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Acquisitions | 12 Months Ended
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Jun. 30, 2021
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | ACQUISITIONS In accordance with ASC 805, the Company allocates the purchase price of its acquisitions to the tangible assets, liabilities, and intangible assets acquired based on fair values. Any excess purchase price over those fair values is recorded as goodwill. The fair value assigned to intangible assets acquired is supported by valuations using estimates and assumptions provided by management. Based on the valuation inputs, the Company has recorded assets acquired and liabilities assumed according to the following fair value hierarchy:
Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2 | Unadjusted quoted prices in active markets for similar assets or liabilities; or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable for the asset or liability.
Level 3 | Unobservable inputs for the asset or liability
InsideResponse, LLC—On May 1, 2020, the Company acquired 100% of the outstanding membership units of InsideResponse, an online marketing consulting firm the Company previously purchased leads from, for an aggregate purchase price of up to $65.0 million (subject to customary adjustments), as set forth in the Agreement and Plan of Merger, as amended on May 1, 2020 (the “Merger Agreement”). The purchase price was comprised of $32.7 million, which was paid in cash at the closing of the transaction and an earnout of up to $32.3 million, which was paid in full in cash during the year ended June 30, 2021, as InsideResponse achieved the applicable earnout target for calendar year 2020, as set forth in the Merger Agreement. Additionally, during the year ended June 30, 2021, the Company recorded $1.5 million in other expenses, net in the consolidated statement of comprehensive income as an adjustment to the fair market value of the earnout liability. Under the terms of the Merger Agreement, total consideration in the acquisition consisted of the following as of the acquisition date (in thousands):
Base purchase price | $ | 32,700 |
Fair value of earnout | 30,437 |
Net working capital true-up(1) | 3,527 |
Closing cash | 904 |
Closing indebtedness | (476) |
Total purchase consideration | $ | 67,092 |
(1) The Company recorded a $0.1 million measurement period adjustment to the carrying amount of goodwill related to the net working capital true-up for the year ended June 30, 2021. At the date of acquisition, the fair value of net tangible assets acquired approximated their carrying value. The trade name acquired was determined using the relief from royalty method, which measures the value by estimating the cost savings associated with owning the asset rather than licensing it. For the proprietary software acquired, the replacement cost method under the cost approach was used, estimating the cost to rebuild the software. The non-compete agreements were valued using the income approach, and the customer relationships were valued using the multiple period excess earnings method. As such, all aforementioned intangible assets were valued using Level 3 inputs. Further, the Company believes that the fair value of the earn-out liability falls within Level 3 of the fair value hierarchy as a result of the unobservable inputs used for the measurement. Goodwill resulting from the transaction constitutes the excess of the consideration paid over the fair values of the assets acquired and liabilities assumed and primarily represents the expected synergies in streamlining the Company's marketing and advertising process by consolidating a primary vendor into its marketing team, providing full access to a rapidly growing and scalable lead generation strategy, guaranteeing our ability to consume more leads and reducing cost. This acquired goodwill is allocated to the Senior segment (which is also the reporting unit), and approximately $5.0 million is deductible for tax purposes. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands):
Description | Estimated Life | Amount
Cash and cash equivalents |  | $ | 955 |
Accounts receivable |  | 8,220 |
Other current assets |  | 459 |
Property and equipment, net |  | 51 |
Accounts payable |  | (2,922) |
Accrued expenses |  | (737) |
Other current liabilities |  | (8) |
Other liabilities |  | (1) |
Net tangible assets acquired |  | 6,017 |
Trade Name | 5 years | 2,680 |
Proprietary Software | 2-5 years | 1,042 |
Non-compete agreements | 3 years | 192 |
Customer relationships | 7 years | 16,069 |
Goodwill | Indefinite | 41,092 |
Total intangible assets acquired |  | 61,075 |
Net assets acquired |  | $ | 67,092 |
The Company will amortize the intangible assets acquired on a straight-line basis over their estimated remaining lives, ranging from two to seven years. Lead distribution company—On February 1, 2021, the Company acquired substantially all of the assets of a lead distribution company for an aggregate purchase price of up to $33.5 million (subject to customary adjustments), as set forth in the Asset Purchase Agreement, dated February 1, 2021 (the "Asset Purchase Agreement"). The purchase price is comprised of $30.0 million, of which $24.0 million was paid in cash at the closing of the transaction with an additional $6.0 million of holdback for indemnification claims, net working capital adjustments, and underperformance. Additionally, the purchase price includes an earnout of up to $3.5 million. The primary purpose of the acquisition was to secure and incorporate the exclusive publisher relationships into the lead generation business of InsideResponse. The Company recorded $0.4 million of acquisition-related costs in general and administrative operating costs and expenses in the consolidated statement of comprehensive income. The earnout is contingent upon the achievement of a minimum of 50,000 insurance policies sold to closed policy leads during calendar year 2021 and will be paid in cash no later than five days after the accountant-reviewed stand-alone financial statements of the lead distribution company, as of and for the period ending December 31, 2021, are finalized. While the earnout provides for a range of possible payouts, if the lead distribution company fails to hit the minimum target threshold set forth in the Asset Purchase Agreement, there will be no payout, but in no circumstance can the earnout exceed $3.5 million. As the earnout payment is contingent upon continued employment of certain individuals, the Company will recognize the earnout as compensation expense in general and administrative operating costs and expenses in the consolidated statement of comprehensive income in the period in which it is earned. As of June 30, 2021, the Company has not accrued an earnout payment based on current forecasted performance. The underperformance amount related to the $6.0 million holdback is calculated as follows: if the lead performance percentage, calculated as the calendar year 2021 closed policy amount divided by the closed policy performance target of 50,000 closed policy leads, is less than or equal to 60%, the underperformance amount shall be calculated as 100% less the lead performance percentage multiplied by $30.0 million. As of June 30, 2021, current forecasted performance is expected to exceed 60%. The Company will accrue interest on the remaining holdback of $5.5 million, after the net working capital true-up of $0.5 million, through the 15-month anniversary of the closing date in interest expense, net in the consolidated statement of comprehensive income. Under the terms of the Asset Purchase Agreement, the total consideration for the acquisition consisted of the following as of the acquisition date (in thousands):
Base purchase price | $ | 30,000 |
Net working capital true-up | (499) |
Total Purchase Consideration | $ | 29,501 |
At the date of acquisition, the fair value of net tangible assets acquired approximated their carrying value. The non-compete agreements were valued using the income approach, and the customer relationships were valued using the multiple period excess earnings method. As such, all aforementioned intangible assets were valued using Level 3 inputs. Goodwill resulting from the transaction constitutes the excess of the consideration paid over the fair values of the assets acquired and liabilities assumed and primarily represents the benefits of leveraging the exclusive publisher relationships in the business. This acquired goodwill is allocated to the Senior segment (which is also the reporting unit), and is not deductible for tax purposes after adding back acquisition costs and excluding the holdback not yet paid. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands):
Description | Estimated Life | Amount
Accounts receivable |  | $ | 1,301 |
Total tangible assets acquired |  | 1,301 |
Non-compete agreements | 5 years | 1,000 |
Vendor relationships | 9 years | 23,700 |
Goodwill | Indefinite | 3,500 |
Total intangible assets acquired |  | 28,200 |
Net Assets Acquired |  | $ | 29,501 |
The Company will amortize the intangible assets acquired on a straight-line basis over their estimated remaining lives, ranging from five to nine years. From the date of acquisition, February 1, 2021, through June 30, 2021, the lead distribution company generated $5.6 million of lead generation revenue, all of which was consumed by the Senior segment. Express Med Pharmaceuticals—On April 30, 2021, the Company acquired 100% of the outstanding shares of Express Med Pharmaceuticals, now branded SelectRx, a leading specialty pharmaceutical distributor, for an aggregate purchase price of up to $24.0 million (subject to customary adjustments), as set forth in the Stock Purchase Agreement dated April 30, 2021 (the "Stock Purchase Agreement"). The aggregate purchase price of up to $24.0 million is comprised of $17.5 million in cash paid at the closing of the transaction, an additional $2.5 million of holdback for indemnification claims, if any, and an earnout of up to $4.0 million, if any. The primary purpose of the acquisition was to take advantage of the Company's technology and customer base to facilitate better patient care through coordination of strategic, value-based care partnerships. The Company recorded $0.3 million of acquisition-related costs in general and administrative operating costs and expenses in the consolidated statement of comprehensive income. In addition, as a result of the acquisition, the Company has entered into an operating lease with a related party. Refer to Note 5 in the consolidated financial statements for further details. The earnout of up to $4.0 million is comprised of two separate provisions. The first provision provides for an earnout of up to $3.0 million and is contingent upon achievement of the following within the first 20 months following the acquisition: facility updates that would allow for processing a minimum of 75,000 active patients, the issuance of pharmacy licenses in all 50 states, and active patients of 15,000 or more. The second provision provides for an earnout of up to $1.0 million and is contingent upon achievement of the following within 36 months following the acquisition: construction of a new facility to accommodate the servicing of additional active patients or 75,000 or more active patients as of the last day of any month prior to the end of the second earnout provision period or as of the end of the second earnout provision period. As of June 30, 2021, the Company has not accrued an earnout payment based on current forecasted performance. The $2.5 million of holdback will be due upon the 15-month anniversary of the closing date of the acquisition. Under the terms of the Stock Purchase Agreement, total consideration in the acquisition consisted of the following as of the acquisition date (in thousands):
Base purchase price | $ | 20,000 |
Net working capital true-up | (483) |
Closing cash | 20 |
Total purchase consideration | $ | 19,537 |
At the date of acquisition, the fair value of net tangible assets acquired, excluding property and equipment, approximated their carrying value. The property and equipment was valued primarily using the cost and sales comparison approach to value. For the proprietary software acquired, the replacement cost method under the cost approach was used, estimating the cost to rebuild the software. The non-compete agreement was valued using the income approach, and the customer relationships were valued using the multiple period excess earnings method. As such, all aforementioned intangible assets were valued using Level 3 inputs. Goodwill resulting from the transaction constitutes the excess of the consideration paid over the fair values of the assets acquired and liabilities assumed and primarily represents the additional value of the synergies of combining the SelectRx business with the Company's technology and existing customer base. This acquired goodwill is allocated to the Senior segment (which is also the reporting unit), and the Company expects approximately $16.0 million to be deductible for tax purposes after adding back acquisition costs and excluding the holdback not yet paid. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands):
Description | Estimated Life | Amount
Cash and cash equivalents |  | $ | 20 |
Accounts receivable |  | 613 |
Other current assets |  | 28 |
Property and equipment, net |  | 287 |
Accounts payable |  | (280) |
Accrued expenses, including compensation and benefits |  | (45) |
Net tangible assets acquired |  | 623 |
Proprietary Software | 3 years | 550 |
Non-compete agreements | 5 years | 100 |
Customer relationships | 1 year | 200 |
Goodwill | Indefinite | 18,064 |
Total intangible assets acquired |  | 18,914 |
Net assets acquired |  | $ | 19,537 |
The Company will amortize the intangible assets acquired on a straight-line basis over their estimated remaining lives, ranging from one to five years. From the date of acquisition, April 30, 2021, through June 30, 2021, SelectRx generated $1.8 million of mail order prescription revenue.

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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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