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Business Combination

12 Months Ended

Dec. 31, 2024

Business Combination

Business Combination

Note 5 — Business Combination

Epiluvac

On January 31, 2023, the Company acquired Epiluvac AB, a privately held manufacturer of chemical vapor deposition (CVD) epitaxy systems that enable silicon carbide (SiC) applications in the electric vehicle market. The results of Epiluvac’s operations have been included in the consolidated financial statements since the date of acquisition.

The acquisition date fair value of the consideration totaled $56.4 million, net of cash acquired, which consisted of the following:


		Acquisition Date
		(January 31, 2023)
		(in thousands)
Cash paid, net of cash acquired		$	30,373
Contingent consideration			26,055
Acquisition date fair value		$	56,428

The purchase agreement included performance milestones that, if achieved, could trigger additional payments to the original selling shareholders. The contingent arrangements include payments up to $15.0 million based on the timely completion of certain defined milestones tied to strategic targets, and up to $20.0 million based on the percentage of orders received during the defined earn-out period. The earn-out period is four years after the closing date of the acquisition, or earlier if certain conditions are met.

The Company estimated the fair value of the contingent consideration by assigning probabilities and discount factors to each of the various defined performance milestones, while using a Monte-Carlo simulation model to determine the most likely outcome for payments to be based on the value of orders received. These fair value measurements are based on significant inputs not observable in the market and thus represent a Level 3 measurement as defined in ASC 820. The discount rate used was 5.54% for the strategic target and order value related contingent payments. The rate was determined based on the nature of the milestone, the risks and uncertainties involved and the time period until the milestone was measured. The determination of the various probabilities and discount factors is highly subjective, requires significant judgment and is influenced by a number of factors, including the adoption of SiC technology. The aggregate fair value of the contingent consideration arrangement at the acquisition date was $26.1 million.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:


		Acquisition Date
		(January 31, 2023)
		(in thousands)
Accounts receivable		$	247
Inventories			391
Prepaid expense and other current assets			381
Property, plant, and equipment			736
Intangible assets			28,540
Total identifiable assets acquired			30,295

Accounts payable and accrued expenses			656
Contract liabilities			429
Deferred income taxes			5,723
Other liabilities			80
Total liabilities assumed			6,888

Net identifiable assets acquired			23,407
Goodwill			33,021
Net assets acquired		$	56,428

The gross contractual value of the acquired accounts receivable is the amount expected to be collected by the Company, and therefore is also considered its fair value. Goodwill generated from the acquisition is primarily attributed to expected synergies from future growth and strategic advantages provided through the expansion of product offerings as well as assembled workforce and is not expected to be deductible for income tax purposes.

The classes of intangible assets acquired, and the estimated useful life of each class is presented in the table below:


		Acquisition Date
		(January 31, 2023)
		Amount			Useful life
		(in thousands)
Technology		$	28,020		15	years
Customer relationships			460		5	years
Backlog			60		1.5	years
Intangible assets acquired		$	28,540

The Company determined the estimated fair value of the identifiable intangible assets based on various factors including cost, discounted cash flow, income method, loss-of-revenue/income method, and relief-from-royalty method in determining the purchase price allocation.

For the year ended December 31, 2023, the Company incurred approximately $1.1 million of acquisition related costs, included within “Selling, general, and administrative” in the Consolidated Statement of Operations. Additionally, the pro forma Consolidated Statement of Operations as if Epiluvac had been acquired as of January 1, 2022 would not be materially different from the Company’s actual Consolidated Statement of Operations for the years ended December 31, 2024, 2023, or 2022.

During the fourth quarter of 2024, the Company lowered its projected cash flows for the Epiluvac asset group as a result of the Company’s market penetration not meeting expectations associated with the SiC technology, and determined that the revised projections were significantly lower than projected cash flows at the time of the acquisition and that these

revised projections required the Company to assess the Epiluvac asset group for impairment. See Note 8, “Goodwill and Intangible Assets,” for additional information.

Additionally, the Company updates its estimate of fair value of the contingent consideration each reporting period, utilizing the same methodologies described above. The discount rate used was 5.4% at December 31, 2024 for the strategic target and order value related contingent payments. During the year ended December 31, 2024, the Company reduced the contingent consideration by approximately $21.2 million as a result of the lowered projected bookings, the benefit for which was included within “Other operating expense (income) net” in the Consolidated Statement of Operations. Additionally, during the year ended December 31, 2024, the Company paid $1.8 million to the original selling shareholders associated with the settlement of a strategic target milestone. The total contingent consideration liability as of December 31, 2024 was $1.2 million, of which $0.7 million was included in “Accrued expenses and other current liabilities” and $0.5 million was included within “Other liabilities” on the Consolidated Balance Sheet.