Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

v3.19.3
Acquisitions
9 Months Ended
Sep. 30, 2019
Business Combinations [Abstract]  
Acquisitions Acquisitions
2019 Acquisitions
Simple Bills
In July 2019, we acquired substantially all of the assets of Simple Bills Corporation (“Simple Bills”), a provider of utility management services for the multi-family student housing market. Aggregate purchase consideration was $18.1 million, including deferred cash obligations of up to $3.4 million that will be released over a two-year period following the closing date, subject to any indemnification claims. In addition, the purchase agreement provides for up to $10.0 million of restricted stock awards contingent upon the achievement of performance targets during 2020 and 2021 for which post-acquisition employment service is required. As these awards are tied to employment services, we will record this amount as stock-based compensation expense over the requisite service period. The acquisition was financed using cash on hand.
The acquired identified intangible assets consisted of developed technology, client relationships and trade names and were assigned estimated useful lives of seven, eight and five years, respectively. Preliminary goodwill recognized of $9.5 million is primarily comprised of anticipated synergies from the expansion of our utility billing solutions. Goodwill and the acquired identified intangible assets are deductible for tax purposes. Acquisition costs associated with this transaction totaled $0.1 million.
Hipercept
In July 2019, we acquired substantially all of the assets of CRE Global Enterprises LLC (“CRE”), and certain of its subsidiaries, including 100% of the shares outstanding in its subsidiaries in the UK, Canada and Colombia (collectively “Hipercept”). Hipercept is a provider of data services and data analytics solutions to institutional commercial real estate owners. Aggregate purchase consideration was $28.2 million, including deferred cash obligations of up to $4.0 million, subject to any indemnification claims, to be released on the first and second anniversary dates of the closing date, and contingent
consideration of up to $28.0 million based on the achievement of certain financial objectives during the six months ended June 30, 2022. The $28.0 million of contingent consideration is comprised of 1) cash payments of up to $25.3 million to CRE, and 2) stock grants of up to $2.7 million to certain individuals for which post-acquisition employment service is required. The fair value of the contingent consideration recorded as purchase consideration was $6.7 million on the date of acquisition and we will record an estimated $0.8 million tied to employment services as stock-based compensation expense over the service period. The acquisition was financed using cash on hand.
The acquired identified intangible assets consisted of developed technology, client relationships and trade names and were assigned estimated useful lives of five, seven and three years, respectively. Preliminary goodwill recognized of $23.1 million is primarily comprised of anticipated synergies from the expansion of our asset and investment management solutions. Goodwill and the acquired identified intangible assets arising from the acquisition of Hipercept’s domestic assets are deductible for tax purposes; those arising from the acquisition of the international entities are not. Acquisition costs associated with this transaction totaled $0.3 million.
LeaseTerm Solutions
In April 2019, we acquired substantially all of the assets of LeaseTerm Insurance Group, LLC (“LeaseTerm Solutions”), a provider of alternatives to traditional renters’ insurance programs and tenant security deposit programs for the multifamily housing industry. Aggregate purchase consideration was $26.5 million, including deferred cash obligations of up to $2.7 million that will be released on the first and second anniversary dates of the closing date, subject to any indemnification claims. The acquisition was financed using cash on hand.
The acquired identified intangible assets consisted of client relationships and trade names and were assigned estimated useful lives of seven and five years, respectively. Preliminary goodwill recognized of $18.6 million is primarily comprised of anticipated synergies from the expansion of our risk management solutions. Goodwill and the acquired identified intangible assets are deductible for tax purposes. Acquisition costs associated with this transaction totaled $0.2 million.
Purchase Consideration and Purchase Price Allocations
The estimated fair values of assets acquired and liabilities assumed are provisional and are based primarily on the information available as of the acquisition date. We believe this information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but we are awaiting additional information necessary to finalize those values. Therefore, the provisional measurements of fair value are subject to change, and such changes could be significant. We expect to finalize the valuation of these assets and liabilities as soon as practicable, but no later than one year from the acquisition closing dates. The components of the purchase consideration and the preliminary allocation of each purchase price, including the effects of measurement period adjustments recorded as of September 30, 2019, are as follows:
 
 
LeaseTerm Solutions
 
Hipercept
 
Simple Bills
 
 
(in thousands)
Fair value of purchase consideration:
 
 
 
 
 
 
Cash, net of cash acquired
 
$
23,417

 
$
17,656

 
$
14,875

Deferred obligations, net
 
3,095

 
3,799

 
3,274

Contingent consideration
 

 
6,700

 

Total fair value of purchase consideration
 
$
26,512

 
$
28,155

 
$
18,149

 
 
 
 
 
 
 
Fair value of net assets acquired:
 
 
 
 
 
 
Restricted cash
 
$
5,889

 
$

 
$

Accounts receivable
 
491

 
888

 
841

Property, equipment, and software
 
400

 
171

 
82

Intangible assets:
 
 
 
 
 
 
Developed product technologies
 

 
1,700

 
4,000

Client relationships
 
7,100

 
3,000

 
5,200

Trade names
 
200

 
100

 
100

Right-of-use assets
 
167

 
435

 
1,993

Goodwill
 
18,625

 
23,116

 
9,541

Other assets
 

 
18

 
115

Accounts payable and accrued liabilities
 
(342
)
 
(703
)
 
(1,497
)
Client deposits held in restricted accounts
 
(5,889
)
 

 

Deferred revenue
 

 
(253
)
 
(547
)
Other long-term liabilities
 
(129
)
 
(317
)
 
(1,679
)
Total fair value of net assets acquired
 
$
26,512

 
$
28,155

 
$
18,149


2018 Acquisitions
We completed four acquisitions during the fiscal year 2018. For the acquisition of Rentlytics, Inc., the estimated fair values of assets acquired and liabilities assumed in the table below are provisional. We expect to finalize the valuation of these assets and liabilities as soon as practicable, but no later than one year from the acquisition date. The allocation of each purchase price, including effects of measurement period adjustments recorded as of September 30, 2019, is as follows:
 
 
 
Date of Acquisition
 
Aggregate Purchase Price
 
Closing Cash Payment, Net of Cash Acquired
 
Net Tangible Assets Acquired (Liabilities Assumed)
 
Identified Intangible Assets
 
Goodwill Recognized
 
 
 
 
 
(in thousands)
ClickPay Services, Inc.
(Final)
 
Apr 2018
 
$
220,992

 
$
138,983

 
$
(4,620
)
 
$
52,700

 
$
172,912

Blu Trend, LLC
(Final)
 
Jul 2018
 
$
8,500

 
$
8,500

 
$
343

 
$
4,270

 
$
3,887

LeaseLabs, Inc.
(Final)
 
Sept 2018
 
$
112,892

 
$
84,498

 
$
1,188

 
$
27,200

 
$
84,504

Rentlytics, Inc.
(Provisional)
 
Oct 2018
 
$
54,953

 
$
47,895

 
$
288

 
$
12,200

 
$
42,465


Purchase consideration for LeaseLabs, Inc. included contingent consideration of up to $9.9 million based on the collection of acquisition date accounts receivable balances during the six-month period after the acquisition date. The fair value of the contingent consideration was $7.0 million on the date of acquisition. The final contingent consideration amount of $6.0 million was paid in April 2019. Refer to Note 13 for additional information regarding our contingent consideration obligation.
Deferred Obligations and Contingent Consideration Activity
The following table presents changes in the Company’s deferred cash and stock obligations and contingent consideration for the nine months ended September 30, 2019 and the year ended December 31, 2018:
 
Deferred Cash and Stock Obligations
 
Contingent Consideration
 
Total
 
(in thousands)
Balance at January 1, 2018
$
47,016

 
$
414

 
$
47,430

Additions, net of fair value discount
36,313

 
7,000

 
43,313

Cash payments
(29,600
)
 
(247
)
 
(29,847
)
Accretion expense
1,970

 

 
1,970

Change in fair value

 
(1,167
)
 
(1,167
)
Indemnification claims and other adjustments
(3,557
)
 

 
(3,557
)
Balance at December 31, 2018
52,142

 
6,000

 
58,142

Additions, net of fair value discount
9,653

 
6,700

 
16,353

Cash payments
(20,914
)
 
(5,963
)
 
(26,877
)
Settlements through common stock issued
(14,846
)
 

 
(14,846
)
Accretion expense
1,302

 
58

 
1,360

Change in fair value

 
(37
)
 
(37
)
Indemnification claims and other adjustments
130

 

 
130

Balance at September 30, 2019
$
27,467

 
$
6,758

 
$
34,225


In May 2019, in connection with our April 2018 acquisitions of NovelPay, LLC (“NovelPay”) and ClickPay Services, Inc. (collectively with NovelPay, “ClickPay”), we issued an aggregate of 154,281 shares of our common stock to the equity holders of ClickPay. These shares are subject to a holdback in respect of indemnification and post-closing purchase price adjustments pursuant to the acquisition agreements.
In September 2019, we settled a deferred equity obligation with regard to our September 2018 acquisition of LeaseLabs, Inc. through the issuance of 80,012 shares of our common stock.
Pro Forma Results of Acquisitions
The following table presents unaudited pro forma results of operations for the three and nine months ended September 30, 2019 and 2018, as if the aforementioned 2019 and 2018 acquisitions had occurred as of January 1, 2018 and January 1, 2017, respectively. The pro forma information includes the business combination accounting effects resulting from these acquisitions, including interest expense, tax expense or benefit, issuance of shares of our common stock, and additional amortization resulting from the valuation of amortizable intangible assets. We prepared the pro forma financial information for the combined entities for comparative purposes only, and it is not indicative of what actual results would have been if the acquisitions had occurred at the beginning of the periods presented, or of future results.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
Pro Forma
 
2018
Pro Forma
 
2019
Pro Forma
 
2018
Pro Forma
 
(unaudited)
 
(in thousands, except per share amounts)
Total revenue
$
256,013

 
$
235,473

 
$
743,443

 
$
686,557

Net income
$
11,855

 
$
7,843

 
$
38,332

 
$
21,986

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.13

 
$
0.09

 
$
0.42

 
$
0.26

Diluted
$
0.12

 
$
0.09

 
$
0.40

 
$
0.25