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Deferred Acquisition Consideration | 3 Months Ended
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Mar. 31, 2023
Business Combinations [Abstract] |
Deferred Acquisition Consideration | 2. Acquisitions 2022 Acquisitions Acquisition of Brand New Galaxy On April 19, 2022, the Company acquired Brand New Galaxy (“BNG”), for approximately $20.9 million of cash consideration, as well as contingent consideration up to a maximum value of $50.0 million. The contingent consideration is due upon meeting certain future earnings targets through 2024, with approximately 67% payable in cash and 33% payable in shares of Class A Common Stock. The consideration has been allocated to the assets acquired and assumed liabilities of BNG based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The preliminary purchase price allocation is as follows:
|  | Amount
|  | (dollars in thousands)
Cash and cash equivalents |  | $ | 2,766 |
Accounts receivable |  | 10,147 |
Other current assets |  | 671 |
Fixed assets |  | 1,587 |
Identifiable intangible assets |  | 12,740 |
Other assets |  | 1,583 |
Accounts payable |  | (4,771) |
Accruals and other liabilities |  | (6,880) |
Advance billings |  | (1,159) |
Other liabilities |  | (3,642) |
Net assets assumed |  | 13,042 |
Goodwill |  | 24,643 |
Purchase price consideration |  | $ | 37,685 |
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of BNG. Goodwill of $24.6 million was assigned to the Brand Performance Network reportable segment. The majority of the goodwill is non-deductible for income tax purposes. Intangible assets consist of trade names, customer relationships and developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately ten years. The following table presents the details of identifiable intangible assets acquired:
|  | Estimated Fair Value |  | Estimated Useful Life in Years
|  | (dollars in thousands)
Customer relationships |  | $ | 6,150 |  |  | 10
Trade names |  | 5,500 |  |  | 10
Developed technology |  | 1,090 |  |  | 7
Total acquired intangible assets |  | $ | 12,740 |  |  |
The purchase price accounting is not yet final as the Company may still make adjustments due to changes in working capital. Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.
|  | Three Months Ended March 31, 2022
|  | (dollars in thousands)
Revenue |  | $ | 650,628 |
Net income |  | 32,876 |
Revenue and net income attributable to BNG, included within the three months ended March 31, 2023 Unaudited Consolidated Statements of Operations was $6.6 million and $1.0 million, respectively. Acquisition of TMA Direct, Inc. On May 31, 2022, the Company acquired approximately 87% of TMA Direct, Inc. (“TMA Direct”) for approximately $17.2 million of cash consideration and approximately $0.5 million of deferred acquisition payments. The Company was also granted an option to purchase the remaining 13% minority interest in TMA Direct for up to approximately $13.3 million. The consideration has been allocated to the assets acquired and assumed liabilities of TMA Direct based upon estimated fair values, with any excess purchase price allocated to goodwill. The purchase price allocation is as follows:
|  | Amount
|  | (dollars in thousands)
Accounts receivable |  | $ | 582 |
Other current assets |  | 669 |
Identifiable intangible assets |  | 13,200 |
Accounts payable |  | (379) |
Other liabilities |  | (270) |
Noncontrolling interests |  | (2,667) |
Net assets assumed |  | 11,135 |
Goodwill |  | 6,569 |
Purchase price consideration |  | $ | 17,704 |
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of TMA Direct. Goodwill of $6.6 million was assigned to the Communications Network reportable segment. The majority of the goodwill is deductible for income tax purposes. Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is ten years. The following table presents the details of identifiable intangible assets acquired:
|  | Fair Value |  | Estimated Useful Life in Years
|  | (dollars in thousands)
Customer relationships |  | $ | 11,400 |  |  | 10
Trade names |  | 1,800 |  |  | 10
Total acquired intangible assets |  | $ | 13,200 |  |  |
Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.
|  | Three Months Ended March 31, 2022
|  | (dollars in thousands)
Revenue |  | $ | 644,909 |
Net income |  | 34,341 |
Revenue and net loss attributable to TMA Direct, included within the three months ended March 31, 2023 Unaudited Consolidated Statements of Operations was $2.6 million and less than $0.1 million, respectively. Acquisition of Maru Group Limited Ltd. On October 3, 2022, the Company acquired Maru Group Limited Ltd. (“Maru”) for approximately £23.0 million (approximately $25.8 million) in cash consideration. The consideration has been allocated to the assets acquired and assumed liabilities of Maru based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The preliminary purchase price allocation is as follows:
|  | Amount
|  | (dollars in thousands)
Cash and cash equivalents |  | $ | 1,033 |
Accounts receivable |  | 7,374 |
Other current assets |  | 899 |
Fixed assets |  | 157 |
Identifiable intangible assets |  | 14,300 |
Other assets |  | 1,920 |
Accounts payable |  | (4,087) |
Accruals and other liabilities |  | (9,154) |
Advance billings |  | (6,462) |
Other liabilities |  | (3,591) |
Net assets assumed |  | 2,389 |
Goodwill |  | 23,404 |
Purchase price consideration |  | $ | 25,793 |
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Maru and the expected growth related to new customer relationships and geographic expansion. Goodwill of $23.4 million was assigned to the All Other reportable segment. The goodwill is partially deductible for income tax purposes. Intangible assets consist of trade names, customer relationships, and developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately eight years. The following table presents the details of identifiable intangible assets acquired:
|  | Estimated Fair Value |  | Estimated Useful Life in Years
|  | (dollars in thousands)
Customer relationships |  | $ | 4,900 |  |  | 10
Trade names |  | 4,000 |  |  | 10
Developed technology |  | 5,400 |  |  | 2-7
Total acquired intangible assets |  | $ | 14,300 |  |  |
Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.
|  | Three Months Ended March 31, 2022
|  | (dollars in thousands)
Revenue |  | $ | 653,375 |
Net Income |  | 28,110 |
Revenue and net loss attributable to Maru, included within the three months ended March 31, 2023 Unaudited Consolidated Statements of Operations was $8.9 million and $2.2 million, respectively. Acquisition of Wolfgang, LLC. On October 3, 2022, the Company acquired the remaining 80% interest that it did not already own in Wolfgang, LLC., (“Wolfgang”) for approximately $3.8 million in cash consideration and 175 thousand shares of Class A Common Stock with a fair value of $1.2 million, subject to post-closing adjustments. The consideration has been allocated to the assets acquired and assumed liabilities of Wolfgang based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The preliminary purchase price allocation is as follows:
|  | Amount
|  | (dollars in thousands)
Cash and cash equivalents |  | $ | 1,606 |
Accounts receivable |  | 1,180 |
Other current assets |  | 100 |
Identifiable intangible assets |  | 1,055 |
Other assets |  | 46 |
Current liabilities |  | (278) |
Net assets assumed |  | 3,709 |
Goodwill |  | 2,451 |
Purchase price consideration including fair value of previously owned interest |  | $ | 6,160 |
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Wolfgang. Goodwill of $2.5 million was assigned to the Integrated Agencies Network reportable segment. The majority of the goodwill is deductible for income tax purposes. Intangible assets consist of customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is five years. The following table presents the details of identifiable intangible assets acquired:
|  | Estimated Fair Value |  | Estimated Useful Life in Years
|  | (dollars in thousands)
Customer relationships |  | $ | 1,055 |  |  | 5
Total acquired intangible assets |  | $ | 1,055 |  |  |
Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.
|  | Three Months Ended March 31, 2022
|  | (dollars in thousands)
Revenue |  | $ | 647,309 |
Net income |  | 34,482 |
Revenue and net income attributable to Wolfgang, included within the three months ended March 31, 2023 Unaudited Consolidated Statements of Operations was $1.1 million and $0.2 million, respectively. Acquisition of Epicenter Experience LLC. On October 3, 2022, the Company acquired the assets of Epicenter Experience LLC., (“Epicenter”) for approximately $9.9 million in cash consideration, subject to post-closing adjustments, as well as contingent consideration up to a maximum value of $5.0 million. The contingent consideration is subject to meeting certain future earnings targets through 2024 and can be paid up to 25% in shares of Class A Common Stock. The consideration has been allocated to the assets acquired and assumed liabilities of Epicenter based upon preliminary estimated fair values. The preliminary purchase price allocation is as follows:
|  | Amount
|  | (dollars in thousands)
Accounts receivable |  | $ | 901 |
Other current assets |  | 45 |
Identifiable intangible assets |  | 7,300 |
Accounts payable |  | (148) |
Other current liabilities |  | (650) |
Net assets assumed |  | 7,448 |
Goodwill |  | 4,416 |
Purchase price consideration |  | $ | 11,864 |
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Epicenter. Goodwill of $4.4 million was assigned to the All Other reportable segment. The majority of the goodwill is deductible for income tax purposes. The intangible asset acquired was developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is five years. The following table presents the details of identifiable intangible assets acquired:
|  | Estimated Fair Value |  | Estimated Useful Life in Years
|  | (dollars in thousands)
Developed technology |  | $ | 7,300 |  |  | 5
Total acquired intangible assets |  | $ | 7,300 |  |  |
Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.
|  | Three Months Ended March 31, 2022
|  | (dollars in thousands)
Revenue |  | $ | 643,885 |
Net income |  | 33,483 |
Revenue and net income attributable to Epicenter, included within the three months ended March 31, 2023 Unaudited Consolidated Statements of Operations was $1.1 million and $0.6 million, respectively. Other Acquisitions On July 12, 2022, the Company acquired PEP Group Holdings B.V., an omnichannel content creation and adaption production company for approximately $0.5 million in cash consideration, subject to post-closing adjustments, as well as contingent consideration up to a maximum value of €2.6 million. The contingent consideration is subject to meeting certain future earnings targets through 2025. On July 15, 2022, the Company acquired Apollo Program II Inc., a real-time artificial intelligence-powered software-as-a-service platform, for approximately $2.3 million in cash consideration, subject to post-closing adjustments, as well as guaranteed deferred payments of $1.0 million and $1.5 million on or prior to July 1, 2023 and July 1, 2024, respectively. 2022 Purchases of Noncontrolling Interests On April 1, 2022, the Company acquired the remaining interest in Hello Design, LLC (“Hello Design”) that it did not already own for an aggregate purchase price of $4.6 million, comprised of a closing cash payment of $3.6 million and a contingent deferred acquisition payment of $1.0 million. The contingent deferred payment was based on the financial results of the underlying business through the end of 2022 with the payment due in 2023. 5. Deferred Acquisition Consideration Deferred acquisition consideration on the Unaudited Consolidated Balance Sheets consists of deferred obligations related to contingent and fixed purchase price payments, and contingent and fixed retention payments tied to continued employment of specific personnel. Contingent deferred acquisition consideration is recorded at the acquisition date fair value and adjusted at each reporting period within Office and general expenses on the Unaudited Consolidated Statements of Operations. The following table presents changes in contingent deferred acquisition consideration, measured at fair value on a recurring basis using significant unobservable inputs, and a reconciliation to the amounts reported on the Unaudited Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022:
| March 31, 2023 |  | December 31, 2022
| (dollars in thousands)
Beginning balance | $ | 161,323 |  |  | $ | 222,369 |
Payments | — |  |  | (73,963) |
Adjustments to deferred acquisition consideration (1) | 4,088 |  |  | (12,779) |
Additions | — |  |  | 26,594 |
Currency translation adjustment and other | 273 |  |  | (898) |
Ending balance (2) | $ | 165,684 |  |  | $ | 161,323 |
(1) Adjustment to deferred acquisition consideration contains fair value changes from the Company’s initial estimates of deferred acquisition payments. (2) The contingent and fixed deferred acquisition consideration obligation was $71.8 million and $93.9 million as of March 31, 2023 and $68.9 million and $92.4 million as of December 31, 2022. In addition, $51.5 million of the deferred acquisition consideration is expected to be settled in the Company’s shares of Class A Common Stock.

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