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Acquisitions, Intangible Assets, and Goodwill | 9 Months Ended
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Sep. 30, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] |
Acquisitions, Intangible Assets, and Goodwill | Acquisitions, Intangible Assets, and Goodwill Acquisitions Exploding Topics On August 15, 2024, the Company completed an asset purchase agreement with Backlinko, LLC, doing business as Exploding Topics, to acquire substantially all of the assets of Exploding Topics. The Company has accounted for this transaction as a business combination under the acquisition method. The purpose of this asset acquisition was to acquire the traffic generating content of Exploding Topics. The acquisition date fair value of the consideration transferred totaled $2,950 which includes a holdback of $531 to be paid on August 15, 2025. This holdback amount is included in other current liabilities within the unaudited condensed consolidated balance sheet as of September 30, 2024. The Company assigned a value of $1,062 to the acquired identifiable intangible assets consisted of content, customer relationships, and developed technology, which are amortized over the assets’ useful lives using a straight-line amortization method. The Company assigned useful lives to the acquired content, customer relationships, and developed technology, of four years, three years, and three years, respectively. The Company used the guideline public company method to value the identifiable intangible assets. After allocating the purchase price to identifiable assets acquired and liabilities assumed, the remaining purchase price of $1,888 was allocated to goodwill, which primarily relates to expected future site traffic generation and is deductible for tax purposes. The allocation of the purchase price is preliminary as of September 30, 2024 as the Company continues to gather information supporting the acquired assets and liabilities to finalize the purchase price allocation. The Company recorded $119 and $128 in transaction costs related to the transaction during the three and nine months ended September 30, 2024, respectively, which are included in the unaudited condensed consolidated statements of operations and comprehensive income (loss) in its income from continuing operations under the line item, General and administrative. As of August 15, 2024, the results of Exploding Topics’ operations are included within the Company’s consolidated financial statements. This business combination did not have a material impact on the Company’s consolidated financial statements. Therefore, actual results of operations subsequent to the acquisition date and pro forma results of operations have not been presented. Ryte On July 11, 2024, the Company acquired 100% of the outstanding shares of Ryte GmbH ("Ryte"). The Company has accounted for this transaction as a business combination under the acquisition method. The purpose of this business combination was to expand the Company’s enterprise offerings by adding enterprise site audit and website performance monitoring. The acquisition date fair value of the consideration transferred consisted of the following:
|  | Acquisition Date
Consideration transferred |  | Fair Value
Cash paid at close |  | $ | 8,910 |
Fair value of deferred purchase payments |  | 1,572 |
Total purchase consideration |  | $ | 10,482 |
The Company determined that the fair value of the assets acquired and liabilities assumed was $10,482, including the cash paid at close and the fair value of the deferred purchase payments as of September 30, 2024. The fair value of deferred purchase payments represents the fair value of two payments of $786 each, the first of which will be paid July 11, 2025 and is included within other current liabilities within the unaudited condensed consolidated balance sheet as of September 30, 2024. The second payment is due January 11, 2026 and is included in other long term liabilities within the unaudited condensed consolidated balance sheet as of September 30, 2024. The table below summarizes the Company’s preliminary purchase price allocation. The allocation of the purchase price is preliminary as of September 30, 2024 as the Company continues to gather information supporting the acquired assets and liabilities to finalize the purchase price allocation.
|  | Purchase Price
Assets acquired |  | Allocation
Fair value of tangible assets: |  |
Cash and cash equivalents |  | $ | 1,550 |
Accounts Receivable |  | 742 |
Prepaid Expenses |  | 463 |
Other current assets |  | 676 |
Other assets |  | 100 |
Identifiable intangible assets |  | 2,630 |
Goodwill |  | 10,489 |
Total assets acquired |  | $ | 16,650 |
Liabilities assumed |  |
Accounts payable |  | $ | 194 |
Short-term debt |  | 2,529 |
Accrued liabilities |  | 457 |
Deferred revenue |  | 2,708 |
Other liabilities |  | 280 |
Total Liabilities Assumed |  | $ | 6,168 |
Fair value of assets acquired and liabilities assumed, net |  | $ | 10,482 |
The Company allocated $2,630 of the purchase price to identifiable intangible assets consisting of developed technology, customer relationships, and trade names, which it amortizes over the assets’ useful lives using a straight-line amortization method. The Company assigned useful lives to acquired developed technology, customer relationships, and trade names, of five years, six years, and five years, respectively. The Company used the multi-period excess earnings method to value the developed technology. The Company used the distributor method, a variation of the multi-period excess earnings method to value the customer relationships. The Company used the relief from royalty method to value the trade names. Trade names primarily relate to the Ryte brand. The significant assumptions used to estimate the value of the intangible assets included the discount rate, revenue growth rates, adjusted operating margin, and obsolescence. After allocating the purchase price to identifiable assets acquired and liabilities assumed, the remaining purchase price was allocated to goodwill, which primarily relates to expected synergies with our existing product offerings and is not deductible for tax purposes. The Company recorded $494 and $721 in transaction costs related to the transaction during the three and nine months ended September 30, 2024, respectively, which are included in the unaudited condensed consolidated statements of operations and comprehensive income (loss) in its income from continuing operations under the line item, General and administrative. As of July 11, 2024, the results of Ryte’s operations are included within the Company’s consolidated financial statements. This business combination did not have a material impact on the Company’s consolidated financial statements. Therefore, actual results of operations subsequent to the acquisition date and pro forma results of operations have not been presented. Brand 24 On April 29, 2024, the Company completed a stock purchase agreement to acquire approximately 58% of the voting equity interests in Brand 24 S.A. (“Brand 24”). The Company has accounted for this transaction as a business combination under the acquisition method. The purpose of the business combination was to expand our public relations business and customer base. The acquisition date fair value of the consideration transferred consisted of the following:
|  | Acquisition Date
Consideration transferred |  | Fair Value
Cash paid at close |  | $ | 10,650 |
Fair value of deferred purchase payments |  | 2,878 |
Consideration transferred |  | $ | 13,528 |
The Company determined that the fair value of the assets acquired and liabilities assumed was $23,374, including the fair value of the noncontrolling interest in Brand 24 of $9,846, which is reflected in the stockholders’ equity section of the unaudited condensed consolidated balance sheet as of September 30, 2024. The fair value of the noncontrolling interest on the closing date was estimated considering the implied enterprise value and the acquired percentage of Brand 24. The fair value of deferred purchase payments represents the fair value of two payments of $1,500 each, the first of which will be paid December 31, 2024 and is included within other current liabilities within the unaudited condensed consolidated balance sheet as of September 30, 2024. The second payment is due November 12, 2025 and is included in other long term liabilities within the unaudited condensed consolidated balance sheet as of September 30, 2024. The deferred purchase payments will accrue interest of 2.5% per year. The table below summarizes the Company’s preliminary purchase price allocation. The allocation of the purchase price is preliminary as of September 30, 2024 as the Company continues to gather information supporting the acquired assets and liabilities to finalize the purchase price allocation.
|  | Purchase Price
Assets acquired |  | Allocation
Fair value of tangible assets: |  |
Cash and cash equivalents |  | $ | 1,502 |
Accounts Receivable |  | 139 |
Other assets |  | 686 |
Identifiable intangible assets |  | 9,350 |
Goodwill |  | 15,846 |
Total assets acquired |  | $ | 27,523 |
Liabilities assumed |  |
Deferred revenue, current |  | 847 |
Deferred tax liabilities |  | 1,411 |
Other liabilities |  | 1,891 |
Total Liabilities Assumed |  | $ | 4,149 |
Fair value of assets acquired and liabilities assumed, net |  | $ | 23,374 |
Fair value of noncontrolling interest |  | $ | 9,846 |
Fair value of controlling interest acquired |  | $ | 13,528 |
The Company allocated $9,350 of the purchase price to identifiable intangible assets consisting of customer relationships, developed technology, and trade names, which it amortizes over the assets’ useful lives using a straight-line amortization method. The Company assigned useful lives to acquired customer relationships, developed technology, and trade names, of six years, five years, and five years, respectively. The Company used the multi-period excess earnings method to value the customer relationships. Customer relationships represent the underlying relationships with certain customers to provide ongoing services for products sold. To value the developed technology and trade names assets, the Company utilized the relief from royalty method. Trade names primarily relate to the Brand 24 brand. The significant assumptions used to estimate the value of the intangible assets included the discount rate, revenue growth rates, and customer attrition rates. After allocating the purchase price to identifiable assets acquired and liabilities assumed, the remaining purchase price was allocated to goodwill, which primarily relates to expected synergies from combining operations and is not deductible for tax purposes. The Company recorded $215 and $605 in transaction costs related to the transaction during the three and nine months ended September 30, 2024, respectively, which are included in the unaudited condensed consolidated statements of operations and comprehensive income (loss) in its income from continuing operations under the line item, General and administrative. As of April 29, 2024, the results of Brand 24’s operations are included within the Company’s consolidated financial statements. This business combination did not have a material impact on the Company’s consolidated financial statements. Therefore, actual results of operations subsequent to the acquisition date and pro forma results of operations have not been presented. In April 2024 the Company entered into award agreements with certain members of Brand 24 Management. These awards are accounted for as liability-classified awards under ASC 718, Compensation - Stock Compensation. The fair value of the awards were estimated using a Monte Carlo Simulation. The Company recorded $227 and $377 in post-acquisition compensation expense related to these awards during the three and nine months ended September 30, 2024, respectively. In May 2024, the Company announced a tender offer to purchase up to 944,616 shares of Brand 24 (the “Tender Offer”) at a price equal to PLN47.0 per share with an opening date for subscriptions of May 31, 2024 and a closing date for subscriptions of July 2, 2024. In July 2024, the Company completed the Tender Offer for outstanding shares of Brand 24 and purchased 135,500 incremental shares for an aggregate cost of $3,684 paid during the three months ended September 30, 2024 using cash on hand. The Tender Offer increased the Company’s ownership to 312,974 shares representing approximately 72% of the shares of Brand 24. Datos On December 1, 2023, the Company completed a stock purchase agreement to acquire approximately 60% of the voting equity interests in Datos Inc. (“Datos”). The Company has accounted for this transaction as a business combination under the acquisition method. The primary purpose of this business combination is to acquire Datos’ valuable clickstream data software. The Company performed acquisition accounting as of December 1, 2023. The acquisition date fair value of the consideration transferred consisted of the following:
|  | Acquisition Date
Consideration transferred |  | Fair Value
Fair value of the January 2021 and February 2022 Convertible Notes |  | $ | 7,530 |
Cash paid at close |  | 4,255 |
Other consideration |  | 2,070 |
Total purchase consideration |  | $ | 13,855 |
The Company determined that the fair value of the assets acquired and liabilities assumed was $19,021, including the fair value of the noncontrolling interest in Datos of $5,166. The fair value of the noncontrolling interest is inclusive of the fair value of the acquired call option, which gives the Company the right, but not the obligation, to purchase the remaining shares in Datos during the period beginning January 1, 2026 and ending on January 1, 2027 (the “Call Option”). The Company estimated the fair value of the noncontrolling interest, inclusive of the Call Option, using an option pricing method (a special case of the income approach), considering the initial transaction price and based on Level 3 significant unobservable inputs such as the total equity value of Datos, forecasted revenues, volatility, and risk-adjusted discount rates. Other consideration includes the deferred purchase payments, the contingent payment, and additional consideration due to the seller. A payment of $501 was made during March 2024 related to other consideration. The remaining fair value of other consideration has been recorded to other current liabilities in the unaudited condensed consolidated balance sheet as of September 30, 2024. The table below summarizes the Company’s purchase price allocation. The allocation of the purchase price is final as of September 30, 2024.
|  | Purchase Price
Assets acquired |  | Allocation
Fair value of tangible assets: |  |
Cash and cash equivalents |  | $ | 549 |
Accounts receivable |  | 518 |
Prepaid expenses and other current assets |  | 320 |
Property and equipment, net |  | 8 |
Other long-term assets |  | 3 |
Identifiable intangible assets |  | 2,780 |
Goodwill |  | 16,791 |
Total assets acquired |  | $ | 20,969 |
Liabilities assumed |  |
Accounts payable |  | 342 |
Deferred revenue |  | 367 |
Accrued expenses |  | 213 |
Other current liabilities |  | 609 |
Other long-term liabilities |  | 417 |
Total Liabilities Assumed |  | $ | 1,948 |
Fair value of assets acquired and liabilities assumed, net |  | $ | 19,021 |
Fair value of noncontrolling interest, including call option |  | $ | 5,166 |
Fair value of controlling interest acquired |  | $ | 13,855 |
The Company did not record any transaction costs related to the transaction during the three months ended September 30, 2024. The Company recorded $100 in transaction costs related to the transaction during the nine months ended September 30, 2024, which are included in the unaudited condensed consolidated statements of operations and comprehensive income (loss) in its income from continuing operations under the line item, General and administrative. As of December 1, 2023, the results of Datos’ operations are included within the Company’s consolidated financial statements. This business combination did not have a material impact on the Company’s consolidated financial statements. Therefore, actual results of operations subsequent to the acquisition date and pro forma results of operations have not been presented. Traffic Think Tank On February 23, 2023, the Company completed a purchase agreement with Rank, LLC (“Traffic Think Tank”), acquiring certain intangible assets of Traffic Think Tank for total cash consideration of $1,800, of which $360 was paid during February 2024 (the “12-month holdback amount”) and $360 was paid during August 2024 (the “18-month holdback amount”). The remaining consideration was paid upon closing. The primary purpose of the acquisition was to acquire valuable brand and content related to Traffic Think Tank’s SEO community and courses. This business combination did not have a material impact on the Company’s unaudited condensed consolidated financial statements. Therefore, actual results of operations subsequent to the acquisition date and pro forma results of operations have not been presented. Intangible Assets Intangible assets consist of intangible assets resulting from the Company’s acquisitions and its capitalized internal-use software development costs. Intangible assets consist of the following:
| As of September 30, 2024
| Weighted Average Remaining Useful Life (years) |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Developed technology | 4.1 |  | $ | 8,799 |  |  | $ | (2,447) |  |  | $ | 6,352 |
Trade name | 3.5 |  | 5,176 |  |  | (2,069) |  |  | 3,107 |
Content | 2.7 |  | 3,142 |  |  | (1,497) |  |  | 1,645 |
Customer relationships | 5.4 |  | 10,814 |  |  | (1,300) |  |  | 9,514 |
Capitalized internal-use software | 2.7 |  | 13,784 |  |  | (3,656) |  |  | 10,128 |
Total as of September 30, 2024 |  |  | $ | 41,715 |  |  | $ | (10,969) |  |  | $ | 30,746 |
| As of December 31, 2023
| Weighted Average Remaining Useful Life (years) |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Developed technology | 4.1 |  | $ | 5,604 |  |  | $ | (1,518) |  |  | $ | 4,086 |
Trade name | 3.7 |  | 4,451 |  |  | (1,404) |  |  | 3,047 |
Content | 2.3 |  | 2,387 |  |  | (1,021) |  |  | 1,366 |
Customer relationships | 4.4 |  | 1,694 |  |  | (396) |  |  | 1,298 |
Capitalized internal-use software | 2.8 |  | 8,460 |  |  | (2,174) |  |  | 6,286 |
Total as of December 31, 2023 |  |  | $ | 22,596 |  |  | $ | (6,513) |  |  | $ | 16,083 |
During the three and nine months ended September 30, 2024, the Company capitalized $1,474 and $5,842, respectively, of software development costs, which are classified as intangible assets on the accompanying unaudited condensed consolidated balance sheets, and recorded amortization expense associated with its capitalized software development costs of $588 and $1,491, respectively. During the three and nine months ended September 30, 2023, the Company capitalized $1,283 and $3,913, respectively, of software development costs, and recorded amortization expense associated with its capitalized software development costs of $151 and $421, respectively. Amortization expense for acquired intangible assets was $1,380 and $2,962 for the three and nine months ended September 30, 2024, respectively. Amortization expense for acquired intangible assets was $557 and $1,631 for the three and nine months ended September 30, 2023, respectively. As of September 30, 2024, future amortization expense is expected to be as follows:
|  | Amount
Remainder of 2024 |  | $ | 2,015 |
2025 |  | 7,808 |
2026 |  | 6,869 |
2027 |  | 4,599 |
2028 |  | 3,037 |
Thereafter |  | 6,418 |
Total |  | $ | 30,746 |
Goodwill The changes in the carrying value of goodwill during the nine months ended September 30, 2024 were as follows:
|  | Amount
Balance as of January 1, 2024 |  | $ | 24,879 |
Datos purchase price allocation adjustment |  | (104) |
Brand 24 acquisition |  | 15,846 |
Ryte acquisition |  | 10,489 |
Exploding Topics acquisition |  | 1,888 |
Foreign currency translation adjustment |  | 1,301 |
Balance as of September 30, 2024 |  | $ | 54,299 |

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