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Acquisitions | 9 Months Ended
--- | ---
Mar. 31, 2021
Business Combinations [Abstract] |
Acquisitions | 8. Acquisitions Fiscal year 2021 Modernize, Inc. On July 1, 2020, the Company completed the acquisition of Modernize, a leading home improvement performance marketing company in the home services client vertical, to broaden its customer and media relationships. In exchange for all the outstanding shares of Modernize, the Company paid $43.9 million in cash upon closing (including $3.9 million cash for net assets acquired subject to post-closing adjustments) and will make $27.5 million in post-closing payments, payable in equal annual installments over a five year period, with the first installment payable twelve months following the date of closing. In addition, the Company made a Section 338(h)(10) election to treat the acquisition for tax purposes as a purchase and sale of assets, and the Company has agreed to pay any incremental taxes to Modernize resulting from that election. The following table summarizes the consideration as of the acquisition date (in thousands):
|  | Estimated Fair Value |
Cash |  | $ | 43,944 |
Post-closing payments, net of imputed interest of $2,724 |  |  | 24,776 |
Section 338 election liability to Modernize |  |  | 2,079 |
Total |  | $ | 70,799 |
The acquisition was accounted for as a business combination and the results of operations of Modernize have been included in the Company’s results of operations as of July 1, 2020. The Company expensed all transaction costs in the period in which they were incurred. The Company allocated the purchase price to identifiable assets acquired and liabilities assumed based on their estimated fair values. The fair value of the assets acquired and liabilities assumed was determined by the Company and in doing so management engaged a third-party valuation specialist to assist with the measurement of the fair value of identifiable intangible assets. The estimated fair value of the identifiable assets acquired and liabilities assumed in the acquisition was based on management’s best estimates. The fair value of the customer relationships was determined using the multi-period excess earnings income approach. The fair value of trade names and acquired technology was determined using the relief-from-royalty method. The fair value of content was determined using the cost approach. The excess of the purchase price over the aggregate fair value of the identifiable assets acquired was recorded as goodwill and is primarily attributable to synergies the Company expects to achieve related to the acquisition. The goodwill is deductible for tax purposes. The following table summarizes the preliminary allocation of the purchase price to the fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):
|  | Estimated Fair Value |
|  | Preliminary as of July 1, 2020 |  |  | Year to Date Adjustments (1) |  |  | Preliminary as of March 31, 2021 |
Cash and cash equivalents |  | $ | 3,638 |  |  | $ | — |  |  | $ | 3,638 |
Accounts receivable, net |  |  | 4,999 |  |  |  | — |  |  |  | 4,999 |
Operating lease right-of-use assets |  |  | 4,702 |  |  |  | — |  |  |  | 4,702 |
Other intangible assets |  |  | 33,700 |  |  |  | — |  |  |  | 33,700 |
Other assets |  |  | 1,386 |  |  |  | — |  |  |  | 1,386 |
Total identifiable assets acquired |  |  | 48,425 |  |  |  | — |  |  |  | 48,425 |
Accrued liabilities |  |  | 4,909 |  |  |  | — |  |  |  | 4,909 |
Operating lease liabilities |  |  | 4,896 |  |  |  | — |  |  |  | 4,896 |
Deferred tax liabilities |  |  | 7,886 |  |  |  | (7,886 | ) |  |  | — |
Other liabilities |  |  | 465 |  |  |  | (240 | ) |  |  | 225 |
Total identifiable liabilities assumed |  |  | 18,156 |  |  |  | (8,126 | ) |  |  | 10,030 |
Net identifiable assets acquired |  |  | 30,269 |  |  |  | 8,126 |  |  |  | 38,395 |
Goodwill |  |  | 38,451 |  |  |  | (6,047 | ) |  |  | 32,404 |
Net assets acquired |  | $ | 68,720 |  |  | $ | 2,079 |  |  | $ | 70,799 |
(1) | The Company made a 338(h)(10) election to treat the acquisition for tax purposes as a purchase and sale of assets which resulted in the release of the deferred tax liabilities of $7.9 million. The Company has agreed to pay any incremental taxes to Modernize resulting from that election, for an increase in total consideration of $2.1 million.
The following table summarizes the fair values of the identifiable intangible assets acquired and the estimated useful lives as of the acquisition date (in thousands):
|  |  |  | Estimated Fair Value |  |  | Estimated Useful Life
Customer/publisher/advertiser relationships |  |  |  | $ | 21,300 |  |  | 9 years
Content |  |  |  |  | 800 |  |  | 1.5 years
Website/trade/domain names |  |  |  |  | 5,300 |  |  | 15 years
Acquired technology and others |  |  |  |  | 6,300 |  |  | 4 years
Total |  |  |  | $ | 33,700 |  |  |
The Company is still finalizing the allocation of the purchase price to the individual assets acquired. Accordingly, these preliminary estimates are subject to change during the measurement period, which is the period subsequent to the acquisition date during which the acquirer may adjust the provisional amounts recognized for a business combination, not to exceed one year form the acquisition date. The final purchase price allocation, which may include changes in the allocations within intangible assets and between intangible assets and goodwill, as well as changes in the estimated useful lives of the intangible assets, will be determined when the Company has completed the detailed review of underlying inputs and assumptions used in its preliminary purchase price allocation. FC Ecosystem, LLC On March 1, 2021, the Company acquired substantially all of the assets relating to the performance marketing services business of FC Ecosystem, LLC, to broaden its customer relationships in the financial services client vertical. In exchange for the assets of FCE, the Company paid $7.0 million in cash upon closing and will make $4.0 million in post-closing payments, payable in equal annual installments over a two year period, with the first installment payable twelve months following the date of closing. The purchase consideration also includes contingent consideration of up to an additional $9.0 million, which is payable for two years following the date of closing and is calculated every February 28 for the preceding twelve months. The following table summarizes the consideration as of the acquisition date (in thousands):
|  | Estimated Fair Value |
Cash |  | $ | 7,000 |
Post-closing payments, net of imputed interest of $189 |  |  | 3,811 |
Contingent consideration |  |  | 2,926 |
Total |  | $ | 13,737 |
The acquisition was accounted for as a business combination. The results of the acquired assets have been included in the Company’s condensed consolidated financial statements since the acquisition date. The Company allocated the purchase price to identifiable intangible assets acquired based on their estimated fair values. The fair value of the intangible assets acquired was determined by the Company based on management’s best estimates, and in doing so management engaged a third-party valuation specialist to assist with the measurement. The fair value of the customer relationship was determined using the multi-period excess earnings income approach. The excess of the purchase price over the aggregate fair value of the identifiable intangible assets acquired was recorded as goodwill and is primarily attributable to synergies the Company expects to achieve related to the acquisition. The goodwill is deductible for tax purposes. The following table summarizes the preliminary allocation of the purchase price and the estimated useful lives of the identifiable assets acquired as of the date of the acquisition (in thousands):
|  | Estimated Fair Value |  |  | Estimated Useful Life
Customer/publisher/advertiser relationships |  | $ | 8,600 |  |  | 7 years
Goodwill |  |  | 5,137 |  |  | Indefinite
Total |  | $ | 13,737 |  |  |
The Company is still finalizing the allocation of the purchase price to the individual assets acquired. Accordingly, these preliminary estimates are subject to change during the measurement period, which is the period subsequent to the acquisition date during which the acquirer may adjust the provisional amounts recognized for a business combination, not to exceed one year form the acquisition date. The final purchase price allocation, which may include changes in the allocations between intangible assets and goodwill, as well as changes in the estimated useful lives of the intangible assets, will be determined when the Company has completed the detailed review of underlying inputs and assumptions used in its preliminary purchase price allocation. Other On February 17, 2021, the Company also completed the acquisition of certain assets of Mayo Labs, LLC, a performance marketing services company serving the financial services client vertical. The Company paid $2.0 million in cash upon closing and will make $2.0 million in post-closing payments, payable in equal annual installments over a two year period, with the first installment payable twelve months following the date of closing. The Company has included the results of the acquired assets in the condensed consolidated financial statements since the acquisition date, which were not considered material to the Company. Unaudited Pro Forma Financial Information The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and the acquired businesses as though these acquisitions had been occurred as of the beginning of fiscal year 2020. The unaudited pro forma financial information is presented for illustrative purposes only and does not necessarily reflect what the combined company’s results of operations would have been had the acquisition occurred as of the beginning of fiscal year 2020, nor is it necessarily indicative of the future results of operations of the combined company.
|  | Three Months Ended |  |  | Nine Months Ended |
|  | March 31, |  |  | March 31, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
|  | (In thousands) |  |  | (In thousands) |
Net revenue |  | $ | 153,052 |  |  | $ | 149,370 |  |  | $ | 427,289 |  |  | $ | 430,782 |
Net income |  |  | 5,189 |  |  |  | 15,629 |  |  |  | 20,836 |  |  |  | 21,536 |
The pro forma financial information for the three and nine months ended March 31, 2021 includes the elimination of $152 thousand and $652 thousand of nonrecurring acquisition costs incurred by the Company that are directly related to the acquisitions. Fiscal year 2020 There was no significant business acquisition completed in fiscal year 2020. Fiscal year 2019 AmOne Corp. On October 1, 2018, the Company completed the purchase of AmOne, an online performance marketing company in the financial services client vertical, to broaden its publisher and customer relationships. In exchange for all outstanding shares of AmOne, the Company paid $23.0 million in cash upon closing (including $2.7 million cash for net assets acquired subject to post-closing adjustments) and will make $8.0 million in post-closing payments, payable in equal semi-annual installments over a two year period, with the first installment paid six months following the date of closing. The outstanding balance owed with respect to the post-closing payments was paid in full as of the second quarter of fiscal year 2021. CloudControlMedia, LLC On April 15, 2019, the Company completed the purchase of CCM, a marketing services company in the education client vertical, to broaden its customer relationships. In exchange for all the outstanding shares of CCM, the Company paid $8.3 million in cash upon closing (including $0.8 million cash for net assets acquired subject to post-closing adjustments) and will make a series of future payments following the acquisition date. The $7.5 million post-closing payments are payable in cash in equal semi-annual installments over a four year period, with the first installment paid six months following the date of closing. The contingent consideration is payable for five years following the date of closing and is calculated every June 30 and December 31 for the preceding six months. MyBankTracker.com, LLC On May 14, 2019, the Company completed the purchase of MBT, a leading personal finance website to broaden its customer relationships. In exchange for all the outstanding shares of MBT, the Company paid $4.5 million in cash upon closing (including $1.5 million cash for net assets acquired) and will make a series of future payments following the acquisition date. The $4.0 million post-closing payments are payable in cash in equal semi-annual installments over a two year period, with the first installment paid twelve months following the date of closing. The contingent consideration is calculated semi-annually for the preceding six months beginning on December 31, 2019 and ending on June 30, 2023. In the third quarter of fiscal year 2020, the Company reached an agreement with the seller and paid the outstanding balance owed in full with respect to the contingent consideration. The following table summarizes the consideration for each acquisition as of the acquisition dates (in thousands):
|  | AmOne |  |  | CCM |  |  | MBT |
Cash |  | $ | 23,032 |  |  | $ | 8,281 |  |  | $ | 4,511 |
Post-closing adjustments for net assets acquired |  |  | 138 |  |  |  | (72 | ) |  |  | — |
Post-closing payments, net of imputed interest (1) |  |  | 7,514 |  |  |  | 6,671 |  |  |  | 3,708 |
Contingent consideration |  |  | — |  |  |  | 3,553 |  |  |  | 1,505 |
Total |  | $ | 30,684 |  |  | $ | 18,433 |  |  | $ | 9,724 |
(1) | The post-closing payment is net of imputed interest of $486 thousand for AmOne, $829 thousand for CCM and $292 thousand for MBT.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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