Acquisitions

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

The revenue and earnings of the acquired businesses have been included in our results from the respective dates of the acquisitions and, other than the ironSource Merger, were not material to our consolidated financial statements in the year of acquisition.

The total purchase price allocated to the net assets acquired is assigned based on the fair values as of the date of acquisition. The fair value assigned to identifiable intangible assets acquired was determined using the income approach and the cost approach. The identifiable intangible assets are subject to amortization on a straight-line basis over their estimated useful lives, as this best approximates the benefit period related to these assets.

The excess of the purchase price over the identified tangible and intangible assets, less liabilities assumed, is recorded as goodwill. Goodwill is not subject to amortization and it typically is not deductible for U.S. income tax purposes.

For 2022, the fair values of assets acquired and liabilities assumed, including current income taxes payable and deferred taxes, may change over the measurement period as additional information is received and certain tax returns are finalized. Accordingly, the provisional measurements of fair value of the current income taxes payable and deferred taxes are subject to change. We expect to finalize the valuation as soon as practicable, but not later than one year from the respective acquisition dates.

2022 Acquisitions

ironSource Ltd.

On November 7, 2022, we completed the acquisition of ironSource, a leading business platform for the app economy. The purchase consideration was payable through the issuance of 112,547,375 shares of our common stock valued at approximately $2.8 billion, and assumed 17,326,341 equity awards valued at approximately $126.7 million for services rendered through the acquisition date. Total purchase consideration transferred was approximately $2.9 billion. We recorded $33.0 million in transaction costs associated with the acquisition for the year ended December 31, 2022. These costs were recorded within general and administrative expenses.

The revenue and earnings of the acquired business have been included in our results since the acquisition date.The revenue and income related to ironSource were $120.3 million and $5.4 million, respectively, for the year ended December 31, 2022.The following table summarizes the consideration paid for ironSource and the estimated fair values of the assets acquired at the acquisition date (in thousands):


Consideration:
Common stock issued	$	2,788,924
Assumed equity awards	126,700
Fair value of total consideration transferred	$	2,915,624
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	$	138,216
Accounts receivable	292,670
Prepaid expenses and other	44,457
Property, plant, and equipment	7,063
Intangible assets, net	1,270,000
Short term investments	103,831
Other assets	66,951
Accounts payable	(25,681)
Accrued expenses and other	(99,419)
Publisher payables	(258,227)
Deferred revenue	(1,325)
Other long-term liabilities	(165,996)
Total identifiable net assets assumed	1,372,540
Goodwill (1)	1,543,084
Total	$	2,915,624

(1) Goodwill reflects the expected future benefits of certain synergies and acquired assembled workforce, which does not qualify for separate recognition as an identifiable intangible asset. The goodwill balance is not subject to amortization and is not deductible for U.S. income tax purposes.

MindKick, Inc.

On January 28, 2022, we completed the purchase of MindKick, Inc. ("MindKick") for a total purchase consideration of approximately $46.6 million. This consideration included a combination of approximately $26.7 million in cash and the issuance of 169,321 shares of our common stock valued at approximately $16.1 million. An additional 42,330 shares of our common stock subject to a service-based vesting condition were granted to certain employees of Mindkick; these shares of common stock are accounted for outside of the business combination and will be recognized as post-combination expense. MindKick provides 2D game creation tools and game templates with the goal of providing consumers the ability to create, play, and share their own 2D games on mobile. Prior to the completion of the acquisition, we held a minority investment in MindKick that we accounted for using the equity method of accounting. In circumstances where a business combination is achieved in stages, previously-held equity interests are remeasured at fair value. The remeasured fair value assigned to the previously-held equity interest in MindKick of $3.7 million approximates cost, and therefore, no gain or loss was recognized. The identifiable assets and liabilities acquired are primarily $37.0 million in goodwill, $7.5 million in intangible assets, $2.8 million in cash, and ($0.7 million) in other net assets and liabilities. The transaction costs associated with the acquisition are not material. The revenue and earnings of the acquired business have been included in our results since the acquisition date and are not material to our consolidated results.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents the consolidated results of ironSource for the years ended December 31, 2022 and 2021, giving effect to the acquisition as if it had occurred on January 1, 2021, and combines the historical financial results of ironSource. The unaudited pro forma financial information includes adjustments to give effect to pro forma events that are directly attributable to the acquisition. The pro forma financial information includes adjustments to amortization for intangible assets acquired and acquisition costs. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations of future periods. The unaudited pro forma financial information does not give effect to the potential impact of current financial conditions, future revenues, regulatory matters, or any anticipated synergies, operating efficiencies, or cost savings that may be associated with the acquisition. Consequently, actual results will differ from the unaudited pro forma financial information presented below (in thousands):


	Year Ended December 31,
	2022		2021
Unaudited pro forma financial information
Pro forma revenue	$	2,016,557	$	1,660,432
Pro forma net loss	$	(983,563)	$	(804,318)

Pro forma results of operations for the other acquisitions have not been presented because they are not material to the consolidated statements of operations and comprehensive loss, either individually or in the aggregate.

2021 Acquisitions

During the year ended December 31, 2021, we completed the acquisitions of certain companies for a total purchase consideration of approximately $2.1 billion payable in cash and stock. The purchase consideration was primarily allocated to goodwill of approximately $1.3 billion and intangible assets of approximately $790.2 million. These acquisitions were strategic in nature as they enhanced our product offerings. The revenue and earnings of the acquired businesses have been included in our results since the acquisition date.

Pro forma results of operations for these acquisitions have not been presented because they are not material to the consolidated statements of operations.