Business Combination | 6 Months Ended |
Sep. 28, 2014 |
Business Combinations [Abstract] | ' |
Business Combination | ' |
8. Business Combination |
Movea S.A |
On July 22, 2014, the Company acquired 100% equity interest of Movea, a company formed under the laws of France, and a leading provider of software for ultra-low power location, activity tracking and context sensing. The acquisition of Movea further scales the Company’s leadership in motion software. |
The Company paid $60.9 million in cash as consideration for the acquisition and could pay an additional $13.0 million in cash contingent upon the achievement of certain milestones within one year of the acquisition. |
In addition, the Company, under its 2011 Stock Incentive Plan granted restricted stock units (RSU), with a fair value of $6.6 million, to certain Movea employees. The RSUs will vest over a 5 year requisite service period. |
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The table below is a summary of the preliminary purchase price allocation of the fair value of assets acquired and liabilities assumed in connection with the acquisition of Movea (in thousands): |
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Cash consideration | | $ | 60,900 | | | | | | | | | | | | | |
Contingent consideration | | | 8,400 | | | | | | | | | | | | | |
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| | $ | 69,300 | | | | | | | | | | | | | |
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Preliminary allocation of purchase price: | | | | | | | | | | | | | | | | |
Current assets | | $ | 3,082 | | | | | | | | | | | | | |
Fixed assets | | | 209 | | | | | | | | | | | | | |
Other non-current assets | | | 592 | | | | | | | | | | | | | |
Developed technology | | | 7,200 | | | | | | | | | | | | | |
Goodwill | | | 68,330 | | | | | | | | | | | | | |
Current liabilities | | | (5,016 | ) | | | | | | | | | | | | |
Long-term liabilities | | | (5,097 | ) | | | | | | | | | | | | |
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Total preliminary purchase price | | $ | 69,300 | | | | | | | | | | | | | |
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The purchase price includes contingent considerations of (i) $8.0 million payable in cash to the former Movea shareholders upon a design win with a major smartphone manufacturer within one year of closing date, and (ii) $5.0 million payable in cash to the former Movea shareholders upon a specific product development milestone by December 2014. The fair value of the contingent consideration of $8.4 million was derived from a probability weighted earn-out model of future contingent payments. |
The purchase price exceeded the fair value of the net tangible and identifiable intangible assets acquired and, as a result, the Company recorded goodwill in connection with this transaction. The acquisition will provide assembled workforce and synergy with other of the Company’s offerings. These factors primarily contributed to a purchase price that resulted in goodwill. |
The following table presents certain information on acquired identifiable intangible assets related to the Movea acquisition: |
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| | Estimated Fair Value | | | Estimated Useful Life | | | | | | | | | |
(in thousands) | (in years) | | | | | | | | |
Developed technology | | $ | 7,200 | | | | 5 | | | | | | | | | |
The fair value of developed technology was determined using a cost approach, which includes an estimate of time and expenses required to recreate the intangible asset. The fair value of developed technology was capitalized as of the acquisition date and will be amortized using a straight-line method to cost of revenue over the estimated useful life of 5 years. |
Unaudited Pro Forma Financial Information |
The following unaudited pro forma financial information presents the combined results of operations of InvenSense and Movea as if the acquisition had occurred as of the beginning of fiscal 2014: |
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| | Three Months Ended | | | Six Months Ended | |
| | September 28, | | | September 29, | | | September 28, | | | September 29, | |
| | 2014 | | | 2013 | | | 2014 | | | 2013 | |
Net revenue | | $ | 90,368 | | | $ | 71,603 | | | $ | 157,550 | | | $ | 128,274 | |
Net income (loss) | | $ | (7,305 | ) | | $ | 11,307 | | | $ | (14,717 | ) | | $ | 19,255 | |
The unaudited pro forma financial information should not be taken as representative of our future consolidated results of operations or financial condition. |
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Trusted Positioning, Inc. |
On August 29, 2014, the Company completed the acquisition of Trusted Positioning, Inc., (“TPI”), a Canadian corporation, which is an indoor/outdoor positioning software company with the vision to provide ‘Positioning Everywhere’. The acquisition of TPI, particularly its advanced location tracking software, strengthens the Company’s position as a provider of intelligent sensor System on Chips (SoC) for the fast growing mobile market. |
The Company’s acquisition of TPI was completed through a step acquisition. In fiscal 2014, the Company made investments totaling $0.3 million to own approximately 4.57% of TPI’s outstanding common stock. On August 29, 2014, the Company purchased the remaining outstanding common stock of TPI for a total consideration of $26.1 million. The total purchase price, as presented in the table below, consists of (i) cash of $11.5 million (ii) issuance of 236,000 shares of the Company’s common stock with a fair value of $5.7 million (iii) contingent considerations with a combined fair value of $7.6 million payable upon TPI’s achievement of certain product development milestones, and (iv) initial investments with a fair value of $1.2 million. |
In addition, the Company, under its 2011 Stock Incentive Plan, granted equity awards (restricted stock units and stock options), to certain TPI employees with an aggregate fair value of $5.0 million. The equity awards will vest over a 5 year requisite service period. |
The table below is a summary of the preliminary purchase price allocation for the 100% equity interest of the fair value of assets acquired and liabilities assumed in connection with the acquisition of TPI (in thousands): |
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Cash consideration | | $ | 11,499 | | | | | | | | | | | | | |
Issuance of common stock | | | 5,703 | | | | | | | | | | | | | |
Contingent consideration | | | 7,634 | | | | | | | | | | | | | |
Fair value of previously held 4.57% equity interest | | | 1,215 | | | | | | | | | | | | | |
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| | $ | 26,051 | | | | | | | | | | | | | |
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Preliminary allocation of purchase price: | | | | | | | | | | | | | | | | |
Current assets | | $ | 512 | | | | | | | | | | | | | |
Fixed assets | | | 50 | | | | | | | | | | | | | |
Other non-current assets | | | 546 | | | | | | | | | | | | | |
Developed technology | | | 8,600 | | | | | | | | | | | | | |
Goodwill | | | 19,893 | | | | | | | | | | | | | |
Current liabilities | | | (1,247 | ) | | | | | | | | | | | | |
Long-term liabilities | | | (2,303 | ) | | | | | | | | | | | | |
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Total preliminary purchase price | | $ | 26,051 | | | | | | | | | | | | | |
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The purchase price includes contingent consideration comprised of (i) $5 million payable upon a design win within one year of acquisition, (ii) $3 million payable upon achieving a development milestone by December 2014, (iii) $2 million payable upon successful development of cloud application within two years of acquisition and (iv) $2 million upon first deployment of cloud application which is expected within one year of successful development of cloud application. The contingent considerations, which was derived from a probability weighted earn-out model of future contingent payments, have a combined fair value of $7.6 million, of which $4.9 million was recorded in accrued liabilities and $2.7 million was recorded in other long-term liabilities. |
The following table presents certain information on acquired identifiable intangible assets related to the TPI acquisition: |
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| | Estimated Fair Value | | | Estimated Useful Life | | | | | | | | | | |
(in thousands) | (in years) | | | | | | | | | | |
Developed technology | | $ | 8,600 | | | 5 | | | | | | | | | | |
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The fair value of developed technology was determined using a cost approach, which includes an estimate of time and expenses required to recreate the intangible asset. The fair value of developed technology was capitalized as of the acquisition date and will be amortized using a straight-line method to cost of revenue over the estimated useful life of 5 years. |
In connection with the acquisition of TPI, the Company recorded a non-cash gain of approximately $0.9 million resulting from the difference between carrying value of its initial investments in TPI of $0.3 million and fair value of such investments of $1.2 million, as of the acquisition date. This non-cash gain is recorded in “Other income, net” on the Condensed Consolidated Statement of Operations. |
MEMS Microphone Business of Analog Devices, Inc. |
In the third quarter of fiscal 2014, the Company acquired certain assets relating to Analog Devices, Inc. (“ADI”) MEMS microphone business for a purchase price of $100 million in cash, of which the Company is entitled to certain contingent future expense reimbursements of approximately $2.2 million. The Company also agreed to a contingent cash payment of up to $70.0 million payable upon the achievement of certain revenue performance targets within one year of the transaction close date. Due to a low probability of achieving the revenue targets, the fair value of the contingent consideration is estimated to be zero in the purchase price allocation described below. ADI licensed certain technology related to the MEMS microphone business to the Company on a royalty-free, worldwide basis, and provides certain transition services to the Company following the closing. |
The strategic rationale for the acquisition was to accelerate the Company’s audio roadmap and complement its current MEMS System on Chip product offerings at existing mobile, gaming and wearable device customers, while gaining entry into new markets. The acquisition expands the Company’s patent portfolio and existing tier one customer base, which includes major OEM brands worldwide. |
The allocation of the purchase price of the assets acquired and liabilities assumed based on their fair values was as follows: |
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| | Total Amount | | | | | | | | | | | | | |
| | (in thousands) | | | | | | | | | | | | | |
Inventories | | $ | 5,107 | | | | | | | | | | | | | |
Property and equipment, net | | | 4,339 | | | | | | | | | | | | | |
Intangible assets: | | | | | | | | | | | | | | | | |
Developed technology | | | 28,520 | | | | | | | | | | | | | |
In-Process Research & Development | | | 7,330 | | | | | | | | | | | | | |
Customer Relationships | | | 1,560 | | | | | | | | | | | | | |
Goodwill | | | 50,952 | | | | | | | | | | | | | |
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Total assets acquired | | $ | 97,808 | | | | | | | | | | | | | |
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Total purchase price (net of $2.2 million of contingent expense reimbursements) | | | 97,808 | | | | | | | | | | | | | |
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The fair value of intangible assets of $37.4 million has been allocated to the following three asset categories: 1) developed technology, 2) in-process research & development and 3) customer relationships. Developed technology and customer relationships are amortized on a straight line basis over the estimated useful life of the assets. |
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The table below presents certain information on acquired identifiable intangible assets related to the ADI acquisition: |
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| | Estimated Fair Value | | | Estimated Useful Life | | | | | | | | | | |
(in thousands) | (in years) | | | | | | | | | | |
Developed technology | | $ | 28,520 | | | 6 | | | | | | | | | | |
Customer relationships | | $ | 1,560 | | | 7 | | | | | | | | | | |
The amounts of revenue and earnings of the Microphone Product Line since the acquisition date included in the consolidated statements of operations for the current reporting periods have not been presented because the impact was not material to the Company’s consolidated results of operations. |