Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Mar. 31, 2020 |
Accounting Policies [Abstract] | |
Fiscal Year | Fiscal Year The Company uses a fiscal calendar year ending on June 30. All references herein to “fiscal 2020” or “2020” represent the fiscal year ending June 30, 2020. All references herein to “fiscal 2019” or “2019” represent the fiscal year ended June 30, 2019. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Extreme and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated. The Company predominantly uses the United States Dollar as its functional currency. The functional currency for certain of its foreign subsidiaries is the local currency. For those subsidiaries that operate in a local functional currency environment, all assets and liabilities are translated to United States Dollars at current month end rates of exchange and revenue and expenses are translated using the monthly average rate. |
Accounting Estimates | Accounting Estimates The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) Leases (Topic 842) (“ROU”) In addition, Topic 842 was subsequently amended by ASU No 2018-10, Codification Improvements; ASU 2018-11, Targeted Improvements; ASU 2018-20 Narrow Scope Improvements; and ASU 2019-01 Codification Improvements. The Company adopted the new standards beginning with its fiscal year 2020. The new standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients” which permitted the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. The new standard also provided practical expedients for ongoing accounting. The Company also elected the short-term lease recognition exemption for all leases that qualified. For those leases that qualified, existing short-term leases at the transition date and those entered into subsequent to the transition date, the Company did not recognize right-of-use assets or lease liabilities. In addition, the Company elected the practical expedient not to separate lease and non-lease components for leases except for the logistic services asset class and certain revenue subscription contracts where the Company leases its hardware products and provides maintenance and support over a service period which is recognized under ASC Topic 606. See Note 9, Leases, for additional information regarding the Company’s leases. On July 1, 2019, the Company recognized ROU assets of $64.6 million and corresponding lease liabilities of $79.5 million on the condensed consolidated balance sheets, which was based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities , which is intended to allow companies to better align risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results by expanding and refining hedge accounting for both nonfinancial and financial risk components and aligning the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. In addition, in October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging ( Topic 815 ), which amends Topic 815 to add the overnight index swap (OIS) rate based on the secured overnight financing rate as a fifth U.S. benchmark interest rate. In addition, Topic 815 was subsequently amended by ASU 2019-04, Codification Improvements. These standards are effective for interim and annual reporting periods beginning after December 15, 2018. The standard was adopted on July 1, 2019 and did not have a material impact on the Company’s financial statements upon adoption. During the third quarter of fiscal 2020, the Company entered into interest rate swap agreements to manage its exposure to fluctuations of interest rates associated with its debt. See Note 14, Derivatives and Hedging, for additional information. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) In March 2020 ASU 2020 - 04 “Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” of the London Interbank Offered Rate (LIBOR) and other interbank offered rates. This guidance is effective upon issuance and can be applied to applicable contract modifications through December 31, 2022. The Company elected to apply the amendments in this update to eligible hedging relationships existing as of January 1, 2020 or entered into during the three months ended March 31, 2020 in accordance with the transition options available. This guidance did not have any impact upon adoption. The Company will apply this guidance to transactions or modifications of these arrangements as appropriate through transition period. Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses with its fiscal year 2021, beginning on July 1, 2020. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), and related disclosures In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40 and related disclosures In December 2019, the FASB issued ASU 2019-12, Income taxes – Simplifying the Accounting for Income Taxes (Topic 740 Income Taxes and related disclosures |
Revenue Recognition | Revenue Recognition Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Certain of the Company’s contracts have multiple performance obligations, as the promise to transfer individual goods or services is separately identifiable from other promises in the contracts and, therefore, is distinct. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on its relative standalone selling price. The stand-alone selling prices are determined based on the prices at which the Company separately sells these products. For items that are not sold separately, the Company estimates the stand-alone selling prices using the best estimated selling price approach. The Company’s performance obligations are satisfied at a point in time or over time as the customer receives and consumes the benefits provided . Substantially all of the Company’s product sales revenues are recognized at a point in time. Substantially all of the Company’s service and SaaS revenu e is recognized over time. For revenue recognized over time, the Company uses an input measure, days elapsed, to measure progress. On March 31, 2020, the Company had $271.7 million of remaining performance obligations, which are primarily comprised of deferred maintenance and SaaS revenue. The Company expects to recognize approximately 24 percent of its deferred revenue as revenue in fiscal 2020, an additional 46 percent in fiscal 2021 and 30 percent of the balance thereafter. Contract Balances. The timing of revenue recognition, billings and cash collections results in billed accounts receivable and deferred revenue in the condensed consolidated balance sheets. Services provided under renewable support arrangements of the Company are billed in accordance with agreed-upon contractual terms, which are either billed fully at the inception of contract or at periodic intervals (e.g., quarterly or annually). The Company sometimes receives payments from its customers in advance of services being provided, resulting in deferred revenues. These liabilities are reported on the condensed consolidated balance sheets on a contract-by-contract basis at the end of each reporting period. Revenue recognized for the three months ended March 31, 2020 and 2019 that was included in the deferred revenue balance at the beginning of each period was $64.3 million and $54.8 million, respectively. Revenue recognized for the nine months ended March 31, 2020 and 2019 that was included in the deferred revenue balance at the beginning of each period was $116.7 million and $110.8 million, respectively. Contract Costs. The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. Management expects that commission fees paid to sales representatives as a result of obtaining service contracts and contract renewals are recoverable and therefore the Company’s condensed consolidated balance sheets included capitalized balances in the amount of $7.4 million and $6.5 million at March 31, 2020 and June 30, 2019, respectively. Capitalized commission fees are amortized on a straight-line basis over the average period of service contracts of approximately three years, and are included in “Sales and marketing” in the accompanying condensed consolidated statements of operations. Amortization recognized during the three months ended March 31, 2020 and 2019, was $1.1 million and $0.8 million, respectively. Amortization recognized during the nine months ended March 31, 2020 and 2019 was $4.1 million and $2.2 million, respectively. Estimated Variable Consideration. There were no material changes in the current period to the estimated variable consideration for performance obligations which were satisfied or partially satisfied during previous periods. Revenue by Category The following table sets forth the Company’s revenue disaggregated by sales channel and geographic region based on the customer’s ship-to locations (in thousands): Three Months Ended March 31, 2020 March 31, 2019 Distributor Direct Total Distributor Direct Total Americas: United States $ 38,666 $ 56,391 $ 95,057 $ 72,071 $ 56,096 $ 128,167 Other 3,277 5,781 9,058 4,930 5,589 10,519 Total Americas 41,943 62,172 104,115 77,001 61,685 138,686 EMEA 49,979 33,630 83,609 48,834 35,076 83,910 APAC 3,242 18,553 21,795 4,850 23,418 28,268 Total net revenues $ 95,164 $ 114,355 $ 209,519 $ 130,685 $ 120,179 $ 250,864 Nine Months Ended March 31, 2020 March 31, 2019 Distributor Direct Total Distributor Direct Total Americas: United States $ 168,755 $ 180,358 $ 349,113 $ 172,752 $ 171,359 $ 344,111 Other 15,496 16,343 31,839 17,893 16,494 34,387 Total Americas 184,251 196,701 380,952 190,645 187,853 378,498 EMEA 173,825 107,521 281,346 190,041 98,687 288,728 APAC 18,362 51,837 70,199 11,967 64,237 76,204 Total net revenues $ 376,438 $ 356,059 $ 732,497 $ 392,653 $ 350,777 $ 743,430 |
Inventories | Inventories The Company values its inventory at lower of cost or net realizable value. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis. The Company adjusts the carrying value of its inventory when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand. At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. Any written down or obsolete inventory subsequently sold has not had a material impact on gross margin for any of the periods presented. Inventories consist of the following (in thousands): March 31, 2020 June 30, 2019 Finished goods $ 55,790 $ 49,492 Raw materials 10,424 14,097 Total Inventories $ 66,214 $ 63,589 |
Property and Equipment, Net | Property and Equipment, Net Property and equipment consist of the following (in thousands): March 31, 2020 June 30, 2019 Computers and equipment $ 75,134 $ 72,309 Purchased software 33,467 29,126 Office equipment, furniture and fixtures 11,405 10,815 Leasehold improvements 52,167 51,245 Total property and equipment 172,173 163,495 Less: accumulated depreciation and amortization (109,212 ) (89,941 ) Property and equipment, net $ 62,961 $ 73,554 |
Deferred Revenue | Deferred Revenue Deferred revenue represents amounts for (i) deferred maintenance and support revenue, (ii) deferred SaaS revenue, and (iii) other deferred revenue including professional services and training when the revenue recognition criteria have not been met. |
Guarantees and Product Warranties | Guarantees and Product Warranties The majority of the Company’s hardware products are shipped with either a one-year The following table summarizes the activity related to the Company’s product warranty liability during the three and nine months ended March 31, 2020 and 2019 (in thousands): Three Months Ended Nine Months Ended March 31, 2020 March 31, 2019 March 31, 2020 March 31, 2019 Balance beginning of period $ 16,209 $ 12,808 $ 14,779 $ 12,807 Warranties assumed due to acquisitions — — 570 — New warranties issued 4,810 4,510 16,271 12,377 Warranty expenditures (5,797 ) (4,112 ) (16,398 ) (11,978 ) Balance end of period $ 15,222 $ 13,206 $ 15,222 $ 13,206 To facilitate sales of its products in the normal course of business, the Company indemnifies its resellers and end-user customers with respect to certain matters. The Company has agreed to hold the customer harmless against losses arising from a breach of intellectual property infringement or other. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. It is not possible to estimate the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements have not had a material impact on its operating results or financial position. |
Other Long-term Liabilities | Other Long-term Liabilities The following is a summary of long-term liabilities (in thousands): March 31, 2020 June 30, 2019 Acquisition-related deferred payments, less current portion $ 6,797 $ 9,604 Contingent consideration obligations, less current portion 626 2,688 Other contractual obligations, less current portion 18,707 26,261 Other 3,802 15,597 Total other long-term liabilities $ 29,932 $ 54,150 |
Concentrations | Concentrations The Company may be subject to concentration of credit risk as a result of certain financial instruments consisting of accounts receivable and short-term investments. The Company does not invest an amount exceeding 10% of its combined cash or cash equivalents in the securities of any one obligor or maker, except for obligations of the United States government, obligations of United States government agencies and money market accounts. |
Earnings Per Share | Basic earnings per share is calculated by dividing net earnings by the weighted average number of common shares outstanding during the period. Dilutive earnings per share is calculated by dividing net earnings by the weighted average number of common shares used in the basic earnings per share calculation plus the dilutive effect of shares subject to repurchase, options and unvested restricted stock units. |