Business Combinations

9 Months Ended

Sep. 30, 2023

Business Combination and Asset Acquisition [Abstract]

Note 2. Business Combinations

Acquisition of Wyndham Capital Mortgage

On April 3, 2023, we acquired all of the outstanding equity interests in Wyndham for cash consideration. With the acquisition of Wyndham, a leading fintech mortgage lender, we broadened our suite of home loan products and now manage the technology for a digitized mortgage experience. The acquisition is being accounted for as a business combination. The purchase consideration is being allocated to the tangible and intangible assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date. The excess of the total purchase consideration over the fair value of the net assets acquired is allocated to goodwill, which is expected to be deductible for tax purposes. The fair value estimates are subject to change for up to one year after the acquisition date as additional information becomes available. The acquisition was not determined to be a significant acquisition.

Acquisition of Technisys S.A.

During the nine months ended September 30, 2023, we made payments of $17,946 related to settlements of vested employee performance awards, which was a component of the purchase consideration in the Technisys Merger. There were 6,305,595 shares issued in the acquisition that were held in escrow. During the second quarter of 2023, we released 6,244,450 of the escrow shares. The remaining 61,145 shares continue to be held in escrow pending resolution of outstanding indemnification claims by SoFi.

Acquisition of Golden Pacific Bancorp, Inc.

As of September 30, 2023, a portion of the total cash purchase consideration ($3.3 million) related to our acquisition of Golden Pacific remained held back, representing an amount payable to a dissenting Golden Pacific shareholder pending resolution of the shareholder’s dissenter’s rights 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.

Goodwill and Intangible Assets

A rollforward of our goodwill balance is presented below:


	Nine Months Ended September 30,
	2023
Beginning balance	$	1,622,991
Less: accumulated impairment	—
Beginning balance, net	1,622,991
Additional goodwill recognized(1)	17,688

Goodwill impairment(2)	(247,174)
Ending balance(3)	$	1,393,505

_____________________

(1) Related to the acquisition of Wyndham, which is attributable to our Lending reportable segment.

(2) During the three and nine months ended September 30, 2023, we recognized goodwill impairment losses related to our Technology Platform reportable segment, which were reported within noninterest expense—goodwill impairment in the condensed consolidated statements of operations and comprehensive loss. These goodwill impairment losses represent non-cash charges and did not affect our liquidity position or regulatory capital ratios.

(3) As of September 30, 2023, goodwill attributable to the Lending, Technology Platform and Financial Services reportable segments was $17,688, $1,338,658 and $37,159, respectively.

An impairment of a reporting unit’s goodwill is determined based on the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the amount of goodwill allocated to the reporting unit. An interim test is performed when events or circumstances occur that may indicate that it is more likely than not that the fair value of any reporting unit may be less than its carrying value. During the third quarter of 2023, the Technology Platform segment continued to experience slower growth rates than expected at the time of acquisition due to: (i) the uncertain macroeconomic environment, which has continued to impact customer spend volume, and (ii) continued longer sales cycles as a result of our shift in strategy to focus on diversified durable growth driven by potential new partners with scaled customer bases and interest in multiple Technology Platform products. These factors constituted a triggering event for goodwill testing purposes. As a result, we performed an interim quantitative test on the Galileo and Technisys reporting units to determine the existence and magnitude of potential goodwill impairment. We determined it was not necessary to perform an interim goodwill impairment test for our other reporting units.

Management calculated the fair value amount of the Galileo and Technisys reporting units using a combination of a discounted cash flow (“DCF”) calculation, which is a form of the income approach, and a market multiples calculation, which is a form of the market approach. The discount rates used for the Galileo and Technisys reporting units in our interim quantitative assessment were 14.0% and 23.5%, respectively. The higher discount rate at Technisys was primarily driven by macroeconomic factors in Latin America, specifically the highly inflationary economic environment in Argentina. We applied a terminal year long-term growth rate of 3.5% to both reporting units, which is consistent with rates used in previous assessments of the reporting units. As a result of this assessment, the fair values of the Galileo and Technisys reporting units were determined to be below their carrying values by 9.9% and 14.8%, respectively, resulting in goodwill impairment charges of $124.5 million and $122.7 million, respectively.