 31, 2015, no amounts were outstanding under the New Credit Facility. The Company amortizes deferred financing costs to interest expense on a straight-line basis over the term of the New Credit Facility. |
Income Taxes |
6 Months Ended |
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Dec. 31, 2015 | |
Income Taxes [Abstract] | |
Income Taxes | 7. Income Taxes The Company recorded an income tax provision of $0.4 million and $0.1 million for the three months ended December 31, 2015 and 2014, respectively and $0.8 million and $0.5 million for the six months ended December 31, 2015 and 2014, respectively. The income tax provisions are primarily comprised of United States federal alternative minimum tax, state taxes and foreign income taxes. No income tax benefit was accrued for jurisdictions where the Company anticipates incurring a loss during the full fiscal year as the related deferred tax assets were fully offset by a valuation allowance. The Company’s resulting effective tax rate differs from the applicable statutory rate primarily due to the valuation allowance against its deferred tax assets in select jurisdictions. The Company maintains liabilities for uncertain tax positions. As of December 31, 2015 and June 30, 2015, the Company’s total amount of unrecognized tax benefits was $5.3 million and $5.1 million, respectively. Of the total of $5.3 million of unrecognized tax benefit as of December 31, 2015, none, if recognized, would impact the effective tax rate. The Company does not expect its unrecognized tax benefits to change materially over the next 12 months. While management believes that the Company has adequately provided for all tax positions, amounts asserted by tax authorities could be greater or less than the Company’s current position. Accordingly, the Company’s provisions for federal, state and foreign tax related matters to be recorded in the future may change as revised estimates are made or as the underlying matters are settled or otherwise resolved. The Company’s primary tax jurisdiction is in the United States. For federal and state tax purposes, the tax years 2002 through 2014 remain open and subject to tax examination by the appropriate federal or state taxing authorities. The Protecting Americans from Tax Hikes (PATH) Act (“Act”) was signed into law on December 18, 2015. The Act contains a number of provisions including, most notably, permanent extension of the United States federal research tax credit. The Act did not have a material impact on our effective tax rate for fiscal 2015 due to the effect of the valuation allowance on the Company's deferred tax assets. |
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Common Stock [Abstract] | ||||||||||||||||
Common Stock | 8. Common Stock Common Shares Reserved for Issuance At December 31, 2015, the Company has reserved shares of common stock for issuance as follows (in thousands):
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Stock-Based Compensation |
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Stock-Based Compensation | 9. Stock-Based Compensation The following table shows total non-cash stock-based compensation expense included in the accompanying Condensed Consolidated Statements Income for the three and six months ended December 31, 2015 and 2014 (in thousands):
The Company estimated the grant date fair value of stock option awards and Employee Stock Purchase Plan (“ESPP”) rights using the Black-Scholes option valuation model with the following assumptions:
Compensation expense is recognized only for the portion of stock options that are expected to vest, assuming an expected forfeiture rate in determining stock-based compensation expense, which could affect the stock-based compensation expense recorded if there is a significant difference between actual and estimated forfeiture rates. As of December 31, 2015, total unrecognized compensation cost related to stock-based options and awards granted to employees and non-employee directors was $9.3 million. This cost will be amortized on a ratable basis over a weighted-average vesting period of approximately 2.8 years. |
Stock Option Plan |
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Stock Option Plan | 10. Stock Option Plan Transactions under the Company’s equity incentive plans are summarized as follows (in thousands, except per share data and contractual term):
The total pre-tax intrinsic value for options exercised during the three months ended December 31, 2015 and 2014 was $2.9 million and $1.8 million, respectively, and $3.4 million and $1.9 million for the six months ended December 31, 2015 and 2014, respectively, representing the difference between the fair values of the Company’s common stock underlying these options at the dates of exercise and the exercise prices paid. |
Employee Stock Purchase Plan |
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Dec. 31, 2015 | |
Employee Stock Purchase Plan [Abstract] | |
Employee Stock Purchase Plan | 11. Employee Stock Purchase Plan The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions. The ESPP consists of six-month offering periods commencing on May 1st and November 1st, each year. Under the ESPP, employees purchase shares of the Company's common stock at 85% of the market value at either the beginning of the offering period or the end of the offering period, whichever price is lower. |
Restricted Stock |
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Restricted Stock | 12. Restricted Stock Under the Company’s equity incentive plan, during the three and six months ended December 31, 2015 and 2014 the Company issued fully vested restricted stock awards to certain non-employee directors electing to receive them in lieu of an annual cash retainer. In addition, restricted stock units can be issued under the 2007 Plan to eligible employees. Restricted stock award and restricted stock unit activity for the six months ended December 31, 2015 and 2014 is as follows (in thousands):
Information regarding restricted stock awards and restricted stock units outstanding at December 31, 2015 is summarized below:
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Litigation, Commitments, Contingencies and Leases |
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Litigation, Commitments, Contingencies and Leases | 13. Litigation, Commitments, Contingencies and Leases Litigation — As of December 31, 2015, the Company is involved in litigation relating to claims arising out of the ordinary course of business or otherwise. Any litigation, regardless of outcome, is costly and time-consuming, can divert the attention of management and key personnel from business operations, deter distributors from selling the Company’s products and dissuade potential customers from purchasing the Company’s products. The Company defends itself vigorously against any such claims. Due to the uncertainty surrounding the litigation process, the Company is unable to estimate a range of loss, if any, at this time, however the Company does not believe a material loss is probable. Contingencies — During the six months ended December 31, 2014 the Internal Revenue Service (“IRS”) issued a Notice of Proposed Adjustment (“NOPA”) resulting from a withholding tax audit of payments made to non-U.S. vendors during calendar years 2008 through 2012. The NOPA asserts a liability for under-withheld taxes of approximately $2.0 million, plus related penalties and estimated interest of approximately $1.3 million. While the Company disagrees with a majority of the IRS’ assertions and proposed liability, the Company accrued $1.1 million for the liability during fiscal 2015. Leases — The Company leases its facilities under noncancelable operating leases which expire at various times through 2023. The leases provide for the lessee to pay all costs of utilities, insurance, and taxes. Future minimum lease payments under the noncancelable capital and operating leases as of December 31, 2015, are as follows (in thousands):
The current portion of the capital leases is included in accrued liabilities and other on the condensed consolidated balance sheet. The non-current portion of the capital leases is included in the other long-term liabilities on the consolidated balance sheet. Lease obligations for the Company’s foreign offices are denominated in foreign currencies, which were converted in the above table to U.S. dollars at the interbank exchange rate on December 31, 2015. Rent expense for the three months ended December 31, 2015 and 2014 was $1.3 million and $1.8 million, respectively. Rent expense for the six months ended December 31, 2015 and 2014 was $2.5 million and $2.9 million, respectively. Purchase commitments — The Company had purchase commitments with contract manufacturers for inventory and with technology firms for usage of software licenses totaling approximately $14.4 million as of December 31, 2015 and $14.9 million as of June 30, 2015. Letters of credit — Outstanding letters of credit maintained by the Company totaled $635,000 as of December 31, 2015. Indemnification — Under the indemnification provisions of the Company’s customer agreements, the Company agrees to indemnify and defend its customers against infringement of any patent, trademark, or copyright of any country or the misappropriation of any trade secret, arising from the customers’ legal use of the Company’s services. The exposure to the Company under these indemnification provisions is generally limited to the total amount paid by the customers under pertinent agreements. However, certain indemnification provisions potentially expose the Company to losses in excess of the aggregate amount received from the customer. The Company also has entered into customary indemnification agreements with each of its officers and directors. |
Segment Information |
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Segment Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | 14. Segment Information ASC Topic 280, Segment Reporting, establishes standards for reporting information about operating segments, products and services, geographic areas of operations and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker or decision making group in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision-maker is its Chief Executive Officer (“CEO”). The CEO reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. On this basis, the Company is organized and operates in a single segment: the design, development, marketing, and sale of business communication solutions. Revenue by geographic region is based on the ship to address on the customer order. The following presents total revenue by geographic region (in thousands):
Revenue from one value-added distributor accounted for approximately 26% and 24% of the total revenue during the three months ended December 31, 2015 and 2014, respectively and 26% of the total revenue during both the six months ended December 31, 2015 and 2014. The Company’s assets are primarily located in the United States of America and not allocated to any specific region; furthermore, the Company does not measure the performance of its geographic regions based upon asset-based metrics. The following presents a summary of long-lived assets, excluding deferred tax assets, other assets, goodwill and intangible assets (in thousands):
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Derivative Instruments and Hedging Activities |
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Derivative Instruments and Hedging Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities | 15. Derivative Instruments and Hedging Activities In the normal course of business, the Company is exposed to fluctuations in interest rates and the exchange rates associated with foreign currencies. During the three and six months ended December 31, 2015, the Company used derivative instruments to reduce the volatility of earnings associated with changes in foreign currency exchange rates. The Company used foreign exchange forward contracts to mitigate the gains and losses generated from the re-measurement of certain foreign monetary assets and liabilities, primarily including cash balances, third party accounts receivable and intercompany transactions recorded on the balance sheet. These derivatives are not designated and do not qualify as hedge instruments. Accordingly, changes in the fair value of these instruments are recognized in other income and expenses during the period of change. These derivatives have maturities of approximately one month. The foreign exchange forward contracts outstanding as of December 31, 2015 are entered into by the Company on the last business day of the period. Given the relatively short duration such contracts are outstanding in relation to changes in potential market rates; the change in the fair value is not material and is not reflected either as an asset or a liability. The following table presents the gross notional value of all of the Company’s foreign exchange forward contracts outstanding as of December 31, 2015 and June 30, 2015 (in thousands):
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Subsequent Event |
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Dec. 31, 2015 | |
Subsequent Event [Abstract] | |
Subsequent Event | 16. Subsequent Event On January 6, 2016, the Company completed its acquisition of all the outstanding membership interests of Corvisa LLC (“Corvisa”) for total cash consideration of approximately $8.4 million pursuant to the terms of a Membership Interest Purchase Agreement. The Company has expensed $0.3 million for legal, consulting and other costs directly related to the acquisition during the three months ended December 31, 2015. In accordance with ASC 805, Business Combinations, the acquisition of Corvisa will be recorded as a purchase business acquisition in the Company’s financial results for the three months ended March 31, 2016. The initial accounting for the Corvisa acquisition has not been completed at this time, therefore, disclosure will be made in the Form 10-Q for the quarterly period ended March 31, 2016. |
Basis of Presentation and Significant Accounting Policies (Policies) |
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Dec. 31, 2015 | |
Basis of Presentation and Significant Accounting Policies [Abstract] | |
Correction of Prior Period Error | Correction of Prior Period Error Subsequent to the issuance of the condensed consolidated financial statements as of and for the three months ended September 30, 2015, the Company determined installation revenue and related cost of revenue was being deferred and recognized over the contractual life for certain contracts that should have been recognized over the customer life. Accordingly, the accompanying condensed consolidated financial statements reflect the Company’s correction of the statement of operations impact of the error for the three and six months ended December 31, 2014, the six months ended December 31, 2015 and the condensed consolidated balance sheet impact as of June 30, 2015. As a result, hosted and related services revenue and cost of revenue were decreased by $0.2 million and $0.5 million for the three and six months ended December 31, 2014, respectively. Hosted and related services revenue and cost of revenue were decreased by $0.1 million for the six months ended December 31, 2015. Prepaid expense and other current assets was increased by $2.7 million, other assets was increased by $1.2 million, deferred revenue was increased by $1.0 million and long-term deferred revenue was increased by $3.0 million as of June 30, 2015. The cumulative impact of the correction on preceding period earnings is an increase to accumulated deficit of $0.1 million as of June 30, 2015. The correction did not affect the net cash provided by operating activities, net cash used in investing activities or net cash provided by financing activities for the six months ended December 31, 2014 and 2015. The correction did not affect the earnings per share for the three and six months ended December 31, 2014 or the six months ended December 31, 2015. The foregoing corrections are not considered material by the Company. |
Computation of Net Income (Loss) per Share | Computation of Net Income (Loss) per Share Basic net income per share is determined by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is determined by dividing net income by the weighted average number of common shares used in the basic income per share calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding under the treasury stock method. Dilutive securities of 1.9 million weighted shares and 2.2 million weighted shares were not included in the computation of diluted net income per share for the three and six months ended December 31, 2015, respectively because such securities were anti-dilutive. Dilutive securities of 4.0 million weighted shares and 3.7 million weighted shares were not included in the computation of diluted net loss per share for the three and six months ended December 31, 2014, respectively because such securities were anti-dilutive. |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash, cash equivalents, short-term investments and accounts receivable. As of December 31, 2015, all of the Company’s cash, cash equivalents and short-term investments were managed by several financial institutions. Accounts receivable are typically unsecured and are derived from revenue earned from customers. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. Accounts receivable from one value-added distributor accounted for 37% of total accounts receivable at December 31, 2015. At June 30, 2015 the same value-added distributor accounted for 33% of the total accounts receivable. |
Significant Accounting Policies | Significant Accounting Policies The Company’s significant accounting policies are included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2015. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements New Accounting Updates Recently Adopted In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (Topic 805). The guidance requires that adjustments to provisional amounts recognized in a business combination be recorded during the measurement period in the period in which the adjustment amounts are determined. This also applies to the effect on earnings of changes in depreciation, amortization or other income effects, if any; as a result to the change in the provisional amounts as if the accounting had been completed at the acquisition date. This accounting guidance is effective for the Company in the financial reporting periods beginning after December 15, 2015, with early adoption permitted. This accounting standard was adopted by the Company beginning October 1, 2015 and it did not have an impact on the Company’s consolidated financial statements. Recent Accounting Standards or Updates Not Yet Effective In May 2014, the FASB issued ASU No. 2014-9 Revenue from Contracts with Customers (Topic 606) - an accounting standard that supersedes the revenue recognition requirements in Topic 605, Revenue Recognition. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. The effective date of the new standard was deferred by one year by ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) Deferral of Effective Date. This accounting guidance is effective for the Company in annual financial reporting periods beginning after December 15, 2017; early adoption is permitted for periods beginning after December 15, 2016. ASU No. 2014-9 may be applied retrospectively (a) to each reporting period presented or (b) with the cumulative effect in retained earnings at the beginning of the adoption period. The Company is currently evaluating the method of adoption and the impact that the adoption of this accounting guidance may have on its Consolidated Financial Statements. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (Topic 330). Under this ASU, inventory will be measured at the “lower of cost and net realizable value” and options that currently exist for “market value” will be eliminated. The ASU defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” No other changes were made to the current guidance on inventory measurement. This accounting guidance is effective for the Company in financial reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this accounting guidance may have on its Consolidated Financial Statements. In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes (Topic740), which simplifies the presentation of deferred income taxes. This ASU requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. The standard is effective in the annual reporting periods beginning after December 15, 2018. Early adoption is permitted for any interim and annual financial statements that have not yet been issued. The Company is currently evaluating the new standard, but does not expect the adoption of this guidance to have a material impact on the Consolidated Financial Statements as the application of this guidance effects balance sheet classification only. |
Business Combination (Tables) |
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Business Combination [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of preliminary purchase price allocation | The following is the preliminary purchase price allocation (in thousands):
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Balance Sheet Details (Tables) |
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Balance Sheet Details [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance sheet components | Balance sheet components consist of the following:
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Summary of intangible assets | Intangible assets consist of the following (in thousands):
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Estimated amortization expenses for intangible assets | The estimated amortization expenses for intangible assets as of December 31, 2015 for the next five years and thereafter are as follows (in thousands):
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Changes in the carrying value of goodwill | The following presents the changes in the carrying value of goodwill (in thousands):
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Summary of short-term investments | The following tables summarize the Company’s short-term investments (in thousands):
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Schedule of maturities of fixed income securities | The following table summarizes the maturities of the Company’s fixed income securities (in thousands):
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Fair Value Disclosure (Tables) |
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Fair Value Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of financial instruments and liabilities measured at fair value on a recurring basis | The tables below set forth the Company’s financial instruments and liabilities measured at fair value on a recurring basis (in thousands):
The above table excludes $94.9 million of cash balances on deposit at banks.
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Common Stock (Tables) |
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Common Stock [Abstract] | ||||||||||||||||
Reserved shares of common stock for issuance | At December 31, 2015, the Company has reserved shares of common stock for issuance as follows (in thousands):
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Stock-Based Compensation (Tables) |
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Stock-based compensation expense | The following table shows total non-cash stock-based compensation expense included in the accompanying Condensed Consolidated Statements Income for the three and six months ended December 31, 2015 and 2014 (in thousands):
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Estimated grant date fair value of stock option awards and Employee Stock Purchase Plan (ESPP) rights using the Black-Scholes option valuation model | The Company estimated the grant date fair value of stock option awards and Employee Stock Purchase Plan (“ESPP”) rights using the Black-Scholes option valuation model with the following assumptions:
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Stock Option Plan (Tables) |
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Stock Option Plan [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of stock options activity | Transactions under the Company’s equity incentive plans are summarized as follows (in thousands, except per share data and contractual term):
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Restricted Stock (Tables) |
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Restricted stock award and restricted stock unit activity | Restricted stock award and restricted stock unit activity for the six months ended December 31, 2015 and 2014 is as follows (in thousands):
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Information regarding restricted stock awards and restricted stock units outstanding | Information regarding restricted stock awards and restricted stock units outstanding at December 31, 2015 is summarized below:
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Litigation, Commitments, Contingencies and Leases (Tables) |
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Schedule of future minimum payments under noncancelable capital and operating leases | Future minimum lease payments under the noncancelable capital and operating leases as of December 31, 2015, are as follows (in thousands):
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Segment Information (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total revenue and long-lived assets, excluding deferred tax assets, other assets, and intangible assets by geographic region | Revenue by geographic region is based on the ship to address on the customer order. The following presents total revenue by geographic region (in thousands):
The following presents a summary of long-lived assets, excluding deferred tax assets, other assets, goodwill and intangible assets (in thousands):
|
Derivative Instruments and Hedging Activities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notional amounts of outstanding derivative positions | The following table presents the gross notional value of all of the Company’s foreign exchange forward contracts outstanding as of December 31, 2015 and June 30, 2015 (in thousands):
|
Description of Business (Details) |
Dec. 31, 2015
User
|
---|---|
Description of Business [Abstract] | |
Maximum users for small and medium sized businesses | 5,000 |
Business Combination (Details) AUD in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Nov. 16, 2015
USD ($)
|
Dec. 31, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
Dec. 31, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
Nov. 16, 2015
AUD
|
Jun. 30, 2015
USD ($)
|
|
Preliminary Purchase Price Allocation [Abstract] | |||||||
Goodwill | $ 127,960 | $ 127,960 | $ 122,750 | ||||
Acquisition-related costs | 534 | $ 0 | $ 534 | $ 0 | |||
M5 Networks Australia Pty Ltd [Member] | |||||||
Business Acquisition [Line Items] | |||||||
Acquisition agreement date | Nov. 16, 2015 | ||||||
Preliminary Purchase Price Allocation [Abstract] | |||||||
Cash acquired | $ 224 | ||||||
Other current assets | 386 | ||||||
Goodwill | 5,210 | ||||||
Other long-term assets | 164 | ||||||
Other liabilities assumed | (1,174) | ||||||
Preliminary purchase price allocation | 6,110 | AUD 8,500 | |||||
Acquisition-related costs | $ 200 | ||||||
Customer Relationships [Member] | M5 Networks Australia Pty Ltd [Member] | |||||||
Preliminary Purchase Price Allocation [Abstract] | |||||||
Intangible assets | $ 1,300 | ||||||
Estimated useful lives of intangible assets | 5 years |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Jun. 30, 2015 |
|
Income Tax Contingency [Line Items] | |||||
Income tax provision | $ 363 | $ 125 | $ 766 | $ 503 | |
Unrecognized tax benefits | 5,300 | 5,300 | $ 5,100 | ||
Unrecognized tax benefits that would impact effective tax rate if recognized | 0 | 0 | |||
Expected change in unrecognized tax benefits in next fiscal year | $ 0 | $ 0 | |||
Maximum [Member] | |||||
Income Tax Contingency [Line Items] | |||||
Open tax years | 2014 | ||||
Minimum [Member] | |||||
Income Tax Contingency [Line Items] | |||||
Open tax years | 2002 |
Employee Stock Purchase Plan (Details) - Employee Stock Purchase Plan [Member] |
6 Months Ended |
---|---|
Dec. 31, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Offering period for ESPP | 6 months |
Purchase price of share | 85.00% |
Restricted Stock (Details) - Restricted Stock Awards and Restricted Stock Units [Member] - USD ($) shares in Thousands, $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
|
Restricted stock award and restricted stock unit activity [Roll Forward] | |||
Beginning outstanding (in shares) | 1,452 | 1,394 | |
Awarded (in shares) | 970 | 762 | |
Released (in shares) | (479) | (486) | |
Forfeited (in shares) | (111) | (101) | |
Ending outstanding (in shares) | 1,832 | 1,569 | |
Information regarding restricted stock awards and restricted stock units outstanding [Abstract] | |||
Shares outstanding, Number of Shares (in shares) | 1,452 | 1,394 | 1,832 |
Shares expected to vest, Number of Shares (in shares) | 1,066 | ||
Shares outstanding, Weighted Average Remaining Contractual Lives | 1 year 8 months 26 days | ||
Shares expected to vest, Weighted Average Remaining Contractual Lives | 1 year 4 months 24 days | ||
Shares outstanding, Aggregate Intrinsic Value | $ 16,213 | ||
Shares expected to vest, Aggregate Intrinsic Value | $ 9,436 |
Derivative Instruments and Hedging Activities (Details) € in Thousands, £ in Thousands, CAD in Thousands, AUD in Thousands, $ in Thousands |
6 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2015
USD ($)
|
Dec. 31, 2015
AUD
|
Dec. 31, 2015
CAD
|
Dec. 31, 2015
EUR (€)
|
Dec. 31, 2015
GBP (£)
|
Jun. 30, 2015
USD ($)
|
Jun. 30, 2015
AUD
|
Jun. 30, 2015
CAD
|
Jun. 30, 2015
EUR (€)
|
Jun. 30, 2015
GBP (£)
|
|
Derivative [Line Items] | ||||||||||
Derivative maturity period | 1 month | |||||||||
Notional contract amount | $ 5,819 | $ 5,573 | ||||||||
Australian Dollar [Member] | ||||||||||
Derivative [Line Items] | ||||||||||
Notional contract amount | 1,340 | AUD 1,860 | 1,840 | AUD 2,420 | ||||||
British Pound [Member] | ||||||||||
Derivative [Line Items] | ||||||||||
Notional contract amount | 2,249 | £ 1,540 | 1,429 | £ 910 | ||||||
Canadian Dollar [Member] | ||||||||||
Derivative [Line Items] | ||||||||||
Notional contract amount | 793 | CAD 1,110 | 596 | CAD 750 | ||||||
Euro [Member] | ||||||||||
Derivative [Line Items] | ||||||||||
Notional contract amount | $ 1,437 | € 1,330 | $ 1,708 | € 1,550 |
Subsequent Event (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jan. 06, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Subsequent Event [Line Items] | |||||
Acquisition-related costs | $ 534 | $ 0 | $ 534 | $ 0 | |
Subsequent Event [Member] | |||||
Subsequent Event [Line Items] | |||||
Approximate consideration for acquisition | $ 8,400 | ||||
Acquisition-related costs | $ 300 |
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