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Acquisitions | 6 Months Ended
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Jun. 30, 2021
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | Acquisitions Asset Acquisitions On March 12, 2020, Alarm.com Incorporated, one of our wholly-owned subsidiaries, acquired certain assets of an unrelated third party. Substantially all of the acquired assets consisted of in-process research and development, or IPR&D. We believe the acquisition of the IPR&D will continue to strengthen our smart intercom capability, including building access security and convenience within the multiple dwelling unit market for residents, guests and deliveries. In consideration for the purchase of the IPR&D, we paid $1.2 million in cash on March 12, 2020, with the remaining $0.3 million expected to be paid 18 months following the acquisition date, subject to offset for any indemnification obligations. The $1.5 million consideration related to IPR&D was expensed at the time of the asset acquisition and was included in research and development expense in our condensed consolidated statements of operations during the six months ended June 30, 2020, as the IPR&D had no alternative future use. On March 31, 2020, Alarm.com Incorporated acquired certain assets of an unrelated third party. Substantially all of the acquired assets consisted of IPR&D. We believe the acquisition of the IPR&D will continue to further our commitment to make significant investments in innovative research and development in the intelligently connected property market to broaden our suite of solutions. In consideration for the purchase of the IPR&D, we paid $2.1 million in cash on March 31, 2020, $0.1 million in December 2019 and the remaining $0.7 million in April 2021. The $2.9 million consideration related to IPR&D was expensed at the time of the asset acquisition and was included in research and development expense in our condensed consolidated statements of operations during the six months ended June 30, 2020, as the IPR&D had no alternative future use. Acquisition of a Business - Shooter Detection Systems On December 14, 2020, Alarm.com Incorporated acquired 100% of the issued and outstanding ownership interest units of Shooter Detection Systems, LLC, or SDS. SDS provides an indoor gunshot detection solution through the Guardian Indoor Active Shooter Detection System, which uses a combination of acoustic and infrared sensors and proprietary algorithms to detect gunshots and communicate shooting incident details to building occupants and security teams. The acquisition of SDS expands our commercial solutions and helps our partners outfit commercial and enterprise customers with the indoor gunshot detection solution. In consideration for the purchase of 100% of the issued and outstanding ownership interest units of SDS, we paid $26.6 million in cash on December 14, 2020. Pursuant to the terms of the unit purchase agreement, following the preliminary determination of the working capital of SDS as of the closing date, the purchase price decreased by $0.1 million. The purchase price allocation was finalized during the second quarter of 2021, including the working capital adjustment, resulting in a measurement period adjustment to increase the purchase consideration by $0.1 million and to increase goodwill by $0.1 million. The table below sets forth the purchase consideration and the fair value allocation of the tangible and intangible net assets acquired (in thousands):
| December 14, 2020
Calculation of Purchase Consideration: |
Cash paid, net of working capital adjustment | $ | 26,577 |
Total consideration | $ | 26,577 |
Tangible and Intangible Net Assets: |
Cash | $ | 311 |
Accounts receivable | 1,179 |
Inventory | 917 |
Other current assets | 240 |
Property and equipment | 77 |
Operating lease right-of-use assets | 384 |
Other assets | 348 |
Customer relationships | 2,362 |
Developed technology | 13,522 |
Trade name | 512 |
Accounts payable | (19) |
Accrued expenses | (111) |
Operating lease current liabilities | (51) |
Operating lease liabilities | (333) |
Goodwill | 7,239 |
Total tangible and intangible net assets | $ | 26,577 |
Goodwill of $7.2 million reflects the value of acquired workforce and synergies we expect to achieve from expanding our commercial solutions through SDS's indoor gunshot detection solution. The goodwill recognized is expected to be deductible for income tax purposes in future periods. We allocate goodwill to reporting units based on expected benefit from synergies and have allocated the goodwill to the Alarm.com segment. Fair Value of Net Assets Acquired and Intangibles In accordance with Accounting Standards Codification, or ASC, 805, Business Combinations, SDS constituted a business and the assets and liabilities were recorded at their respective fair values as of December 14, 2020. We developed our estimate of the fair value of intangible net assets using the with-and-without method for customer relationships, the multi-period excess earnings method for the developed technology and the relief-from-royalty method for the trade name. Customer Relationships We recorded the customer relationships intangible separately from goodwill based on determination of the length, strength and contractual nature of the relationship that SDS shared with its customers. We valued the single group of customer relationships using the with-and-without method, an income approach. The significant assumptions used in the with-and-without method include estimates about future expected cash flows from customer contracts and the discount rate. We are amortizing the customer relationships, valued at $2.4 million, on an attribution basis derived from the discounted cash flows of the model over an estimated useful life of six years. Developed Technology Developed technology primarily consists of intellectual property of proprietary software that is marketed for sale. We valued the developed technology by applying the multi-period excess earnings method, an income approach. The significant assumptions used in the multi-period excess earnings method include estimates about future expected cash flows from the developed technology, the obsolescence factor and the discount rate. We are amortizing the SDS developed technology, valued at $13.5 million, on an attribution method based on the discounted cash flows of the model over an estimated useful life of seven years. Trade Name We valued the trade names acquired using a relief from royalty method. The significant assumptions used in relief from royalty method include future expected cash flows from the trade name, the royalty rate and the discount rate. We are amortizing the trade names, valued at $0.5 million, on an attribution basis derived from the discounted cash flows of the model over an estimated useful life of five years.

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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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