Quarterly report pursuant to Section 13 or 15(d)

GOODWILL AND PURCHASED INTANGIBLE ASSETS

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GOODWILL AND PURCHASED INTANGIBLE ASSETS
 9 Months Ended
Mar. 31, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND PURCHASED INTANGIBLE ASSETS GOODWILL AND PURCHASED INTANGIBLE ASSETS
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in business combinations. Goodwill is not subject to amortization but is tested for impairment annually during the third fiscal quarter, as well as whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In testing goodwill for impairment, we utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. When performing the qualitative assessment, we consider the following factors: stock price or market capitalization, changes in the industry and competitive environment, budget-to-actual revenue and profitability performance from the prior year and projected revenue and profitability trends for future years at our reporting units. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform a quantitative assessment by comparing the carrying value to the fair value of the reporting units. If the fair value is determined to be less than the carrying value, the amount of impairment is computed as the excess of the carrying value over the estimated fair value, not to exceed the carrying value of goodwill. Any impairment charges could have a material adverse effect on our operating results and net asset value in the quarter in which we recognize the impairment charge.
We performed the required annual goodwill impairment testing for all reporting units as of February 29, 2024, and concluded that goodwill was not impaired, except for the Display reporting unit (“Display”). As a result of this qualitative assessment, we determined that it was not necessary to perform a quantitative assessment for the reporting units subject to testing other than Display. In March 2024, we made the decision to exit the Display business by announcing the end of manufacturing of most Display products by December 31, 2024, but we will continue to provide services to the installed base of Display products for existing customers. The exit of the business does not qualify as a discontinued operation under the relevant accounting guidance, but the decision triggered a quantitative impairment assessment for the Display reporting unit, which resulted in a total goodwill impairment charge of $70.5 million in the quarter ended March 31, 2024.
To determine the fair value of the reporting unit, we utilized an income approach estimated through a discounted cash flow analysis, by adding the present value of the estimated annual discounted cash flows over a discrete projection period. This valuation technique requires us to use significant estimates and assumptions, including discount rates and internal forecasts of the anticipated future performance of the business. The discount rates are based on the weighted average cost of capital of comparable peer companies, adjusted for company-specific risk. There can be no assurance that these estimates and assumptions will prove to be an accurate prediction of the future.
The next annual goodwill impairment assessment by reporting unit is scheduled to be performed in the third quarter of the fiscal year ending June 30, 2025.
During the second quarter of fiscal 2024, we noted a significant deterioration of the long-term forecast for our Printed Circuit Board (“PCB”) and Display businesses, which are a part of our PCB and Display operating segment, as the company initiated its annual strategic planning process. The downward revision of financial outlook for the PCB and Display businesses triggered a goodwill impairment test. In addition, in the second quarter of fiscal 2024, we began to evaluate strategic options for our Display business. Effective from the second quarter of fiscal 2024, our PCB and Display operating segment is comprised of two reporting units, 1) PCB and 2) Display, while, prior to the change, the PCB and Display operating segment represented a single reporting unit. As a result of our quantitative assessment, we recorded a total goodwill impairment charge of $192.6 million for the PCB and Display reporting unit in the three months ended December 31, 2023. The goodwill balances of the new PCB and Display reporting units were determined based on their relative fair values. We assessed for impairment subsequent to the reporting unit change and noted no impairment.
The following table presents changes in goodwill carrying value by reporting unit during the nine months ended March 31, 2024:
(In thousands) Wafer Inspection and Patterning
Global Service and Support (“GSS”)
Specialty Semiconductor Process
PCB and Display
 PCB Display Component Inspection Total
Balances as of June 30, 2023
Goodwill $ 1,004,700  $ 25,908  $ 826,037  $ 942,819  $ —  $ —  $ 13,575  $ 2,813,039 
Accumulated impairment losses (277,570) —  (144,179) (112,470) —  —  —  (534,219)
$ 727,130  $ 25,908  $ 681,858  $ 830,349  $ —  $ —  $ 13,575  $ 2,278,820 
Activity for the nine months ended March 31, 2024
Goodwill impairment —  —  —  (192,600) —  (70,474) —  (263,074)
Reallocation due to change in reporting units —  —  —  (637,749) 567,275  70,474  —  — 
Foreign currency adjustments (19) —  —  —  —  —  —  (19)
Balances as of March 31, 2024
Goodwill 1,004,681  25,908  826,037  —  567,275  70,474  13,575  $ 2,507,950 
Accumulated impairment losses (277,570) —  (144,179) —  —  (70,474) —  (492,223)
$ 727,111  $ 25,908  $ 681,858  $ —  $ 567,275  $ —  $ 13,575  $ 2,015,727 

Purchased Intangible Assets
The components of purchased intangible assets as of the dates indicated below were as follows:
(In thousands)   As of March 31, 2024 As of June 30, 2023
Category
Range of
Useful 
Lives
(in years)
 Gross
Carrying
Amount		 Accumulated
Amortization
and
Impairment		 Net
Amount		 Gross
Carrying
Amount		 Accumulated
Amortization
and
Impairment		 Net
Amount
Existing technology
4-8
 $ 1,552,074  $ 999,639  $ 552,435  $ 1,536,826  $ 841,815  $ 695,011 
Customer relationships
4-9
 358,567  238,925  119,642  358,567  205,037  153,530 
Trade name / Trademark
4-7
 119,083  93,447  25,636  116,583  78,749  37,834 
Order backlog and other
<1-7
 83,336  82,689  647  85,836  82,264  3,572 
Intangible assets subject to amortization
 2,113,060  1,414,700  698,360  2,097,812  1,207,865  889,947 
In-process research and development 46,074  16,833  29,241  61,322  15,966  45,356 
Total $ 2,159,134  $ 1,431,533  $ 727,601  $ 2,159,134  $ 1,223,831  $ 935,303 

Purchased intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. Impairment indicators primarily include declines in our operating cash flows from the use of these assets. As of March 31, 2024, in connection with the Company's decision to exit the Display business, as described above, an immaterial amount of purchased intangible assets were abandoned. There were no other impairment indicators for purchased intangible assets in the three months ended March 31, 2024.
In connection with the evaluation of the goodwill impairment in the PCB and Display reporting unit during the second quarter of fiscal 2024, due to the downward revision of financial outlook for the businesses as noted above, the Company assessed tangible and intangible assets for impairment prior to performing the goodwill impairment test. The Company first performed a recoverability test for each asset group identified in the PCB and Display operating segment by comparing projected undiscounted cash flows from the use and eventual disposition of each asset group to its carrying value. This test indicated that the undiscounted cash flows were not sufficient to recover the carrying value of the asset groups. We then compared the carrying value of the individual long-lived assets within those asset groups against their fair value in order to measure the impairment loss. As a result of this assessment, we recorded a total purchased intangible asset impairment charge of $26.4 million. No impairment was identified for other long-lived assets in the three months ended December 31, 2023.
Total impairment charges for goodwill and purchased intangible assets of $219.0 million were recognized during the three months ended December 31, 2023, as a separate charge and included in income (loss) from operations.
Amortization expense for purchased intangible assets for the periods indicated below was as follows:
Three Months Ended March 31, Nine Months Ended March 31,
(In thousands) 2024 2023 2024 2023
Amortization expense - Costs of revenues $ 44,849  $ 45,446  $ 137,024  $ 135,958 
Amortization expense - SG&A 12,916  19,656  43,411  59,912 
Amortization expense - Research and development —  31  —  93 
Total $ 57,765  $ 65,133  $ 180,435  $ 195,963 
Based on the purchased intangible assets gross carrying amount recorded as of March 31, 2024, the remaining estimated annual amortization expense is expected to be as follows:
Fiscal year ending June 30: Amortization (In thousands)
2024 (remaining three months) $ 58,837 
2025 218,639 
2026 197,846 
2027 125,517 
2028 48,849 
2029 and thereafter 48,672 
Total $ 698,360