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Acquisitions | 9 Months Ended
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Mar. 31, 2022
Business Combinations [Abstract] |
Acquisitions | 7. Acquisitions 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 annual installment paid in the first quarter of fiscal year 2022. 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. The incremental taxes resulting from this election were paid to Modernize in the fourth quarter of fiscal year 2021. 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 payment to Modernize |  |  | 1,703 |
Total |  | $ | 70,423 |
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 Company has finalized the allocation of the purchase price to the fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date, upon completion of the measurement period. The following table summarizes the final allocation of the purchase price as of the acquisition date (in thousands):
|  | Estimated Fair Value |
|  | Preliminary as of July 1, 2020 |  |  | Year to Date Adjustments (1) |  |  | Final as of June 30, 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 |  |  |  | (6,423 | ) |  |  | 32,028 |
Net assets acquired |  | $ | 68,720 |  |  | $ | 1,703 |  |  | $ | 70,423 |
(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 paid the incremental taxes to Modernize resulting from that election, for an increase in total consideration of $1.7 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 |  |  |
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 paid in the third quarter of fiscal year 2022. 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 based on the achievement of revenue and margin targets 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 results of operations 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 Company has finalized the allocation of the purchase price to the fair values of the identifiable assets acquired as of the acquisition date, upon completion of the measurement period. The following table summarizes the final 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 |  |  |
Other In the third quarter of fiscal year 2021, the Company 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 paid in the third quarter of fiscal year 2022. In the second quarter of fiscal year 2022, the Company completed an immaterial acquisition within the home services client vertical. The Company paid $1.0 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 results of these acquisitions have been included in the Company’s results of operations since their respective acquisition dates, 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 |  | $ | 154,948 |  |  | $ | 149,370 |  |  | $ | 435,253 |  |  | $ | 430,782 |
Net income |  |  | 5,803 |  |  |  | 15,477 |  |  |  | 23,303 |  |  |  | 19,888 |
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, and these costs have been reflected in the fiscal year 2020 financial information.

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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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