Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

v3.20.1
Acquisitions
3 Months Ended
Mar. 31, 2020
Business Combinations [Abstract]  
Acquisitions Acquisitions
2020 Acquisitions
On January 22, 2020, we entered into an Agreement and Plan of Merger, by which we acquired all of the outstanding stock of Modern Message Inc. (“Modern Message”), a provider of resident engagement solutions to the multifamily housing industry. Aggregate purchase consideration was $64.7 million, comprised of $62.7 million paid at closing and deferred cash obligations of up to $2.0 million, subject to working capital adjustments and indemnification claims. A portion of the deferred cash obligations will be released within 150 days of closing, a portion on the first anniversary of the closing, and the remainder on the second anniversary of closing. In addition, the Agreement and Plan of Merger provided for retention incentives for certain executives in the form of restricted stock grants that are tied to post-acquisition employment service. These shares were granted during the first quarter of 2020, and had an aggregate grant date fair value of $10.7 million which will be recognized as stock-based compensation over the requisite service period. The acquisition was financed with cash on hand.
The acquired identified intangible assets consisted of developed technology, client relationships, and trade names that were assigned estimated useful lives of five, nine and five years, respectively. Preliminary goodwill recognized of $49.3 million is primarily comprised of anticipated synergies from the expansion of our resident engagement platform. Goodwill and the acquired identified intangible assets are not deductible for tax purposes. Acquisition costs associated with this transaction totaled $0.3 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 date. The components of the purchase consideration and the preliminary allocation of purchase price as of March 31, 2020 is as follows:
 
 
Modern Message
 
 
(in thousands)
Fair value of purchase consideration:
 
 
Cash, net of cash acquired
 
$
62,710

Deferred obligations, net
 
2,008

Total fair value of purchase consideration
 
$
64,718

 
 
 
Fair value of net assets acquired:
 
 
Restricted cash
 
$
3,248

Accounts receivable
 
1,160

Intangible assets:
 
 
Developed product technologies
 
8,700

Client relationships
 
9,400

Trade names
 
700

Goodwill
 
49,268

Other assets
 
416

Accounts payable and accrued liabilities
 
(774
)
Client deposits held in restricted accounts
 
(3,450
)
Deferred revenue
 
(198
)
Deferred tax liability, net
 
(3,752
)
Total fair value of net assets acquired
 
$
64,718


2019 Acquisitions
We completed five acquisitions during fiscal year 2019. For the acquisitions in the table below, the estimated fair values of assets acquired and liabilities assumed 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 dates. The allocation of each purchase price, including effects of measurement period adjustments recorded as of March 31, 2020, 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)
LeaseTerm Solutions
(Provisional)
 
Apr 2019
 
$
26,512

 
$
23,417

 
$
587

 
$
7,300

 
$
18,625

Hipercept
(Provisional)
 
Jul 2019
 
$
28,303

 
$
17,804

 
$
149

 
$
4,800

 
$
23,354

Simple Bills
(Provisional)
 
Jul 2019
 
$
18,149

 
$
14,875

 
$
(724
)
 
$
9,300

 
$
9,573

IMS
(Provisional)
 
Dec 2019
 
$
55,605

 
$
50,177

 
$
60

 
$
16,100

 
$
39,445

Buildium
(Provisional)
 
Dec 2019
 
$
569,431

 
$
566,241

 
$
(14,467
)
 
$
113,000

 
$
470,898


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 three months ended March 31, 2020 and the year ended December 31, 2019:
 
Deferred Cash and Stock Obligations
 
Contingent Consideration
 
Total
 
(in thousands)
Balance at January 1, 2019
$
52,142

 
$
6,000

 
$
58,142

Additions, net of fair value discount
18,183

 
6,700

 
24,883

Cash payments
(25,215
)
 
(5,963
)
 
(31,178
)
Settlements through common stock issued
(14,846
)
 

 
(14,846
)
Accretion expense
1,540

 
58

 
1,598

Change in fair value

 
(259
)
 
(259
)
Indemnification claims and other adjustments
(57
)
 

 
(57
)
Balance at December 31, 2019
31,747

 
6,536

 
38,283

Additions, net of fair value discount
2,008

 

 
2,008

Cash payments
(45
)
 

 
(45
)
Accretion expense
267

 
51

 
318

Change in fair value

 
185

 
185

Indemnification claims and other adjustments
(266
)
 

 
(266
)
Balance at March 31, 2020
$
33,711

 
$
6,772

 
$
40,483


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 with respect to 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 months ended March 31, 2020 and 2019, as if the aforementioned 2020 and 2019 acquisitions had occurred as of January 1, 2019 and 2018, 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
March 31, 2020
Pro Forma
 
Three Months Ended
March 31, 2019
Pro Forma
 
(unaudited)
 
(unaudited)
 
(in thousands, except per share amounts)
 
(in thousands, except per share amounts)
Total revenue
$
277,155

 
$
255,528

Net income (loss)
$
6,170

 
$
(268
)
Net income (loss) per share:
 
 
 
Basic
$
0.07

 
$
0.00

Diluted
$
0.06

 
$
0.00