| Acquisitions | 8. Acquisitions Fiscal year 2021 Modernize, Inc. On July 1, 2020, the Company completed the acquisition of Modernize, a leading home improvement performance marketing company in the home services client vertical, to broaden its customer and media relationships. In exchange for all the outstanding shares of Modernize, the Company paid $43.9 million in cash upon closing (including $3.9 million cash for net assets acquired subject to post-closing adjustments) and will make $27.5 million in post-closing payments, payable in equal annual installments over a five year period, with the first installment payable twelve months following the date of closing The following table summarizes the consideration as of the acquisition date (in thousands):
Estimated Fair Value
Cash
$
43,944
Post-closing payments, net of imputed interest of $2,724
24,776
Total
$
68,720
The acquisition was accounted for as a business combination and the results of operations of Modernize have been included in the Company’s results of operations as of July 1, 2020. The Company expensed all transaction costs in the period in which they were incurred. The Company allocated the purchase price to identifiable assets acquired and liabilities assumed based on their estimated fair values. The fair value of the assets acquired and liabilities assumed was determined by the Company and in doing so engaged a third-party valuation specialist to assist with the measurement of the fair value of identifiable intangible assets. The estimated fair value of the identifiable assets acquired and liabilities assumed in the acquisition was based on management’s best estimates. The fair value of the customer relationships was determined using the multi-period excess earnings income approach. The fair value of trade names and acquired technology was determined using the relief-from-royalty method. The fair value of content was determined using the cost approach. The excess of the purchase price over the aggregate fair value of the identifiable assets acquired was recorded as goodwill and is primarily attributable to synergies the Company expects to achieve related to the acquisition. The goodwill is not deductible for tax purposes. The following table summarizes the preliminary allocation of the purchase price to the fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):
Estimated Fair Value
Cash and cash equivalents
$
3,638
Accounts receivable, net
4,999
Operating lease right-of-use assets
4,702
Other intangible assets
33,700
Other assets
1,386
Total identifiable assets acquired
48,425
Accrued liabilities
4,909
Operating lease liabilities
4,896
Deferred tax liabilities
7,886
Other liabilities
465
Total identifiable liabilities assumed
18,156
Net identifiable assets acquired
30,269
Goodwill
38,451
Net assets acquired
$
68,720
The following table summarizes the fair values of the identifiable intangible assets acquired and the estimated useful lives as of the acquisition date (in thousands):
Estimated Fair Value
Estimated Useful Life
Customer/publisher/advertiser relationships
$
21,300
9 years
Content
800
1.5 years
Website/trade/domain names
5,300
15 years
Acquired technology and others
6,300
4 years
Total
$
33,700
The Company is still finalizing the allocation of the purchase price to the individual assets acquired. Accordingly, these preliminary estimates are subject to change during the measurement period, which is the period subsequent to the acquisition date during which the acquirer may adjust the provisional amounts recognized for a business combination, not to exceed one year form the acquisition date. The final purchase price allocation, which may include changes in the allocations within intangible assets and between intangible assets and goodwill, as well as changes in the estimated useful lives of the intangible assets, will be determined when the Company has completed the detailed review of underlying inputs and assumptions used in its preliminary purchase price allocation. The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and Modernize as though Modernize had been acquired as of the beginning of fiscal year 2020. The unaudited pro forma financial information is presented for illustrative purposes only and do not necessarily reflect what the combined company’s results of operations would have been had the acquisition occurred as of the beginning of fiscal year 2020, nor is it necessarily indicative of the future results of operations of the combined company.
Three Months Ended
September 30,
2020
2019
(In thousands)
Net revenue
$
139,269
$
142,930
Net income
14,851
2,068
The pro forma financial information for the three months ended September 30, 2020 includes the elimination of $170 thousand of nonrecurring acquisition costs incurred by the Company that are directly related to the acquisition. Fiscal year 2020 There was no significant business acquisition completed in fiscal year 2020. Fiscal year 2019 AmOne Corp. On October 1, 2018, the completed the purchase of AmOne, an online performance marketing company in the financial services client vertical, to broaden its publisher and customer relationships. In exchange for all outstanding shares of AmOne, the Company paid $23.0 million in upon closing (including $2.7 million cash for net assets acquired subject to post-closing adjustments) and will make $8.0 million in post-closing payments, payable in equal semi-annual installments over a two year period, with the first installment paid six months following the date of closing. CloudControlMedia, LLC On April 15, 2019 completed the of a marketing services company in the education client vertical, to broaden its customer relationships In exchange for all the outstanding shares of CCM, the Company paid $8.3 million in cash upon closing ( including $0.8 million cash for net assets acquired subject to post-closing adjustments) and will make a series of future payments following the acquisition date. The $7.5 million post-closing payments are payable in cash in equal semi-annual installments over a four year period, with the first installment paid six months following the date of closing. The contingent consideration is payable for five years following the date of closing and is calculated every June 30 and December 31 for the preceding six months. MyBankTracker.com, LLC O n May 14, 2019, completed the purchase of MBT, a leading personal finance website to broaden its customer relationships. In exchange for all the outstanding shares of MBT, the Company paid $4.5 million in cash upon closing (including $1.5 million cash for net assets acquired) and will make a series of future payments following the acquisition date. The $4.0 million post-closing payments are payable in cash in equal semi-annual installments over a two year period, with the first installment paid twelve months following the date of closing. The contingent consideration is calculated semi-annually for the preceding six months beginning on December 31, 2019 and ending on June 30, 2023. In the third quarter of fiscal year 2020, the Company reached an agreement with the seller and paid off the outstanding balance owed with respect to the contingent consideration. The following table summarizes the consideration for each acquisition as of the acquisition dates (in thousands):
AmOne
CCM
MBT
Cash
$
23,032
$
8,281
$
4,511
Post-closing adjustments for net assets acquired
138
(72
)
—
Post-closing payments, net of imputed interest (1)
7,514
6,671
3,708
Contingent consideration
—
3,553
1,505
Total
$
30,684
$
18,433
$
9,724
(1)
The post-closing payment is net of imputed interest of $486 thousand for AmOne, $829 thousand for CCM and $292 thousand for MBT. |
