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Business Combinations | 6 Months Ended
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Jun. 30, 2022
Business Combination and Asset Acquisition [Abstract] |
Business Combinations | Business Combinations Acquisition of Golden Pacific Bancorp, Inc. On February 2, 2022, we acquired Golden Pacific Bancorp, Inc., a bank holding company, and its wholly-owned subsidiary, which is a national bank (collectively referred to as “Golden Pacific”), pursuant to an Agreement and Plan of Merger dated as of March 8, 2021 by and among the Company, a wholly-owned subsidiary of the Company, and Golden Pacific. In the business combination, we acquired all of the outstanding equity interests in Golden Pacific for total cash purchase consideration of $22.3 million (the “Bank Merger”). After closing the Bank Merger, we became a bank holding company and Golden Pacific began operating as SoFi Bank, National Association (“SoFi Bank”). We are duly registered as a bank holding company with the Board of Governors of the Federal Reserve System (the “Federal Reserve”). SoFi Bank is a national banking association whose primary federal regulator is the Office of the Comptroller of the Currency (the “OCC”). Deposit accounts of SoFi Bank are insured by the Federal Deposit Insurance Corporation (the “FDIC”) through the Deposit Insurance Fund to the fullest extent permitted by law. The closing of the Bank Merger was subject to regulatory approval. On January 18, 2022, we received approval from the Federal Reserve of our application to become a bank holding company under the Bank Holding Company Act, and we received conditional approval from the OCC to close the Bank Merger. The OCC also approved our application to change the composition of Golden Pacific’s assets in connection with the Bank Merger. The OCC conditional approval imposed a number of conditions, including that SoFi Bank have initial paid-in capital of no less than $750 million and adhere to an operating agreement. Golden Pacific’s community bank business continues to operate as a division of SoFi Bank. A portion of the total cash purchase consideration ($0.6 million) was held back by the Company to satisfy any indemnification or certain other obligations (“Holdback Amount”), as certain legal proceedings with which Golden Pacific is involved as a plaintiff were not resolved at the time the Bank Merger closed. The Holdback Amount will be used for further financing or costs incurred associated with the litigation, which we began incurring during the second quarter of 2022, and the remaining amount upon resolution of the litigation, if any, will be released to the Golden Pacific shareholders. Additionally, we held back a $3.3 million payable to a dissenting Golden Pacific shareholder pending resolution of the shareholder’s appraisal claim, which could possibly result in a lower or higher amount paid to the dissenting shareholder once a ruling is made regarding the appraisal claim. The Bank Merger was accounted for as a business combination. The preliminary purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date, which were measured in accordance with the principles outlined in ASC 820. The excess of the total purchase consideration over the fair value of the net assets acquired of $11.2 million was allocated to goodwill, none of which is expected to be deductible for tax purposes, and which is allocated to our Financial Services segment. Goodwill is primarily attributable to the expected benefits of operating a national bank. The results of operations of Golden Pacific are included in SoFi’s consolidated financial statements as of and for the three and six months ended June 30, 2022. As the acquisition was not determined to be a significant acquisition under ASC 805, Business Combinations, we are not disclosing the pro forma impact of this acquisition to the results of operations in our interim and annual filings with the SEC. Identifiable intangible net assets at the date of acquisition included finite-lived intangible assets for core deposits with an aggregate fair value of $1.0 million. The intangible assets are being amortized over a period of 7.3 years based on the estimated economic life of the underlying assets. We incurred total acquisition-related costs related to the Bank Merger of $2.2 million, which were incurred during the three months ended March 31, 2021, and are presented within noninterest expense—general and administrative in the unaudited condensed consolidated statements of operations and comprehensive income (loss). Acquisition of Technisys S.A. On March 3, 2022, we acquired Technisys S.A., a Luxembourg société anonyme (“Technisys”), pursuant to an Agreement and Plan of Merger dated as of February 19, 2022 and amended as of March 3, 2022, by and among the Company, Technisys, Atom New Delaware, Inc., a Delaware corporation and a wholly owned subsidiary of Atom, and Atom Merger Sub Corporation, a Delaware corporation and wholly owned subsidiary of SoFi Technologies (“Technisys Merger”). In the business combination, we acquired all of the outstanding equity interests in Technisys. Technisys is a cloud-native digital and core banking platform with an existing footprint of financial services customers in Latin America. The Technisys Merger was accounted for as a business combination. The following table presents the components of the purchase consideration to acquire Technisys:
Fair value of common stock issued(1) | $ | 875,042 |
Fair value of awards assumed(2) | 2,855 |
Amounts payable to settle vested employee performance awards(3) | 37,297 |
Settlement of pre-combination transactions between acquirer and acquiree | 235 |
Total purchase consideration | $ | 915,429 |
___________________ (1) Reflects the shares of SoFi common stock issued upon closing the acquisition of 81,856,112, inclusive of 6,903,663 shares held in escrow, multiplied by the closing stock price of SoFi common stock on the closing date of the Technisys Merger. As of June 30, 2022, the purchase price allocation process for Technisys was not finalized, as further discussed below. (2) We contemporaneously converted outstanding performance awards into restricted stock units (“RSUs”) to acquire common stock of SoFi (“Replacement Awards”). The fair value of awards assumed in the purchase consideration was based on the closing stock price of SoFi common stock on the closing date of the Technisys Merger. Refer to Note 12 for additional information on our RSUs, including the Replacement Awards. (3) We made payments of $14,773 and $17,641 related to this component of purchase consideration during the three and six months ended June 30, 2022, respectively. As of June 30, 2022, the equity component of the total purchase consideration remained subject to further adjustment, pending final agreement regarding a closing net working capital calculation specified in the merger agreement. Any further adjustment to the equity consideration, which may increase or decrease by up to 598,068 shares, would similarly impact the carrying value of recognized goodwill, but would not impact the estimated fair values of the assets acquired and liabilities assumed in conjunction with the transaction. The following table presents the allocation of the preliminary total purchase consideration to the estimated fair values of the identified assets acquired and liabilities assumed of Technisys as of the date of acquisition, as well as measurement period adjustments reflected in the second quarter of 2022, which also impacted the amount of goodwill:
| Preliminary Purchase Price Allocation |  | Measurement Period Adjustments(1) |  | Updated Purchase Price Allocation
Assets acquired |  |  |  |  |
Cash and cash equivalents | $ | 25,710 |  |  | $ | — |  |  | $ | 25,710 |
Accounts receivable(2) | 15,354 |  |  | (2,303) |  |  | 13,051 |
Intangible assets(3) | 239,000 |  |  | — |  |  | 239,000 |
Operating lease right-of-use (“ROU”) assets | 587 |  |  | — |  |  | 587 |
Other assets | 1,011 |  |  | 2,361 |  |  | 3,372 |
Total identifiable assets acquired | 281,662 |  |  | 58 |  |  | 281,720 |
Liabilities assumed |  |  |  |  |
Accounts payable, accruals and other liabilities | 16,462 |  |  | 7,500 |  |  | 23,962 |
Operating lease liabilities | 587 |  |  | — |  |  | 587 |
Deferred income taxes(4) | 55,104 |  |  | 2,239 |  |  | 57,343 |
Total liabilities assumed | 72,153 |  |  | 9,739 |  |  | 81,892 |
Total identified net assets acquired | 209,509 |  |  | (9,681) |  |  | 199,828 |
Goodwill(5) | 705,920 |  |  | 9,681 |  |  | 715,601 |
Total consideration | $ | 915,429 |  |  | $ | — |  |  | $ | 915,429 |
_________________ (1)The measurement period adjustments did not have a significant impact on our results of operations. The adjustment to accounts payable, accruals and other liabilities includes a tax payable adjustment of $6,548. (2)Included accounts receivable and unbilled revenue with a gross contractual amount of $15,407. At the date of acquisition, the Company expected $2,356 to be uncollectible. (3)Intangible assets consist of finite-lived intangible assets, as follows:
| Gross carrying amount |  | Weighted-average useful life (years)
Developed technology(a) | $ | 187,000 |  |  | 8.8
Customer-related(b) | 42,000 |  |  | 4.8
Trade names, trademarks and domain names(c) | 10,000 |  |  | 8.8
__________________ (a) Valued using the Multi-Period Excess Earnings Method (“MPEEM”), which is a form of the income approach. The significant assumptions include: (i) the estimated annual net cash flows, which are a function of expected earnings attributable to the asset (and include an assumed technology migration curve), contributory asset charges and the applicable tax rate, and (ii) an assumed discount rate, which reflects the risk of the asset relative to the overall risk of Technisys. (b) Valued using the With and Without Method, which is a form of the income approach. The significant assumptions include: (i) the estimated annual revenues and net cash flows both with the existing customer base and without the existing customer base, which include assumptions regarding revenue ramp-up periods and attrition rates, and (ii) an assumed discount rate, consistent with (a) above. (c) Valued using the Relief from Royalty Method, which is a form of the income approach. The significant assumptions include: (i) the estimated annual net cash flows, which are a function of expected earnings attributable to the asset, the probability of use of the asset, the royalty rate and the applicable tax rate, and (ii) the discount rate, consistent with (a) above. (4)The deferred tax liabilities recognized in the acquisition were primarily related to the acquired intangible assets, in which the acquiree had a significantly lower tax basis compared to the fair value. (5)The excess of the total purchase consideration over the fair value of the identified net assets acquired was allocated to goodwill, none of which is expected to be deductible for tax purposes. The goodwill is subject to additional changes based on the outcome of the net working capital calculation referenced earlier in this footnote. Goodwill is primarily attributable to expected growth opportunities at Technisys, and secondarily attributable to the expected synergies from leveraging the Technisys technology to enhance and expand Galileo’s product offerings and operations, as well as expand its market reach. As such, all of the goodwill is allocated to the Technology Platform segment. The Company incurred total acquisition-related costs related to the Technisys Merger of $20.6 million, of which $3.3 million were incurred during the year ended December 31, 2021, and $17.3 million were incurred during the six months ended June 30, 2022, which were presented within noninterest expense—general and administrative in the unaudited condensed consolidated statements of operations and comprehensive income (loss). From the date of acquisition through June 30, 2022, the acquired results of operations for Technisys contributed total net revenue of $26.5 million and net loss of $9.4 million to the Company’s consolidated results, which was inclusive of amortization expense recognized on the acquired intangible assets. The following unaudited supplemental pro forma financial information presents the Company’s consolidated results of operations for the three months ended June 30, 2021, and six months ended June 30, 2022 and 2021 as if the business combination had occurred on January 1, 2021:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2021 |  | 2022 |  | 2021
Total net revenue |  | $ | 248,149 |  |  | $ | 703,775 |  |  | $ | 457,252 |
Net loss |  | (172,431) |  |  | (197,369) |  |  | (373,368) |
The unaudited supplemental pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the actual results of operations that would have been achieved, nor is it indicative of future results of operations. The unaudited supplemental pro forma financial information reflects pro forma adjustments that give effect to applying the Company’s accounting policies and certain events the Company believes to be directly attributable to the acquisition. The pro forma adjustments primarily include: •incremental straight-line amortization expense associated with acquired intangible assets; •an adjustment to reflect post-combination share-based compensation expense associated with the Replacement Awards as if the conversion had occurred on January 1, 2021; •an adjustment to reflect acquisition-related costs for both parties as if they were incurred during the earliest period presented; and •the related income tax effects, at the statutory tax rate applicable for each period, of the pro forma adjustments noted above. The unaudited supplemental pro forma financial information does not give effect to any anticipated cost savings, operating efficiencies or other synergies that may be associated with the acquisition, or any estimated costs that have been or will be incurred by the Company to integrate the assets and operations of Technisys. Goodwill A rollforward of our goodwill balance is presented below as of the date indicated:
| June 30, 2022 |  |  |  |
Beginning balance | $ | 898,527 |  |  |  |  |
Less: accumulated impairment | — |  |  |  |  |
Beginning balance, net | 898,527 |  |  |  |  |
Additional goodwill recognized(1) | 726,848 |  |  |  |  |
Ending balance(2) | $ | 1,625,375 |  |  |  |  |
_____________________ (1) The additional goodwill recognized as of June 30, 2022 includes $715,601 related to the Technisys Merger (inclusive of a measurement period adjustment in the second quarter of 2022) and $11,247 related to the Bank Merger. (2) As of June 30, 2022, we had goodwill attributable to the following reportable segments: $1,588,216 to Technology Platform and $37,159 to Financial Services.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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