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Business Combinations and Asset Acquisitions | 12 Months Ended
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Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract] |
Business Combinations and Asset Acquisitions |
3. | Business Combinations and Asset Acquisitions
Assets acquired and liabilities assumed in business combinations are recognized at their acquisition date fair values. Determination of the fair values of assets and liabilities acquired requires estimates and the use of valuation techniques when market values are not readily available. The results of operations of businesses acquired by the Company have been included in the consolidated statements of operations since their respective dates of acquisition. Goodwill generated from all business combinations completed was primarily attributable to expected synergies from future growth and potential monetization opportunities. 2021 Acquisitions During the year ended December 31, 2021, the Company completed several business acquisitions including the acquisition of 100% of the ownership interests in KVS Title, LLC, a title insurance and escrow settlement services company, Glide Labs, Inc., a real estate technology company, Randall Family of Companies, a group of Southern Coastal New England residential real-estate brokerage entities, three additional small real estate brokerages and three additional small title insurance and escrow settlement services companies. The purpose of these acquisitions was to expand the Company’s title and escrow offerings, to grow the Company’s transaction management tools included in its end-to-end real estate platform, and to expand its existing brokerage business in key domestic markets. During 2021, the Company completed two asset acquisitions of smaller residential real estate brokerages in connection with ongoing agent recruitment efforts in key domestic markets. The consideration for these two acquisitions comprised $13.2 million in cash, net of cash acquired , $5.8 million in the Company’s Class A common stock and up to $3.4 million of additional cash that may be paid contingent on certain earnings-based targets being met. During the year ended December 31, 2021, the Company recorded net assets of $23.9 million primarily comprised of customer relationships. Such amounts are also included in the tables below. Total Consideration of Business Combinations and Asset Acquisitions The following table summarizes the aggregate fair value of the components of the purchase consideration, as of the respective dates of each of the business combinations and asset acquisitions (in millions):
Cash paid at closing |  | $ | 148.6 |
Class A common stock issued |  |  | 5.8 |
Cash to be paid after closing |  |  | 21.8 |
Contingent consideration |  |  | 5.6 |
Non-controlling interest |  |  | 3.8 |
|  | $ | 185.6 |
The following table summarizes the preliminary allocations of the purchase price for the business combinations and asset acquisitions (in millions):
Cash and cash equivalents |  | $ | 11.2 |
Other current assets |  |  | 4.1 |
Property and equipment |  |  | 2.5 |
Goodwill (1) |  |  | 68.5 |
Operating lease right-of-use assets |  |  | 12.8 |
In t angible assets (2) |  |  |  |
Acquired Technology |  |  | 5.5 |
Customer relationships |  |  | 90.7 |
Trademarks |  |  | 11.3 |
Total assets |  | $ | 206.6 |
Total liabilities |  | $ | (21.0 | )
Net assets |  | $ | 185.6 |
| (1) | Approximately $22.9 million of the goodwill is deductible for tax purposes. The amount of tax-deductible goodwill may increase in the future to approximately $52.1 million dependent on the payment of certain holdbacks and acquisition related compensation arrangements. These amounts are not expected to have an impact on the income tax provision while the Company maintains a full valuation allowance on its domestic deferred tax assets.
| (2) | The identified intangible assets have a useful life of 2-9 years.
The Company has recorded the preliminary purchase price allocation as of the acquisition dates and expects to finalize its analysis within the measurement period (up to one year from the acquisition date) of the respective transaction. Any adjustments during the measurement period would have a corresponding offset to goodwill. Upon conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, any subsequent adjustments are recorded to the consolidated statements of operations. Pro forma revenue and earnings for 2021 acquisitions have not been presented because they do not have a material impact to the Company’s consolidated revenue and results of operations, either individually or in the aggregate. 2020 Acquisitions Modus Technologies, Inc. On October 9, 2020, the Company completed the acquisition of 100% of the outstanding shares of Modus Technologies, Inc., a title and escrow company that provides an internally developed title and escrow technology platform to agents, home sellers and buyers. The purpose of the acquisition was to expand its title and escrow service offerings and technology capabilities. The consideration for the purchase of Modus Technologies, Inc. included a contingent consideration arrangement, payable over three years and based on the attainment of transaction-based targets as defined by the purchase agreement. The maximum amount of contingent consideration that could be earned was $70.0 million, payable in a combination of $50.0 million in cash and $20.0 million in the Company’s Class A common stock. The Company recorded the contingent consideration liability at its fair value of $20.0 million and will continue to adjust the contingent consideration liability at each reporting date to its then fair value, with any changes recorded through Operations and support in the accompanying consolidated statements of operations. See “Note 5 — Fair Value of Financial Assets and Liabilities” for further discussion of inputs used to determine the fair value of contingent consideration. A portion of this contingent consideration is subjected to forfeiture dependent on certain employees providing future service to the Company and will be accounted for as compensation expense over the required service periods. See “Other Acquisition Related Compensation” below. As of December 31, 2021, the remaining unpaid contingent consideration is $11.0 million and will be paid primarily in 2022 and 2023. Other During 2020, the Company completed several asset acquisitions. These transactions included the acquisition of smaller residential real estate brokerages in connection with ongoing agent recruitment efforts in key domestic markets. The consideration for these acquisitions was paid entirely in cash. The following table summarizes the aggregate fair value of the components of the purchase consideration, as of the respective dates of each of the acquisitions (in millions):
|  | Modus Technologies, Inc. |  |  | Other |
Cash paid at closing |  | $ | 27.7 |  |  | $ | 0.9 |
Cash to be paid after closing |  |  | 2.0 |  |  |  | — |
Contingent consideration (payable in the form of cash and Class A common stock) |  |  | 20.0 |  |  |  | — |
|  | $ | 49.7 |  |  | $ | 0.9 |
The following table summarizes the allocations of the purchase price (in millions):
|  | Modus Technologies, Inc. |  |  | Other |
Cash and cash equivalents |  | $ | 3.0 |  |  | $ | — |
Other current assets |  |  | 0.1 |  |  |  | — |
Property and equipment |  |  | 0.5 |  |  |  | — |
Goodwill (1) |  |  | 38.4 |  |  |  | — |
Operating lease right-of-use assets |  |  | 4.1 |  |  |  | — |
Intangible assets (2) : |  |  |  |  |  |  |  |
Acquired technology |  |  | 6.3 |  |  |  | — |
Customer relationships |  |  | 1.3 |  |  |  | 0.9 |
Trademarks |  |  | 1.7 |  |  |  | — |
Total assets |  | $ | 55.4 |  |  | $ | 0.9 |
Total liabilities |  | $ | (5.7 | ) |  | $ | — |
Net assets |  | $ | 49.7 |  |  | $ | 0.9 |
(1) | The goodwill is non-tax deductible.
(2) | The identified intangible assets have a useful life of 3-6 years.
Pro forma revenue and earnings for 2020 acquisitions have not been presented because they do not have a material impact to the Company’s consolidated revenue and results of operations, either individually or in aggregate. 2019 Acquisitions Contactually, Inc. In February 2019, the Company completed the acquisition of 100% of the outstanding shares of Contactually, Inc. (“Contactually”), a technology company that provides an internally developed cloud-based Customer Relationship Management (“CRM”) platform tailored to the real estate industry. The Company acquired Contactually primarily for its CRM expertise and engineering employees to assist in the development of the Company’s own proprietary CRM software platform. Other During 2019, the Company completed the acquisition of several residential real estate brokerages in connection with ongoing agent recruitment efforts in key domestic markets. The consideration for these acquisitions includes contingent consideration arrangements, payable over a period of up to 6 years and are based on the attainment of profitability targets as defined by the purchase agreements. The maximum amount that can be earned is $13.1 million, payable in cash. The Company recorded the contingent consideration at its fair value of $7.4 million and will continue to adjust the contingent consideration liabilities at each reporting date to its then fair value, with any changes recorded to Operations and support in the accompanying consolidated statements of operations. The following table summarizes the aggregate fair value of the components of the purchase consideration, as of the respective dates of each of the acquisitions (in millions):
|  | Contactually, Inc. |  |  | Other |
Cash paid at closing |  | $ | 24.5 |  |  | $ | 14.6 |
Elimination of pre-existing relationships |  |  | 1.6 |  |  |  | — |
Contingent consideration (payable in the form of cash) |  |  | — |  |  |  | 7.4 |
|  | $ | 26.1 |  |  | $ | 22.0 |
The following table summarizes the allocation of the purchase price (in millions):
|  | Contactually, Inc. |  |  | Other |
Cash and cash equivalents |  | $ | 1.0 |  |  | $ | 2.8 |
Other current assets |  |  | 1.0 |  |  |  | 0.4 |
Property and equipment |  |  | — |  |  |  | 6.7 |
Goodwill (1) |  |  | 21.3 |  |  |  | 6.2 |
Operating lease right-of-use assets |  |  | 1.8 |  |  |  | 33.7 |
Intangible assets (2) : |  |  |  |  |  |  |  |
Acquired technology |  |  | 5.7 |  |  |  | — |
Customer relationships |  |  | — |  |  |  | 6.5 |
Trademarks |  |  | — |  |  |  | 0.6 |
Other non-current assets |  |  | 0.3 |  |  |  | 1.1 |
Total assets |  | $ | 31.1 |  |  | $ | 58.0 |
Total liabilities |  | $ | (5.0 | ) |  | $ | (36.0 | )
Net assets |  | $ | 26.1 |  |  | $ | 22.0 |
(1) | The goodwill is non-tax deductible.
(2) | The identified intangible assets have a useful life of 2-9 years.
Pro forma revenue and earnings for 2019 acquisitions have not been presented because they do not have a material impact to the Company’s consolidated revenue and results of operations, either individually or in aggregate. Contingent Consideration Contingent consideration represents obligations of the Company to transfer cash and common stock to the sellers of certain acquired businesses in the event that certain targets and milestones are met. Approximately $11.0 million of the obligations as of December 31, 2021 are fixed in value. As of December 31, 2021, the undiscounted maximum payment under these arrangements was $24.4 million. Changes in contingent consideration measured at fair value on a recurring basis were as follows (in millions):
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Opening balance |  | $ | 39.8 |  |  | $ | 16.4 |  |  | $ | 19.6 |
Acquisitions |  |  | 5.6 |  |  |  | 20.0 |  |  |  | 7.4 |
Fair value (gains) losses included in net loss |  |  | (4.7 | ) |  |  | 8.9 |  |  |  | (9.9 | )
Payments |  |  | (16.3 | ) |  |  | (5.5 | ) |  |  | (0.7 | )
Closing balance |  | $ | 24.4 |  |  | $ | 39.8 |  |  | $ | 16.4 |
Other Acquisition Related Compensation In connection with the Company’s acquisitions, a portion of the cash and equity consideration amounts paid or to be paid to the selling shareholders are subject to clawback and forfeiture dependent on certain employees and agents providing continued service to the Company. Accordingly, this consideration is accounted for as compensation for future services and the Company recognizes the expenses over the underlying retention periods. As of December 31, 2021, the Company expects to pay an additional $60.5 million in future cash consideration to sellers in connection with these arrangements. For the years ended December 31, 2021, 2020 and 2019, the Company recognized $28.6 million, $ 4.2 million and $7.1 million in compensation expense within Operations and support in the accompanying consolidated statement s of operations related to these arrangements. Similarly, the Company granted 277,776, 221,390 and 21,080 shares of common stock to sellers in accordance with arrangements where receipt of the shares were contingent on certain employees and agents providing continued service to the Company in the years ended December 31, 2021, 2020 and 2019. Accordingly, these share-based payments will be accounted for as stock-based compensation expense over the underlying retention periods. For the years ended December 31, 2021 and 2019, the Company recognized $1.1 million and $0.6 million in stock-based compensation expense within Operations and support in the accompanying consolidated statement of operations related to these arrangements. There was no stock-based compensation expense related to these compensation arrangements recognized during the year ended December 31, 2020.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: 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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