Business Combinations

6 Months Ended

Jun. 30, 2021

2020 Acquisitions

On January 6, 2020, the Company acquired substantially all of the assets of MedTouch, pursuant to the terms of an Asset Purchase Agreement. The acquisition of MedTouch expands the Company’s digital healthcare marketing services. The Company’s total allocable purchase price consideration was $20.0 million. The Company incurred approximately $0.6 million in transaction costs, which were expensed when incurred. The amount of goodwill deductible for tax purposes is $20.4 million.

On March 23, 2020, the Company acquired substantially all of the assets of Brainjocks, pursuant to the terms of an Asset Purchase Agreement. The acquisition of Brainjocks expands the Company’s strategic marketing and technical delivery services. On May 4, 2020, pursuant to a separate Asset Purchase Agreement, a wholly-owned subsidiary of the Company completed the acquisition of substantially all of the assets of Brainjocks Europe d.o.o. Novi Sad, an affiliate of Brainjocks operating in Serbia. With the completion of this acquisition, the Company has facilities located in Novi Sad, Serbia. The Company's total allocable purchase price consideration was $21.2 million. The Company incurred approximately $1.1 million in transaction costs, which were expensed when incurred. The amount of goodwill deductible for tax purposes, excluding contingent consideration, is $8.7 million.

On June 17, 2020, a wholly-owned subsidiary of the Company acquired PSL pursuant to the terms of a Stock Purchase Agreement. PSL is based in Medellin, Colombia, with additional locations in Bogota and Cali, Colombia. The acquisition of PSL strengthens the Company’s global delivery capabilities, enhancing its nearshore systems and custom software application development, testing, and ongoing support for customers. PSL added more than 600 professionals and strategic client relationships with customers across several industries. The Company's total allocable purchase price consideration was $83.1 million, net of cash acquired. The Company incurred approximately $2.1 million in transaction costs, which were expensed when incurred. The goodwill is non-deductible for tax purposes.

The acquisition date fair value of the consideration transferred for the 2020 acquisitions consisted of the following (in millions):


	MedTouch			Brainjocks			PSL
Cash	$	13.9		$	15.8		$	60.8
Company common stock issued at closing	1.9			2.4			4.5
Contingent consideration (1)	4.2		(2)	2.3		(3)	17.7		(4)
Net working capital adjustment due to the seller(s)	—			0.7			0.1
Total allocable purchase price consideration	$	20.0		$	21.2		$	83.1

(1)Represents the initial fair value estimate of additional revenue and earnings-based contingent consideration, which may be realized by the seller(s) 12 months after the closing date of the acquisition.

(2)MedTouch achieved a portion of the potential maximum cash payout pursuant to the Asset Purchase Agreement, and as a result, the Company paid $9.2 million in contingent consideration in the second quarter of 2021. The maximum cash payout that may have been realized by MedTouch was $10.2 million. The Company recorded a pre-tax adjustment in “Adjustment to fair value of contingent consideration” on the Unaudited Condensed Consolidated Statements of Operations of $0.2 million and $0.3 million during the three and six months ended June 30, 2021, respectively.

(3)The maximum cash payout that may be realized by Brainjocks is $4.8 million. As of June 30, 2021, the fair value of the contingent consideration was $3.9 million. The Company recorded a pre-tax adjustment in “Adjustment to fair value of contingent consideration” on the Consolidated Statements of Operations of $0.1 million and $0.3 million during the three and six months ended June 30, 2021.

(4)The maximum cash payout that may be realized by PSL is $22.2 million. As of June 30, 2021, the Company’s best estimate of the fair value of the contingent consideration was $20.9 million. The Company recorded a pre-tax adjustment to reduce the liability in “Adjustment to fair value of contingent consideration” on the Consolidated Statements of Operations of $0.7 million and $0.6 million during the three and six months ended June 30, 2021, respectively.

The Company has allocated the total purchase price consideration between tangible assets, identified intangible assets, liabilities, and goodwill as follows (in millions):


	MedTouch		Brainjocks		PSL
Acquired tangible assets	$	4.7	$	7.0	$	11.6
Identified intangible assets	6.7		8.4		29.6
Liabilities assumed	(6.0)		(4.9)		(17.7)
Goodwill	14.6		10.7		59.6
Total purchase price	$	20.0	$	21.2	$	83.1

As the Company completed its evaluation of the acquired assets and assumed liabilities of PSL, the Company recorded certain adjustments during the measurement period based on facts and circumstances that existed as of acquisition date. The measurement period adjustments resulted in an increase to the total purchase price of $1.1 million, an increase to acquired tangible assets of $0.5 million, a decrease to identified intangible assets of $0.4 million, an increase to liabilities assumed of $1.7 million and an increase to goodwill of $2.7 million from the acquisition date through June 30, 2021. The measurement period for the PSL acquisition is now closed.

The following table presents details of the intangible assets acquired during the year ended December 31, 2020 (dollars in millions).

Weighted Average Useful Life

Estimated Useful Life

Aggregate Acquisitions

Customer relationships

6 years

5 - 7 years

33.0

Customer backlog

1 year

9.6

Non-compete agreements

5 years

0.2

Trade name

1 year

0.4

Developed software

4 years

3 - 5 years

1.5

Total acquired intangible assets

44.7

Pro-forma Results of Operations

The following presents the unaudited pro-forma combined results of operations of the Company with PSL for the six months ended June 30, 2020, after giving effect to certain pro-forma adjustments and assuming PSL was acquired as of the beginning of 2019. Pro-forma results of operations have not been presented for MedTouch or Brainjocks because the effect of these acquisitions on the Company's consolidated financial statements were not material individually or in the aggregate.

These unaudited pro-forma results are presented in compliance with the adoption of ASU No. 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations, and are not necessarily indicative of the actual consolidated results of operations had the acquisition of PSL actually occurred on January 1, 2019 or of future results of operations of the consolidated entities (in thousands except per share data):


	Six Months Ended June 30,
	2020
Revenues	$	308,529
Net income	$	19,400
Basic net income per share	$	0.61
Diluted net income per share	$	0.60
Shares used in computing basic net income per share	31,896
Shares used in computing diluted net income per share	32,602