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Acquisitions | 3 Months Ended
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Mar. 31, 2024
Business Combinations [Abstract] |
Acquisitions | 7. ACQUISITIONS Adsmurai On August 5, 2022, the Company made a loan (the "Adsmurai Loan") in the principal amount of €12,535,000 ($12.8 million as of that date) to an entity affiliated with owners of a majority interest in Adsmurai, S.L. (“Adsmurai”), a company engaged in the sale and marketing of digital advertising. The loan had a two-year term, an interest rate of 5% annually, and could be converted into 51% of the issued and outstanding shares of stock of Adsmurai at the Company’s sole discretion. If the Company elected not to convert the loan, the borrower had the option to repay the loan at maturity either in cash or with 51% of the issued and outstanding shares of stock of Adsmurai. As of that date, the Company determined for accounting purposes that (i) Adsmurai was a VIE because the equity investors at risk, as a group, lacked the characteristics of a controlling financial interest; and (ii) the Company was the primary beneficiary because the conversion right gave it the power to direct the activities of the entity that most significantly impacted the entity’s economic performance. The Company determined that Adsmurai was a business and accounted for its consolidation under the provisions of ASC 805, “Business Combinations”, and included Adsmurai's results of operations since the date of the loan in the Company's Condensed Consolidated Statements of Operations. The following is a summary of the final purchase price allocation (in millions):
Cash | $ | 7.4 |
Accounts receivable |  | 11.9 |
Other assets |  | 0.7 |
Fixed assets |  | 2.8 |
Intangible assets subject to amortization |  | 8.2 |
Goodwill |  | 13.3 |
Current liabilities |  | (14.4 | )
Deferred tax |  | (2.0 | )
Debt |  | (2.8 | )
Noncontrolling interest |  | (12.3 | )
Convertible loan |  | (12.8 | )
Intangible assets subject to amortization acquired includes:
Intangible Asset | Estimated Fair Value (in millions) |  | Weighted average life (in years) |
Advertiser relationships | $ | 4.7 |  | 7.0 |
Existing technology |  | 2.4 |  | 5.0 |
Trade name |  | 1.1 |  | 5.0 |
The fair value of the trade receivables is $11.9 million. The gross amount due under contract is $12.3 million, of which $0.4 million is expected to be uncollectable. The goodwill, which is not expected to be deductible for tax purposes, is assigned to the Company’s digital segment and is attributable to Adsmurai’s workforce and synergies from combining Adsmurai’s operations with those of the Company. On April 3, 2023, the Company entered into an agreement (the “Adsmurai Acquisition Agreement”) among the Company and the selling stockholders of Adsmurai (the “Adsmurai Sellers”), pursuant to which the Company acquired a 51% equity interest in Adsmurai (the “Adsmurai Acquisition”) on the same date. The Company acquired 51% of the issued and outstanding shares of stock of Adsmurai by means of conversion of the Adsmurai Loan, for total purchase consideration of €13.0 million ($14.2 million as of April 3, 2023), including interest. The Adsmurai Acquisition Agreement also contains representations, warranties, covenants and indemnities of the parties thereto. In connection with the Adsmurai Acquisition, on April 3, 2023 the Company made a loan to entities affiliated with owners of the remaining 49% interest in Adsmurai in the principal amount of €7,355,000 ($8.1 million as of April 3, 2023) and a second loan on July 11, 2023 in the principal amount of €4,993,344 ($5.6 million as of July 11, 2023) based on Adsmurai’s EBITDA for calendar year 2022 (the “New Adsmurai Loans”). The New Adsmurai Loans have a seven-year term, bear interest at a rate of 5% annually and can be repaid upon the exercise of the option rights set forth in the Adsmurai Options Agreement (defined below). The loan receivable is recorded within Other assets in the Condensed Consolidated Balance Sheets. In connection with the Adsmurai Acquisition, the Company and the Adsmurai Sellers also entered into an Options Agreement (the “Adsmurai Options Agreement”). Subject to the terms of the Adsmurai Options Agreement, for a purchase price based on a predetermined multiple of Adsmurai’s EBITDA in the trailing four fiscal quarters, plus amounts outstanding under the Adsmurai Loan: • the Adsmurai Sellers have the right to cause the Company to purchase: o 10% of the issued and outstanding shares of Adsmurai stock between January and March 2024, 10% of the issued and outstanding shares of Adsmurai stock between January and March 2025, and all of the remaining issued and outstanding shares of Adsmurai stock between July and September 2027; or o all of the issued and outstanding shares of Adsmurai owned by such Adsmurai Seller each January, in the sole discretion of such Adsmurai Seller; or o all of the issued and outstanding shares of Adsmurai owned by such Adsmurai Seller, in the event such Adsmurai Seller's employment is terminated by the Company; and • the Company has the right to purchase all of the remaining issued and outstanding shares of Adsmurai stock between January and June 2027. Applicable accounting guidance requires an equity instrument that is redeemable for cash or other assets to be classified outside of permanent equity if it is redeemable (a) at a fixed or determinable price on a fixed or determinable date, (b) at the option of the holder, or (c) upon the occurrence of an event that is not solely within the control of the issuer. As a result of the put and call option redemption feature, and because the redemption is not solely within the control of the Company, the noncontrolling interest is considered redeemable, and is classified in temporary equity within the Company’s Condensed Consolidated Balance Sheets initially at its acquisition date fair value. The noncontrolling interest is adjusted each reporting period for income (or loss) attributable to the noncontrolling interest as well as any applicable distributions made. In addition, because the noncontrolling interest is not currently redeemable, but is probable that it will become redeemable, and because the Company has elected the immediate method to recognize changes in the redemption value as they occur, each reporting period a measurement period adjustment, if any, is recorded to adjust the noncontrolling interest to the higher of either the redemption value, assuming it was redeemable at the reporting date, or its carrying value. The fair value of the redeemable noncontrolling interest, which includes the Adsmurai Options Agreement, recognized on the acquisition date was $43.6 million. The fair value was estimated by applying the real options approach. Key assumptions include risk-neutral expected growth rates based on management’s assessments of expected growth in EBITDA, adjusted by appropriate factors capturing their correlation with the market and volatility, discounted at a cost of debt rate. The table below presents the reconciliation of changes in redeemable noncontrolling interests (in thousands):
|  | Three-Month Period |
|  | Ended March 31, |
|  | 2024 |  |  | 2023 |
Beginning balance January 1 |  | $ | 43,758 |  |  | $ | - |
Dividend accrued |  |  | (1,139 | ) |  |  | - |
Net income (loss) attributable to redeemable noncontrolling interest |  |  | (2,779 | ) |  |  | - |
Ending balance March 31 |  | $ | 39,840 |  |  | $ | - |
Jack of Digital On August 3, 2022, the Company acquired 15% of the issued and outstanding stock of Jack of Digital, a digital marketing services company that serves as the exclusive advertising sales partner of ByteDance Ltd. in Pakistan, for $0.1 million. As of that date, the Company determined for accounting purposes that (i) Jack of Digital was a VIE because the equity investors at risk, as a group, lacked the characteristics of a controlling financial interest; and (ii) the Company was the primary beneficiary because it had the power to direct the activities of the entity that most significantly impacted the entity’s economic performance. On April 3, 2023, the Company acquired the remaining issued and outstanding stock of Jack of Digital for $1.1 million. Of that amount, the Company paid an initial installment payment of $0.5 million in 2023, an additional installment payment of $0.3 million during the three-month period ended March 31, 2024, and the balance will be paid in January 2025. Additionally, the transaction includes a contingent earn-out payment based upon the achievement of an EBITDA target in calendar year 2026, calculated as a predetermined multiple of EBITDA for that year. The total purchase price for the acquisition, including the fair value of the contingent consideration, was $1.4 million. The table below presents the reconciliation of changes in noncontrolling interests (in thousands):
|  | Three-Month Period |
|  | Ended March 31, |
|  | 2024 |  |  | 2023 |
Beginning balance January 1 |  | $ | - |  |  | $ | 14,947 |
Dividend paid |  |  | - |  |  |  | (546 | )
Transfer of noncontrolling interest to redeemable noncontrolling interest |  |  | - |  |  |  | - |
Acquisition of noncontrolling interest |  |  | - |  |  |  | - |
Net income (loss) attributable to noncontrolling interest |  |  | - |  |  |  | (342 | )
Ending balance March 31 |  | $ | - |  |  | $ | 14,059 |
BCNMonetize On May 19, 2023, the Company acquired 100% of the issued and outstanding shares of stock of BCNMonetize, a global mobile app marketing solutions company headquartered in Barcelona, Spain. The acquisition, funded from the Company’s cash on hand, included an initial purchase price of $6.0 million in cash, which amount was adjusted at closing to $7.2 million due to customary purchase price adjustments for cash, i ndebtedness and estimated working capital. Additionally, the transaction includes contingent earn-out payments based upon the achievement of certain EBITDA targets in calendar years 2023 through 2026, calculated as a predetermined multiple of EBITDA for each of those years. The total purchase price for the acquisition, including the fair value of the contingent consideration, was $8.8 million. The Company is in the process of completing the purchase price allocation for BCNMonetize. The following is a summary of the preliminary purchase price allocation (in millions):
Cash | $ | 0.8 |
Accounts receivable |  | 2.8 |
Other assets |  | 0.7 |
Intangible assets subject to amortization |  | 4.2 |
Goodwill |  | 3.5 |
Current liabilities |  | (2.1 | )
Deferred tax |  | (1.1 | )
Intangible assets subject to amortization acquired includes:
Intangible Asset | Estimated Fair Value (in millions) |  | Weighted average life (in years) |
Publisher relationships | $ | 2.2 |  | 3.0 |
Advertiser relationships |  | 1.5 |  | 1.0 |
Trade name |  | 0.3 |  | 1.0 |
Non-Compete agreements |  | 0.2 |  | 1.5 |
The fair value of the assets acquired includes trade receivables of $2.8 million. The gross amount due under contract was $2.9 million, of which $0.1 million was expected to be uncollectable. The goodwill, which is not expected to be deductible for tax purposes, is assigned to the Company’s digital segment and is attributable to BCNMonetize's workforce and expected synergies from combining BCNMonetize's operations with the Company's operations. As noted above, t he acquisition of BCNMonetize includes a contingent consideration arrangement that requires additional consideration to be paid by the Company to the selling stockholders of BCNMonetize, based on a pre-determined multiple of BCNMonetize's 12-month EBITDA in calendar years 2023 through 2026. The fair value of the contingent consideration recognized on the acquisition date of $1.6 million was estimated by applying the real options approach. Key assumptions include risk-neutral expected growth rates based on management’s assessments of expected growth in EBITDA, adjusted by appropriate factors capturing their correlation with the market and volatility, discounted at a cost of debt rate ranging from 8.2% to 8.4% over the three-year period. These are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs. The following unaudited pro forma information has been prepared to give effect to the Company’s acquisition of BCNMonetize as if the acquisition had occurred on January 1, 2023. This pro forma information was adjusted to exclude acquisition fees and costs of $0.2 million for the three-month period ended March 31, 2023, which were expensed in connection with the acquisition. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had this acquisition occurred on such date, nor does it purport to predict the results of operations for any future periods.
In thousands, except share and per share data |  | Three-Month Period |
|  | Ended March 31, |
|  | 2023 |
Pro Forma: |  |  |
Total revenue |  | $ | 242,342 |
Net income (loss) attributable to common stockholders |  | $ | 2,973 |
Basic and diluted earnings per share: |  |  |
Net income (loss) per share, attributable to common stockholders, basic and diluted |  | $ | 0.03 |
Weighted average common shares outstanding, basic |  |  | 87,623,887 |
Weighted average common shares outstanding, diluted |  |  | 89,786,585 |

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent + Details
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