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Acquisitions | 9 Months Ended
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Sep. 30, 2021
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | Acquisitions On September 9, 2021, we acquired all the equity interest of Ultimate Information Systems, Inc. (dba Arx). Arx is a cloud-based platform which creates accessible technology to enable a modern-day police force that is fully transparent, accountable, and a trusted resource to the community it serves. The total purchase price, net of cash acquired, was approximately $12.8 million, of which $12.4 million was paid in cash and approximately $0.5 million was accrued for indemnity holdbacks, subject to certain post-closing adjustments. On September 1, 2021, we acquired VendEngine, Inc. (VendEngine) as contemplated by the Agreement and Plan of Merger dated June 3, 2021. As result of the merger, VendEngine became a direct subsidiary of the Company. VendEngine is a cloud-based software provider focused on financial technology for the corrections market. The total purchase price, net of cash acquired of $3.0 million, was approximately $83.1 million, consisting of $80.2 million paid in cash, and approximately $5.9 million related to indemnity holdbacks, subject to certain post-closing adjustments. In connection with this transaction, we acquired total tangible assets of $6.6 million and assumed liabilities of approximately $4.3 million. We recorded goodwill of approximately $58.7 million, none of which is expected to be deductible for tax purposes, and other identifiable intangible assets of approximately $32.0 million. The $32.0 million of intangible assets are attributable to customer relationships, acquired software, trade name and will be amortized over a weighted average period of approximately 17 years. We recorded net deferred tax liabilities of $7.5 million related to the tax effect of our estimated fair value allocations. VendEngine provides a suite of financial and communications applications ranging from deposit technologies for commissary, ordering, and warehouse technology to a host of informational, electronic communications, security, accounting, and financial trust management components for more than 300 correctional facilities across 32 states and the Caribbean. Therefore, the goodwill of approximately $58.7 million arising from this acquisition is primarily attributed to our ability to generate increased revenues, earnings and cash flow by expanding our addressable market and client base. On April 21, 2021 (the “Closing Date”), we acquired NIC as contemplated by the Agreement and Plan of Merger dated February 9, 2021. As result of the merger, NIC became a direct subsidiary of the Company and NIC’s subsidiaries became indirect subsidiaries. NIC is a leading digital government solutions and payment company that primarily serves federal and state government agencies. The total purchase price, net of cash acquired of $331.8 million, was approximately $2.0 billion, consisting of cash paid of $2.3 billion and $1.9 million of purchase consideration related to the conversion of unvested restricted stock awards. We have performed a preliminary valuation analysis of the fair market value of NIC’s assets and liabilities. The following table summarizes the preliminary allocation of the purchase price as of the acquisition date:
(In thousands) |  |
Cash |  | $ | 331,783 |
Accounts receivable |  | 149,515 |
Other current assets |  | 12,988 |
Other noncurrent assets |  | 20,974 |
Identifiable intangible assets |  | 790,000 |
Goodwill |  | 1,438,603 |
Accounts payable |  | (150,099) |
Accrued expenses |  | (63,809) |
Other noncurrent liabilities |  | (11,493) |
Deferred revenue |  | (3,294) |
Deferred tax liabilities, net |  | (194,676) |
Total consideration |  | $ | 2,320,492 |
In connection with this transaction, we acquired total tangible assets of $515.3 million and assumed liabilities of approximately $228.7 million. We recorded goodwill of approximately $1.4 billion, none of which is expected to be deductible for tax purposes, and other identifiable intangible assets of approximately $790.0 million. The $790.0 million of intangible assets are attributable to customer relationships, acquired software and trade name and will be amortized over a weighted average period of approximately 17 years. We recorded net deferred tax liabilities of $194.7 million related to the tax effect of our estimated fair value allocations. In the nine months ended September 30, 2021, we recorded adjustments to the preliminary opening balance sheet attributed to a decrease to accounts receivable and increases in identifiable intangible assets, deferred revenue and related deferred taxes resulting in a net decrease to goodwill of approximately $25.5 million. NIC delivers user-friendly digital services that make it easier and more efficient for citizens and businesses to interact with government - providing valuable conveniences like applying for unemployment insurance, submitting business filings, renewing licenses, accessing information and making secure payments without visiting a government office. In addition, NIC has extensive expertise and scale in the government payments arena which will accelerate our strategic payments initiatives. Therefore, the goodwill of approximately $1.4 billion arising from this acquisition is primarily attributed to our ability to generate increased revenues, earnings and cash flow by expanding our addressable market and client base. The following unaudited pro forma consolidated operating results information has been prepared as if the acquisition of NIC had occurred on January 1, 2020, after giving effect to certain adjustments, including amortization of intangibles, interest, transaction costs, and tax effects.
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
Revenues |  | $ | 459,873 |  |  | $ | 420,336 |  |  | $ | 1,322,055 |  |  | $ | 1,152,675 |
Net income |  | $ | 44,170 |  |  | $ | 50,257 |  |  | $ | 103,330 |  |  | $ | 130,555 |
Basic earnings per share |  | $ | 1.08 |  |  | $ | 1.25 |  |  | $ | 2.53 |  |  | $ | 3.26 |
Diluted earnings per share |  | $ | 1.04 |  |  | $ | 1.21 |  |  | $ | 2.45 |  |  | $ | 3.15 |
The pro forma information above does not include acquisitions that are not considered material to our results of operations. The pro forma information does not purport to represent what our results of operations actually would have been had such transaction occurred on the date specified or to project our results of operations for any future period. On March 31, 2021, we acquired all the equity interest of Glass Arc, Inc. (dba ReadySub). ReadySub is a cloud-based platform that assists school districts with absence tracking, filling substitute teacher assignments, and automating essential payroll processes. The total cash price was approximately $6.2 million, net of cash acquired. On March 31, 2021, we acquired substantially all assets of DataSpec, Inc. (DataSpec), a provider of a SaaS solution that allows for secure electronic claims submission to the federal Department of Veterans Affairs and reporting capabilities, in addition to scheduling, calendaring, and payments. The total cash purchase price was approximately $5.8 million. The operating results of Arx, DataSpec, ReadySub, and VendEngine are included with the operating results of the Enterprise Software segment since their date of acquisition. The impact of the Arx, DataSpec, ReadySub, and VendEngine acquisitions, individually and in the aggregate, on our operating results, assets and liabilities is not material. The operating results of NIC are disclosed separately as a reportable segment. Revenues from NIC included in Tyler's results of operations totaled approximately $249.7 million and net income was approximately $27.2 million from the date of acquisition through September 30, 2021. In 2021, we incurred fees of approximately $22.7 million for financial advisory, legal, accounting, due diligence, valuation and other various services necessary to complete these acquisitions. The Company also incurred $1.6 million of expense related to a separation agreement with NIC's former Chief Executive Officer. These costs were expensed in 2021 and are included in selling, general and administrative expenses in the accompanying condensed consolidated statement of income. As of September 30, 2021, the purchase price allocations for Arx, DataSpec, NIC, ReadySub and VendEngine are not yet complete; therefore, the preliminary valuation estimates of fair value assumed at the acquisition date for intangible assets, receivables, deferred revenue and related deferred taxes are subject to change as valuations are finalized. Our balance sheet as of September 30, 2021, reflects the allocation of the purchase price to the net assets acquired based on their estimated fair value at the date of each acquisition. The fair value of the assets and liabilities acquired are based on valuations using Level III, unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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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 http://asc.fasb.org/topic&trid=2303972 + Details
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