Annual report [Section 13 and 15(d), not S-K Item 405]

GOODWILL AND PURCHASED INTANGIBLE ASSETS

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GOODWILL AND PURCHASED INTANGIBLE ASSETS
 12 Months Ended
Jun. 30, 2025
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.
The following table presents the carrying value of goodwill and the movements by reportable segment during the fiscal years ended June 30, 2025 and 2024:
(In thousands) Semiconductor Process Control Specialty Semiconductor Process PCB & Component Inspection Total
Balances as of June 30, 2023 $ 753,038  $ 681,858  $ 843,924  $ 2,278,820 
Goodwill impairment —  —  (263,074) (263,074)
Foreign currency adjustment (20) —  —  (20)
Balances as of June 30, 2024 753,018  681,858  580,850  2,015,726 
Goodwill impairment —  —  (230,400) (230,400)
Foreign currency adjustments 6,867  —  —  6,867 
Balances as of June 30, 2025 $ 759,885  $ 681,858  $ 350,450  $ 1,792,193 
During the second quarter of fiscal 2025, in connection with our annual strategic planning process, we noted a continued deterioration of the long-term forecast for our PCB business, which is part of our PCB and Component Inspection reportable segment. In addition, in the second quarter of fiscal 2025, we completed an internal reorganization affecting the composition of reporting units within our Specialty Semiconductor Process and PCB and Component Inspection reportable segments. The downward revision of financial outlook for PCB and the reorganization of reporting units triggered goodwill impairment tests. As a result of our quantitative assessment before reorganization, we recorded a total goodwill impairment charge of $230.4 million in the former PCB reporting unit, which was part of the PCB and Component Inspection reportable segment, in the second quarter of fiscal 2025. No goodwill impairment was identified in the Specialty Semiconductor Process reportable segment. We assessed for impairment subsequent to the reorganization and noted no impairment. The goodwill balances of our new reporting units after reorganization were allocated on a relative fair value basis.
During the second quarter of fiscal 2024, we noted a significant deterioration of the long-term forecast for our PCB and flat and flexible panel displays (“Display”) businesses, which were part of our former 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 was 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 second quarter of fiscal 2024. 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.
To determine the fair value of the reporting units noted above, we utilized income and market approaches and applied a weighting of 75 percent and 25 percent, respectively. The income approach is estimated through discounted cash flow analysis. The estimated fair value of this reporting unit was computed by adding the present value of the estimated annual discounted cash flows over a discrete projection period to the residual value of the business at the end of the projection period. This valuation technique requires us to use significant estimates and assumptions, including long-term growth rates, discount rates and other inputs. The estimated growth rates for the projection period are based on our internal forecasts of anticipated future performance of the business. The residual value is estimated using a perpetual nominal growth rate, which is based on projected long-range inflation and long-term industry projections. The discount rates are calculated as the weighted average cost of capital of comparable peer companies, adjusted for company-specific risk. The market approach estimates the fair value of the reporting unit by utilizing the market comparable method, which uses revenue and earnings multiples from comparable companies.
We performed the required annual goodwill impairment test as of February 28, 2025 and concluded that goodwill was not impaired. As a result of our qualitative assessments, we determined that it was not necessary to perform a quantitative assessment at that time.
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. 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, 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 third quarter of fiscal 2024.
To determine the fair value of the Display 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 calculated as 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.
There have been no significant events or circumstances affecting the valuation of goodwill subsequent to the assessment performed in the third quarter of the fiscal year ended June 30, 2025. The next annual assessment of goodwill by reporting unit is scheduled to be performed in the third quarter of the fiscal year ending June 30, 2026.
As of June 30, 2025, following the internal reorganization noted above, goodwill is net of accumulated impairment losses of $277.6 million and $70.5 million in the Semiconductor Process Control and PCB and Component Inspection reportable segments, respectively. As of June 30, 2024, following the fiscal 2024 goodwill impairment and changes to the PCB and Display operating segment noted above, goodwill is net of accumulated impairment losses of $277.6 million, $144.2 million and $70.5 million in the Semiconductor Process Control, Specialty Semiconductor Process and PCB and Component Inspection reportable segments, respectively. As of June 30, 2023, goodwill is net of accumulated impairment losses of $277.6 million, $144.2 million and $112.5 million in the Semiconductor Process Control, Specialty Semiconductor Process and PCB and Component Inspection reportable segments, respectively.
Purchased Intangible Assets
Changes in the gross carrying amount of intangible assets result from changes in foreign currency exchange rates and acquisitions. The components of purchased intangible assets as of the dates indicated below were as follows:
(In thousands) As of June 30, 2025 As of June 30, 2024
Category Gross Carrying Amount Accumulated Amortization and Impairment Net Amount Gross Carrying Amount Accumulated Amortization and Impairment Net Amount
Existing technology $ 1,555,688  $ 1,222,520  $ 333,168  $ 1,552,074  $ 1,045,585  $ 506,489 
Customer relationships 359,555  285,274  74,281  358,567  248,106  110,461 
Trade name/trademark 119,409  113,210  6,199  119,083  97,106  21,977 
Order backlog and other 89,309  84,419  4,890  83,336  82,740  596 
Intangible assets subject to amortization
 2,123,961  1,705,423  418,538  2,113,060  1,473,537  639,523 
IPR&D 46,074  19,827  26,247  46,074  16,833  29,241 
Total $ 2,170,035  $ 1,725,250  $ 444,785  $ 2,159,134  $ 1,490,370  $ 668,764 
Refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” for our policy of testing purchased intangible assets for impairment.
In connection with the evaluation of the goodwill impairment in the PCB and Component Inspection reportable segment during the second quarter of fiscal 2025, due to the continued deterioration of financial outlook for the businesses and internal reorganization both 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 Component Inspection reportable 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 $8.7 million. No impairment was identified for other long-lived assets in the second quarter of fiscal 2025.
As part of the evaluation of goodwill impairment in the former PCB and Display operating segment in the second quarter of fiscal 2024 noted above, the Company assessed long-lived assets for impairment prior to performing the goodwill impairment test. As a result, we recorded a total purchased intangible asset impairment charge of $26.4 million in the second quarter of fiscal 2024.
In the third quarter of fiscal 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.
The total impairment charges for goodwill and purchased intangible assets of $239.1 million during the second quarter of fiscal 2025 and $219.0 million during the second quarter of fiscal 2024, as well as the goodwill impairment charge of $70.5 million in the third quarter of fiscal 2024, were recognized as separate charges and included in income (loss) from operations.
As of June 30, 2025 and 2024, there were no impairment indicators for purchased intangible assets.
Amortization expense for purchased intangible assets was $220.4 million, $239.3 million, and $260.6 million, for the fiscal years ended June 30, 2025, 2024 and 2023, respectively.
Based on the purchased intangible assets gross carrying amount recorded as of June 30, 2025, the remaining estimated annual amortization expense is expected to be as follows:
Fiscal Year Ending June 30: Amortization (In thousands)
2026 $ 195,869 
2027 123,357 
2028 48,123 
2029 35,237 
2030 14,349 
Thereafter 1,603 
Total $ 418,538 
The expected amortization expense is an estimate. Actual amounts of amortization may differ from estimated amounts due to additional intangible asset acquisitions, changes in foreign currency exchange rates, impairment of intangible assets and other events.