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Acquisitions
 12 Months Ended
Jul. 31, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]  
Acquisitions

Note 6—Acquisitions

 

Integra CCS

 

On March 3, 2022, net2phone 2.0 purchased all of the outstanding shares of Onwaba S.R.L. and Gem S.R.L. for an aggregate purchase price of up to $15.0 million. Onwaba S.R.L. and Gem S.R.L. are located in Uruguay and use the trade name Integra CCS. The operating results of the acquired companies from the date of acquisition, which were not significant, are included in the Company’s consolidated financial statements.

 

The purchase price consisted of: (a) cash of $7.2 million that was paid at closing, (b) 27,765 shares of the Company’s Class B common stock with a value of $1.0 million that were issued at closing, (c) cash of $3.3 million, half of which was paid in fiscal 2023 and the remainder was paid in fiscal 2024, and (d) contingent consideration of up to $3.5 million based on annual cumulative incremental recurring seat revenue of the net2phone segment over a four-year period, payable in cash and/or equity at net2phone 2.0’s discretion.

 

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

 

(in thousands)    
Cash paid  $7,200 
Cash acquired   (81)
Cash paid, net of cash acquired   7,119 
Shares of the Company’s Class B common stock   1,000 
Future payments subject to holdback   3,158 
Contingent consideration   1,361 
Total fair value of consideration, net of cash acquired  $12,638 

 

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 represented 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, 2023. In fiscal 2024, the Company paid an aggregate of $0.5 million of the contingent consideration.

 

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

 

(in thousands)    
Trade accounts receivable  $332 
Prepaid expenses   4 
Other current assets   21 
Property, plant, and equipment (mainly acquired technology)   777 
Goodwill   8,433 
Customer relationships (7-year useful lives)    2,230 
Tradename (5-year useful life)   400 
Non-compete agreements (6-year useful lives)   660 
Operating lease right-of-use asset   732 
Other assets   24 
Accrued expenses   (243)
Operating lease liability current portion   (176)
Operating lease liability noncurrent portion   (556)
Net assets acquired excluding cash  $12,638 

 

 

The goodwill was assigned to the net2phone segment and was attributable primarily to the assembled workforce and the expected synergies from the business combination. The goodwill is not expected to be deductible for income tax purposes.

 

Leaf Global Fintech Corporation

 

On March 1, 2022, the Company’s subsidiary, IDT International Telecom, Inc. (“IDTIT”), purchased all of the outstanding shares of Leaf Global Fintech Corporation (“Leaf”), a provider of digital wallet services in emerging markets, for up to $6.05 million. Leaf’s operating results from the date of acquisition, which were not significant, are included in the Company’s consolidated financial statements.

 

The purchase price was comprised of (a) $0.5 million paid in cash at the closing, (b) a working capital adjustment for a maximum of $50,000, and (c) contingent consideration of up to $5.5 million based on annual gross profit over a five-year period.

 

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

 

(in thousands)    
Cash paid  $500 
Cash acquired   (167)
Cash paid, net of cash acquired   333 
Contingent consideration   3,330 
Total fair value of consideration, net of cash acquired  $3,663 

 

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 represented 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, 2022. In fiscal 2024 and fiscal 2023, the Company determined that the requirements for the contingent consideration payments would likely not be met. The Company recorded gains of $1.8 million and $1.6 million in fiscal 2024 and fiscal 2023, respectively, on the write-off of the contingent consideration payment obligations, which was included in “Other operating expense, net” in the accompanying consolidated statements of income.

 

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

 

(in thousands)    
Current assets  $9 
Property, plant, and equipment (mainly acquired technology)   324 
Goodwill   3,199 
Tradename (5-year useful life)   131 
Net assets acquired excluding cash  $3,663 

 

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