On May 22, 2019, the Company completed its acquisition of Trilogy pursuant to an Agreement and Plan of Merger and Reorganization, dated as of April 7, 2019 (the “Merger Agreement”), for a net purchase price of $608.6 million in cash and stock consideration, subject to final adjustments related to working capital and indebtedness. Under the terms of the Merger

Agreement, the Company has issued restricted stock units for shares of its common stock, par value $0.001 per share, to certain employees and officers of Trilogy. These awards were issued pursuant to the Company’s 2014 Equity Incentive Plan, are subject to future service requirements and will primarily vest over an 18-month period. In addition, a portion of the purchase price held in escrow was recognized as compensation expense in the third quarter of 2019 as the service requirements of certain key employees was determined to be fulfilled. The net assets and results of operations of Trilogy are included in the Company’s consolidated financial statements within the Alternative Credential Segment as of May 22, 2019.

The following table reflects the Company’s completed valuation of the assets acquired and liabilities assumed of Trilogy as of the date of the acquisition:



	Estimated Average Useful Life (in years)	Purchase Price Allocation
		(in thousands)
Cash and cash equivalents		$	35,320
Current assets		30,081
Property and equipment, net		2,411
Other non-current assets		6,276
Amortizable intangible assets:
Developed technology	3	48,096
Developed content	4	48,050
University client relationships	10	84,150
Trade names and domain names	5	7,100
Goodwill		425,346
Current liabilities		(57,010		)
Non-current liabilities		(21,224		)
		$	608,596

Intangible assets are valued using the cost replacement, multi-period excess earnings and relief-from-royalty methodologies, which are Level 3 measurements. The fair value of the developed technology and developed content acquired from Trilogy was determined using the replacement cost method under the cost approach. Under the replacement cost method, consideration was given to the estimated time, investment and resources required to recreate the acquired intangibles, adjusted for obsolescence, an estimated developer’s profit and rate of return, in accordance with accepted valuation methodologies.

The fair value of university client relationships was determined using the multi-period excess earnings method under the income approach based on discounted projected cash flows associated with the net earnings attributable to the acquired customer relationships. These projected cash flows are estimated over the remaining economic life of the intangible asset and are considered from a market participant perspective. Significant estimates and assumptions required under this method include growth rates for revenue attributable to the existing university partnership base, forecasted margins, attrition and renewal rates, a discount rate, and contributory asset charges.

Trade names were valued using the relief-from-royalty method under the income approach. This method assumes that 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 several assumptions, including future revenue for the trade name, the appropriate royalty rate and the discount rate.

The goodwill balance is primarily attributed to the assembled workforce, expanded market opportunities and operating synergies anticipated upon the integration of the operations of the Company and Trilogy. The goodwill resulting from the acquisition will not be tax deductible. Refer to Note 5 for details.

The unaudited pro forma combined financial information below is presented for illustrative purposes and does not purport to represent what the results of operations would actually have been if the business combination occurred as of the dates indicated or what the results would be for any future periods. The following table presents the Company’s unaudited pro forma combined revenue, pro forma combined net loss and pro forma combined net loss per share for the years ended December 31, 2019 and 2018, as if the acquisition of Trilogy had occurred on January 1, 2018:



	Year Ended December 31,
	2019			2018
	(in thousands, except per share amounts)
Pro forma revenue	$	624,796		$	497,637
Pro forma net loss	(268,900		)	(109,508		)
Pro forma net loss per share, basic and diluted	$	(4.38	)	$	(1.96	)