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Acquisitions

12 Months Ended

Jul. 31, 2021

Note 6—Acquisitions

Mobile Top-Up Provider

On December 3, 2020, the Company’s subsidiary IDT International Telecom, Inc. (“IDTIT”) acquired 51% of the issued shares of a company that provides a digital platform facilitating supply and distribution of mobile airtime and data top-ups and other services across borders. The operating results of the acquired company from the date of acquisition, which were not significant, are included in the Company’s consolidated financial statements.

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The acquisition date fair value of the consideration consisted of the following (in thousands):

(in thousands)	Dec 3, 2020
Cash paid	$	2,732
Cash acquired		(344	)
Cash paid, net of cash acquired		2,388
Contingent consideration		393
Total fair value of consideration, net of cash acquired	$	2,781

The contingent consideration of $0.5 million will be paid (a) no later than November 30, 2021 if the acquired company generates EBITDA (as defined in the purchase agreement) of no less than $1.0 million between October 1, 2020 and September 30, 2021; or (b) no later than November 30, 2022 if the acquired company generates EBITDA of no less than $1.0 million between October 1, 2021 and September 30, 2022. The acquisition date fair value of the contingent consideration was estimated using discounted cash flow models. This fair value measurement was based on significant inputs not observable in the market and therefore represents a Level 3 measurement. There was no change in the estimated fair value of the contingent consideration in the period from the acquisition date to July 31, 2021.

The impact of the acquisition’s purchase price allocations on the Company’s consolidated balance sheet was as follows:

(in thousands)	Dec 3, 2020
Trade accounts receivable	$	656
Prepaid expenses		1,644
Property, plant, and equipment		75
Goodwill		2,025
Customer relationships (15-year useful life)		1,960
Tradenames (20-year useful life)		440
Deferred income tax assets		197
Other assets		30
Trade accounts payable		(1,306	)
Accrued expenses		(423	)
Other current liabilities		(329	)
Non-compete agreement
Other liabilities
Noncontrolling interests		(2,188	)
Net assets acquired excluding cash	$	2,781

The goodwill was assigned to the Traditional Communications segment and was attributable primarily to the assembled workforces and the expected synergies from the business combination. The goodwill is not expected to be deductible for income tax purposes.

Pursuant to a Put/Call Option Agreement related to the 5% of the issued shares of the acquired company that the seller did not initially sell to IDTIT (“Option Shares”), the seller exercised its option and on March 22, 2021, IDTIT purchased the Option Shares for $0.3 million. The purchase of the Option Shares resulted in a $0.2 million reduction in “Noncontrolling interests” and a $21,000 reduction in “Additional paid-in capital” in the consolidated balance sheets.

On June 15, 2021, IDTIT purchased 19% of the issued shares of the acquired company from the remaining noncontrolling interest holder. The purchase price was cash of $1.0 million plus contingent consideration of up to $0.3 million if the acquired company meets certain Adjusted EBITDA targets (as defined in the purchase agreement) no later than April 1, 2023. The acquisition date fair value of the contingent consideration of $0.2 million was estimated using cash flow models. This fair value measurement was based on significant inputs not observable in the market and therefore represents a Level 3 measurement. The purchase of the shares resulted in a $1.0 million reduction in “Noncontrolling interests,” a $0.3 million reduction in “Additional paid-in capital,” and $0.2 million liability in the consolidated balance sheets. There was no change in the estimated fair value of the contingent consideration in the period from the acquisition date to July 31, 2021.

The Company’s pro forma results of operations as if the acquisition occurred on August 1, 2019 were not materially different from the actual results of operations.

Ringsouth Europa, S.L.

On December 11, 2019, the Company’s subsidiary, net2phone, Inc. acquired 100% of the outstanding shares of Ringsouth Europa, S.L. (“Ringsouth”), a regional provider of cloud communications services to businesses in Spain. The acquisition expanded net2phone’s business into Spain. Ringsouth’s operating results from the date of acquisition, which were not significant, are included in the Company’s consolidated financial statements.

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The acquisition date fair value of the consideration consisted of the following:

(in thousands)	Dec 11, 2019
Cash paid	$	450
Contingent consideration		375
Total fair value of consideration	$	825

The contingent consideration includes two potential payments to the seller of $0.4 million each, based on monthly recurring revenue targets to be achieved over a 36-month period and 48-month period. The second potential payment is not contingent upon meeting the target for the first payment. The fair value of the contingent consideration was estimated using discounted cash flow models and Monte Carlo simulations. This fair value measurement was based on significant inputs not observable in the market and therefore represents a Level 3 measurement. There was no change in the estimated fair value of the contingent consideration in the period from the acquisition date to July 31, 2021, although the balance changed due to foreign currency translation adjustments.

The impact of the acquisition’s purchase price allocations on the Company’s consolidated balance sheet was as follows:

(in thousands)	Dec 11, 2019
Trade accounts receivable	$	142
Other current assets		21
Property, plant, and equipment		84
Goodwill		1,437
Non-compete agreement (4-year useful life)		50
Customer relationships (7-year useful life)		130
Tradename (2-year useful life)		30
Deferred income tax assets		118
Other assets		10
Trade accounts payable		(302	)
Accrued expenses		(136	)
Other current liabilities		(408	)
Other liabilities		(351	)
Net assets acquired	$	825

The goodwill was assigned to the net2phone-UCaaS segment and was attributable primarily to Ringsouth’s assembled workforce and expected synergies from the business combination. The goodwill is expected to be deductible for income tax purposes.

The Company’s pro forma results of operations as if the Ringsouth acquisition occurred on August 1, 2019 were not materially different from the actual results of operations.

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)