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Business Combinations | 12 Months Ended
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Dec. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
Business Combinations | Business Combinations On the Barrelhead, Inc.—On July 11, 2022, the Company completed the acquisition of On the Barrelhead, Inc. (OTB), a data-driven platform that provides consumers and SMBs with credit-driven product recommendations. The Company completed the acquisition of OTB under an Agreement and Plan of Merger and Reorganization. Purchase Consideration The purchase consideration consisted of the following:
(in millions) |  | Total
Cash consideration 1 |  | $ | 75.7 |
Stock consideration 2 |  | 43.2 |
Total consideration |  | 118.9 |
Less: amounts considered separate from the business combination and attributable to post-combination expense 3 |  | (0.7) |
Purchase Consideration |  | $ | 118.2 |
(1) Includes $12.2 million of cash which is held in escrow for the settlement of breaches, if any, of certain representations, warranties, agreements and covenants. (2) Represents the aggregate fair value of 4.9 million shares issued of the Company’s Class A common stock based on the closing price of the stock on the acquisition date of July 11, 2022, which was $8.75 per share. (3) Primarily comprised of the additional fair value of unvested OTB option awards discretionally accelerated by the Company and attributable to post-combination expense. Half of the stock consideration is subject to a lockup arrangement whereby such shares may not be sold or otherwise transferred prior to expiration of the 24-month period following the acquisition date. Retention Agreements and Inducement Awards Concurrently with the closing of the acquisition, the Company provided employment offer letters to OTB’s employees, including compensatory retention agreements with the co-founders of OTB which could result in up to $15.0 million of cash awards. Cash awards under these retention agreements are payable in equal installments on the first, second and third anniversary dates of the closing of the acquisition. Also concurrently with the closing of the acquisition, the Compensation Committee of the Company’s Board of Directors granted restricted stock unit (RSU) awards under the NerdWallet, Inc. 2022 Inducement Equity Incentive Plan (the Inducement Plan) to employees of OTB who were offered employment with the Company, which RSU awards had an aggregate grant date fair value on the acquisition date of $17.5 million, including $12.8 million of RSU awards to the co-founders of OTB, $2.3 million of RSU awards to six non-management employees of OTB and $2.4 million of RSU awards to all fourteen employees of OTB. The $12.8 million of RSU awards to the co-founders of OTB will generally vest in full upon the third anniversary of the closing of the acquisition. The $2.3 million of RSU awards to non-management employees of OTB will vest annually over four years, with 20% of the RSUs subject to vest on each of the first, second and third annual vesting dates and the remaining 40% of the RSUs subject to vest on the fourth annual vesting date. The $2.4 million of RSU awards granted to all employees of OTB will generally vest over four years subject to a one-year cliff and quarterly vesting thereafter. RSU awards under the Inducement Plan are subject to the conditions of the Inducement Plan and the terms and conditions of the grant agreements covering such awards. Compensation expenses under these employment offer letters and vesting of awards under these retention agreements and Inducement Plan are generally subject to the employees’ continued employment with the Company, and the fair value of such compensation and awards are excluded from the Purchase Price and accounted for separately from the business combination. The value of cash awards under these retention agreements are recognized as compensation expense ratably over the three-year period following the close of the acquisition. The value of RSU awards under the Inducement Plan are recognized as stock-based compensation ratably over the respective vesting terms of the awards. Purchase Accounting The acquisition has been accounted for as a business combination. The allocation of purchase consideration to the assets acquired and liabilities assumed is as follows:
(in millions) |  | Fair Value
Purchase Consideration |  | $ | 118.2 |
Fair Value of Assets Acquired |  |
Cash and cash equivalents |  | 6.9 |
Accounts receivable |  | 12.2 |
Intangible assets |  | 50.1 |
Total assets |  | 69.2 |
Fair Value of Liabilities Assumed |  |
Accounts payable |  | 6.4 |
Accrued expenses and other current liabilities |  | 0.6 |
Deferred tax liability |  | 12.1 |
Total liabilities |  | 19.1 |
Less: Net Assets Acquired |  | 50.1 |
Goodwill |  | $ | 68.1 |
The acquired intangible assets consist of definite-lived assets with estimated fair values and useful lives as follows:
(dollars in millions) |  | Fair Value |  | Weighted-Average Useful Life (Years)
Developed technology |  | $ | 48.9 |  |  | 5.0
Customer relationships |  | 1.2 |  |  | 1.0
Total intangible assets |  | $ | 50.1 |  |  | 4.9
The estimated fair value of acquired intangible assets was determined using the multi-period excess earnings method of the income approach for developed technology, and the replacement cost method for customer relationships. The deferred tax liability of $12.1 million primarily relates to identified intangible assets. The Company recorded goodwill of $68.1 million, which represents the excess of the purchase consideration over the estimated fair value of the assets acquired, net of the liabilities assumed. The goodwill is primarily attributable to synergies from combining the operations of the Company and OTB, as well as the value ascribed to the knowledge and experience of the OTB co-founders and employees. For income tax purposes, the acquisition is a stock purchase and goodwill is not tax deductible. Acquisition-related costs of $3.5 million were incurred during 2022, and are included in general and administrative expense on the consolidated statements of operations. Due to the extensive level of integration of OTB’s technology and operations into the Company’s operations following the closing of the acquisition, the Company is not able to quantify the acquisition’s contribution following the closing of the acquisition to the Company’s revenue and operating loss for 2022, as the ability to objectively quantify such amounts would require a significant level of estimation. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information is presented as if the OTB acquisition, including the related debt financing, was completed on January 1, 2021. The pro forma financial information includes the historical operating results of the Company and OTB prior to the acquisition, with adjustments directly attributable to the acquisition. Pro forma adjustments have been made to reflect the incremental intangible asset amortization to be incurred based on the preliminary fair values and useful lives of each identifiable intangible asset, incremental stock-based compensation related to inducement equity awards, incremental compensation related to cash retention agreements, incremental interest expense related to debt drawn to finance the cash portion of the purchase price, the adjustment of acquisition-related expenses, and the related tax effects of pro forma adjustments for the respective periods.The unaudited pro forma financial information is as follows:
(in millions) |  |
Year Ended December 31, |  | 2022 |  | 2021
Revenue |  | $ | 583.9 |  |  | $ | 417.7 |
Net loss |  | (21.9) |  |  | (51.7) |
The unaudited pro forma financial information is not intended to present, or be indicative of, what the results of operations would have been for the combined company for the periods presented had the acquisition actually occurred on January 1, 2021, nor is it meant to be indicative of results of operations that may be achieved by the combined company in the future. The unaudited pro forma financial information does not include any cost savings or other synergies that resulted, or may result, from the OTB acquisition or any estimated costs that will be incurred to integrate OTB. Future results may vary significantly from the results reflected in this unaudited pro forma financial information because of future events and transactions, as well as other factors. Fundera—In October 2020, the Company executed a merger agreement to acquire all outstanding shares of Fundera. Fundera is a company that provides an application that connects small businesses to lenders and covers everything from loans to legal services, free financial content and one-on-one access to experienced lending. Fundera was founded in 2013 and maintains an office in New York, NY. The acquisition date aggregate purchase price was $65.1 million, which consisted of the following:
(in millions) |  | Fair Value
Cash |  | $ | 29.2 |
Fair value of contingent consideration |  | 35.9 |
Total purchase price |  | $ | 65.1 |
The total closing consideration for the Fundera acquisition was $29.2 million in cash, of which $4.6 million in cash was held in escrow for the settlement of general representation and warranty provisions. Further the Company could make up to two additional earnout payments based on achievement of Fundera’s future revenue and profitability milestones for 2021 and 2022. These additional payments, to the extent earned, will be payable in cash. See Note 3–Fair Value Measurements for further information on contingent consideration and additional payments made. The fair value of earnouts, which are subject to the recipients continued employment services was $2.7 million and was excluded from the aggregate purchase price and accounted for separately from the business combination. The amounts were recognized as compensation expense as earned through 2022, classified as research and development and sales and marketing expenses based on the recipients’ job functions, in the consolidated statement of operations. The Company has recorded a deferred compensation liability related to earnouts of $1.7 million as of December 31, 2022, which is included within accrued expenses and other current liabilities on the consolidated balance sheet. As of December 31, 2022, Fundera’s revenue and profitability milestones for 2022 have been achieved and the contingent consideration liability was recorded at the full payout amount of $30.9 million. The estimated fair value of the contingent consideration was previously determined using a Monte Carlo simulation model, based upon available information and certain assumptions, known at the time the estimate was made, which management believes were reasonable. At the time of acquisition, certain stock options held by Fundera employees were replaced with RSUs by the Company with a total fair value of $1.9 million. The vesting of these RSUs is contingent on continued employment, and was excluded from the aggregate purchase price. These awards are recognized as stock-based compensation ratably over the remaining vesting term through 2024. The acquisition has been accounted for as a business combination. The allocation of purchase price to the assets acquired and liabilities assumed is as follows:
(in millions) |  | Fair Value
Net tangible assets |  | $ | 1.0 |
Fixed assets |  | 0.2 |
Intangible assets |  | 29.4 |
Deferred tax liability |  | (2.8) |
Goodwill |  | 37.3 |
Total purchase price |  | $ | 65.1 |
The acquired intangible assets are definite-lived assets consisting of user base, customer relationships, developed technology and trade name. The estimated fair value was determined using the excess earnings method for user base, with-and-without method for acquired customer relationships, and relief-from-royalty method for the acquired technology and trade name. The fair value of the intangible assets with definite lives is as follows:
(dollars in millions) |  | Fair Value |  | Weighted Average Useful Life (Years)
User base |  | $ | 19.4 |  |  | 7.0
Customer relationships |  | 5.0 |  |  | 3.0
Technology |  | 4.6 |  |  | 3.0
Trade name |  | 0.4 |  |  | 0.5
Total intangible assets |  | $ | 29.4 |  |  | 5.6
The Company recorded goodwill of $37.3 million, which represents the excess of the purchase price over the estimated fair value of tangible and intangible assets acquired, net of the liabilities assumed. The goodwill is primarily attributable to Fundera as a going concern, which represents the ability of the Company to earn a higher return on the collection of assets and business of Fundera than if those assets and business were to be acquired and managed separately. The benefit of access to the workforce is an additional element of goodwill. For income tax purposes, the acquisition was a stock purchase and goodwill is not tax deductible. Acquisition-related costs of $1.0 million were incurred in 2020 and are included in general and administrative expense on the consolidated statement of operations. During the period from the acquisition date through December 31, 2020, the Company recognized revenue and loss before income tax for Fundera of $2.0 million and $0.3 million, respectively. Pro Forma Results (Unaudited) The following pro forma combined results of operations are provided for the years ended December 31, 2020 and 2019, as though the Fundera acquisition had been completed as of January 1, 2019. These supplemental pro forma results of operations are provided for illustrative purposes only and do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future. The pro forma results of operations do not include any cost savings or other synergies that resulted, or may result, from the Fundera acquisition or any estimated costs that will be incurred to integrate Fundera. Future results may vary significantly from the results reflected in this pro forma financial information because of future events and transactions, as well as other factors. The Company’s historical financial information was adjusted based on currently available information and certain assumptions that the Company believes are reasonable under the circumstances. The unaudited supplemental pro forma information includes adjustments to amortization and depreciation for acquired intangible assets and property and equipment, adjustments to stock-based compensation, the purchase accounting effect on interest expense, and transaction costs:
(in millions) |  |
Year Ended December 31, |  | 2020
Revenue |  | $ | 262.6 |
Net income |  | $ | 3.6 |
Know Your Money—On September 30, 2020, the Company acquired all the outstanding shares of Notice Media Ltd., doing business as Know Your Money, an online provider of financial guidance and tools based in the United Kingdom. The aggregate purchase price transferred for KYM was $13.7 million, which consisted of the following:
(in millions) |  | Fair Value
Cash |  | $ | 12.3 |
Fair value of contingent consideration |  | 1.4 |
Total purchase price |  | $ | 13.7 |
The Company paid $12.3 million in initial cash consideration and could have made up to two additional earnout payments based on certain defined operating metrics during the earnout periods January 1, 2021 through December 31, 2021 and January 1, 2022 through December 31, 2022. These additional payments, to the extent earned, would be payable in cash. As part of the transaction, the Company entered into additional earnouts which were subject to the recipients’ continued service. The fair value of such earnouts was $5.9 million, which was excluded from the aggregate purchase price and accounted for separately from the business combination. The amounts were recognized as compensation expense as earned over the earnout periods. The estimated fair value of the contingent consideration related to KYM was immaterial as of December 31, 2022, and is included in contingent consideration in the consolidated balance sheet. The estimated fair value of the contingent consideration was previously determined using a Monte Carlo simulation model, based upon available information and certain assumptions, known at the time the estimate was made, which management believes were reasonable. The acquisition has been accounted for as a business combination. The allocation of purchase price to the assets acquired and liabilities assumed is as follows:
(in millions) |  | Fair Value
Net tangible assets |  | $ | 1.5 |
Fixed assets |  | 0.2 |
Intangible assets |  | 7.4 |
Deferred tax liability |  | (1.4) |
Goodwill |  | 6.0 |
Total purchase price |  | $ | 13.7 |
The acquired intangible assets are definite-lived assets consisting of customer relationships and developed technology. The estimated fair values of the customer relationships were determined using the excess earning method and the developed technology was determined using the relief from royalty method. The fair value of the intangible assets with definite lives is as follows:
(dollars in millions) |  | Fair Value |  | Weighted Average Useful Life (Years)
Customer relationships |  | $ | 6.0 |  |  | 5.0
Technology |  | 1.4 |  |  | 3.0
Total intangible assets |  | $ | 7.4 |  |  | 4.6
The Company recorded goodwill of $6.0 million, which represents the excess of the purchase price over the estimated fair value of tangible and intangible assets acquired, net of the liabilities assumed. The goodwill is primarily attributable to KYM as a going concern, which represents the ability of the Company to earn a higher return on the collection of assets and business of KYM than if those assets and business were to be acquired and managed separately. The benefit of access to the workforce is an additional element of goodwill. For income tax purposes, the acquisition was a stock purchase and goodwill is not tax deductible. Acquisition-related costs of $0.5 million were incurred in 2020 and are included in general and administrative expense on the consolidated statement of operations. During the period from the acquisition date through December 31, 2020 the Company recognized revenue and loss before income tax for KYM of $1.5 million and $0.1 million, respectively. Pro forma results of operations have not been provided to reflect the KYM acquisition as such results would not have been materially different from the Company’s reported results.

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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 https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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