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BUSINESS COMBINATIONS | 6 Months Ended
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Jun. 30, 2022
Business Combinations [Abstract] |
BUSINESS COMBINATIONS | BUSINESS COMBINATIONS Our acquisitions were accounted for as business combinations and the total purchase consideration of each was allocated to the net tangible and intangible assets and liabilities acquired based on their fair values on the acquisition dates with the remaining amounts recorded as goodwill. The values assigned to the assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the date of this Quarterly Report on Form 10-Q may be adjusted during the measurement period for each acquisition of up to 12 months from the dates of acquisition as further information becomes available. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. During the three and six months ended June 30, 2021 we incurred $14.2 million and $21.2 million of costs in connection with our acquisitions, respectively. During the three and six months ended June 30, 2022 we incurred $2.2 million cost and $2.4 million of benefit in connection with our acquisitions, respectively. These costs are included in acquisition and integration costs (benefit) on our condensed consolidated statements of operations and primarily represent legal, accounting and broker fees. The results of Entertainment have been included in the consolidated financial statements since its date of acquisition. For the three and six months ended June 30, 2022, Entertainment's combined revenue included in the consolidated statement of operations was approximately 3% of consolidated revenue, respectively. Due to the continued integration of the combined businesses, it was impractical to determine the earnings. For the acquisitions of Dosh, Bridg and Entertainment, as applicable, the estimated fair values of merchant relationships, partner relationships, and the card-linked subscriber base were determined using the replacement cost method and lost profits, as applicable, which required us to estimate the costs to recreate an asset of equivalent utility at prices available at the time of the valuation analysis and the lost profits over the period of time to recreate the asset. Trade names were valued using the "relief-from-royalty" approach. This method assumes that trademarks and trade names have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method required us to estimate the future revenues for the related brands, the appropriate royalty rates and the weighted-average costs of capital. Developed technology for Entertainment was valued using the replacement cost method, which required us to estimate the costs to recreate an asset of equivalent utility at prices available at the time of the valuation analysis. Developed technology for Dosh and Bridg was valued using the excess earnings method, an income approach. Under the excess earnings method, the fair value of an intangible asset is equal to the present value of the asset’s projected incremental after-tax cash flows (excess earnings) remaining after deducting the market rates of return on the estimated value of contributory assets (contributory charge) over its remaining useful life. Acquisition of Entertainment On January 7, 2022, we completed the acquisition of Entertainment for purchase consideration of $14.6 million, as presented below (in thousands):
| January 7, 2022
Fair value of common stock transferred | $ | 11,937 |
Cash paid to extinguish acquiree debt | 2,053 |
Cash paid to settle pre-acquisition liabilities and acquiree deal-related costs | 624 |
Cash paid to membership interest holders | 24 |
Cash receivable from membership interest holders pursuant to finalization of net working capital | (61) |
Total purchase consideration | $ | 14,577 |
The following table presents the preliminary purchase consideration allocation recorded on our condensed consolidated balance sheet as of the acquisition date (in thousands):
| January 7, 2022
Cash and cash equivalents | $ | 376 |
Accounts receivable and other assets | 1,259 |
Intangible assets | 9,800 |
Goodwill | 5,002 |
Accounts payable and other liabilities | (1,860) |
Total purchase consideration | $ | 14,577 |
The goodwill was primarily attributed to the value of future synergies created with our current and future offerings. Goodwill is not expected to be deductible for income tax purposes. During the second quarter of 2022, we recorded a measurement period adjustment of $0.1 million cash to be received from membership interest holders related to the finalization of net working capital amounts in accordance with the Entertainment membership interest purchase agreement. The following table presents the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands):
| Fair Value |  | Useful life (in years)
Trade name | $ | 800 |  |  | 3.0
Developed technology | 700 |  |  | 3.0
Merchant relationships | 8,300 |  |  | 4.0
Acquisition of Bridg On May 5, 2021, we completed the acquisition of Bridg for purchase consideration of $578.9 million, as presented below (in thousands):
| May 5, 2021
Cash paid to common and preferred stockholders, warrant holders and vested option holders | $ | 337,166 |
Cash paid to extinguish acquiree debt | 1,949 |
Cash paid to settle pre-acquisition liabilities and acquiree deal-related costs | 8,012 |
Fair value of contingent consideration | 230,921 |
Fair value of assumed options attributable to pre-combination service | 841 |
Total purchase consideration | $ | 578,889 |
The following table presents the purchase consideration allocation recorded on our condensed consolidated balance sheet as of the acquisition date (in thousands):
| May 5, 2021
Cash and cash equivalents | $ | 1,630 |
Accounts receivable and other assets | 1,989 |
Intangible assets | 64,700 |
Goodwill | 538,271 |
Accounts payable and other liabilities | (20,694) |
Deferred tax liabilities | (7,007) |
Total purchase consideration | $ | 578,889 |
The goodwill was primarily attributed to the value of future growth expected for the Bridg platform and of synergies created with our current and future offerings. Goodwill is not expected to be deductible for income tax purposes. D uring the three months ended June 30, 2022, management determined that it was necessary to perform an interim impairment test for Goodwill, and as a result of our test, we recognized a goodwill impairment of $83.1 million on the Bridg Platform reporting unit. Refer to Note 4 - Goodwill and Acquired Intangibles for more information. During the second quarter of 2022, we recorded a measurement period adjustment to our income tax provision resulting in $1.4 million income tax benefit reflected on our consolidated statement of operations. Deferred tax liabilities for Bridg primarily related to acquired intangible assets. As a part of this acquisition, we have agreed to make a First Anniversary Payment equal to 20 times the ARR based on the month preceding the anniversary, less $12.5 million, and a Second Anniversary Payment equal to 15 times the ARR for customers as of the first anniversary based on the month preceding the second anniversary, less the prior ARR at the first anniversary. The Second Anniversary Payment is subject to a specified cap. We have agreed to pay at least 30% of the First Anniversary Payment and the Second Anniversary Payment in cash, with the remainder to be paid in cash or our common stock, at our option. As of June 30, 2022, the fair value of the brokerage fee of the First Anniversary Payment is $6.9 million and the fair value of the brokerage fee of the Second Anniversary Payment is $6.6 million, reflected in accrued expenses on our condensed consolidated balance sheet. The following table presents the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands):
| Fair Value |  | Useful life (in years)
Trade name | $ | 200 |  |  | 2.0
Developed technology | 53,500 |  |  | 6.0
Merchant relationships | 11,000 |  |  | 5.0
Acquisition of Dosh On March 5, 2021, we completed our acquisition of Dosh for purchase consideration of $277.6 million, as presented below (in thousands):
| March 5, 2021
Cash paid to common and preferred stockholders, warrant holders and vested option holders | $ | 136,626 |
Cash paid to extinguish acquiree debt | 16,574 |
Cash paid to settle pre-acquisition liabilities and acquiree deal-related costs | 3,463 |
Fair value of common stock transferred | 117,354 |
Fair value of assumed options attributable to pre-combination service | 3,593 |
Total purchase consideration | $ | 277,610 |
The following table presents the purchase consideration allocation recorded on our condensed consolidated balance sheet as of the acquisition date (in thousands):
| March 5, 2021
Cash and cash equivalents | $ | 7,323 |
Accounts receivable and other assets | 6,146 |
Intangible assets | 80,000 |
Goodwill | 205,690 |
Accounts payable and other liabilities | (4,146) |
Consumer Incentive liability | (15,101) |
Deferred tax liabilities | (2,302) |
Total purchase consideration | $ | 277,610 |
The goodwill was primarily attributed to the value of synergies created with the Company’s current and future offerings and of future growth expected from the labor force of Dosh. Goodwill is not expected to be deductible for income tax purposes. The following table presents the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands):
| Fair Value |  | Useful life (in years)
Trade name | $ | 2,500 |  |  | 3.0
Developed technology | 37,500 |  |  | 6.0
Merchant relationships | 21,000 |  |  | 5.0
Partner relationships | 2,000 |  |  | 7.0
Card-linked subscriber user base | $ | 17,000 |  |  | 5.0
Pro forma consolidated results of operations The following unaudited pro forma financial information presents combined results of operations for the period presented as if the acquisition of Entertainment had been completed on January 1, 2021 and the acquisitions of Dosh and Bridg had been completed on January 1, 2020. The pro forma information includes adjustments to depreciation expense for property and equipment acquired, to amortize expense for the intangible assets acquired, and to eliminate the acquisition transaction expenses recognized in the period. The pro forma financial information is for informational purposes only and is not necessarily indicative of the consolidated results of operations of the combined business had the acquisitions actually occurred on January 1, 2021 and January 1, 2020, respectively, or the results of future operations of the combined business. For instance, planned or expected operational synergies following the acquisition are not reflected in the pro forma information. Consequently, actual results will differ from the unaudited pro forma information presented below.
| Six Months Ended June 30,
| 2021 |  | 2022
| (in thousands)
Revenue | $ | 124,511 |  |  | $ | 143,354 |
Net loss | $ | (85,428) |  |  | $ | (93,524) |

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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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