Variable Interest Entities

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

4. VARIABLE INTEREST ENTITIES

Adsmurai

On August 5, 2022, the Company made a loan in the principal amount of €12,535,000 (approximately $12.8 million as of that date) to an entity affiliated with owners of a majority interest in Adsmurai, S.L. (“Adsmurai”), a company engaged in the sale and marketing of digital advertising. The loan has a two-year term, bears interest at a rate of 5% annually, and can be converted into 51% of the issued and outstanding shares of stock of Adsmurai at the Company’s sole discretion. If the Company elects not to convert the loan, the borrower has the option to repay the loan at maturity either in cash or with 51% of the issued and outstanding shares of stock of Adsmurai.

The Company has determined for accounting purposes that (i) Adsmurai is a VIE because the equity investors at risk, as a group, lack the characteristics of a controlling financial interest; and (ii) the Company is the primary beneficiary because the conversion right gives it the power to direct the activities of the entity that most significantly impact the entity’s economic performance. See Note 2 for more details.

The Company has determined that Adsmurai is a business and has accounted for its consolidation under the provisions of ASC 805, “Business Combinations”, and included Adsmurai's results of operations since the date of the loan in the Company's

Consolidated Statements of Operations. The Company is in the process of completing the purchase price allocation for Adsmurai. The following is a summary of the preliminary purchase price allocation (in millions):


Cash	$	7.4
Accounts receivable		12.2
Other assets		0.7
Fixed assets		2.8
Intangible assets subject to amortization		8.2
Goodwill		13.0
Current liabilities		(14.4	)
Deferred tax		(2.0	)
Debt		(2.8	)
Noncontrolling interest		(12.3	)
Convertible loan		(12.8	)

Intangible assets subject to amortization acquired includes:


Intangible Asset	Estimated Fair Value (in millions)		Weighted average life (in years)
Advertiser relationships	$	4.7	7.0
Existing technology		2.4	5.0
Trade name		1.1	5.0

The fair value of the trade receivables is $12.2 million. The gross amount due under contract is $12.3 million, of which $0.1 million is expected to be uncollectable.

The goodwill, which is not expected to be deductible for tax purposes, is assigned to the Company’s digital segment and is attributable to Adsmurai’s workforce and synergies from combining Adsmurai’s operations with those of the Company.

Subsequent to the consolidation through December 31, 2022, the Company consolidated Adsmurai's revenues of $31.7 million, and net income of $2.0 million.

The following unaudited pro forma information has been prepared to give effect to the Company’s consolidation of Adsmurai as if the transaction had occurred on January 1, 2021. This pro forma information was adjusted to exclude acquisition fees and costs of $0.6 million for the year ended December 31, 2022, which were expensed in connection with the transaction. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had this transaction occurred on such date, nor does it purport to predict the results of operations for any future periods.


In thousands, except share and per share data	Year Ended
	December 31,
	2022		2021
Pro Forma:
Total revenue	$	984,566	$	801,436
Net income (loss) attributable to common stockholders	$	19,283	$	29,696

Basic and diluted earnings per share:
Net income (loss) per share, attributable to common stockholders, basic	$	0.23	$	0.35
Net income (loss) per share, attributable to common stockholders, diluted	$	0.22	$	0.34

Weighted average common shares outstanding, basic		85,391,163		85,301,603
Weighted average common shares outstanding, diluted		87,769,762		87,910,603

Jack of Digital

On August 3, 2022, the Company made an investment of $0.1 million in exchange for approximately 15% of the issued and outstanding stock of Jack of Digital, a digital marketing services company that serves as the exclusive advertising sales partner of ByteDance in Pakistan.

The Company has determined for accounting purposes that (i) Jack of Digital is a VIE because the equity investors at risk, as a group, lack the characteristics of a controlling financial interest; and (ii) the Company is the primary beneficiary because it has the power to direct the activities of the entity that most significantly impact the entity’s economic performance. See Note 2 for more details.

Subsequent to the consolidation through December 31, 2022, the Company consolidated Jack of Digital's revenues of $1.7 million, and de minimis net income.

following unaudited pro forma information has been prepared to give effect to the Company’s consolidation of Jack of Digital as if the transaction had occurred on January 1, 2021. This pro forma information was adjusted to exclude acquisition fees and costs of $0.3 million for the year ended December 31, 2022, which were expensed in connection with the transaction. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had this transaction occurred on such date, nor does it purport to predict the results of operations for any future periods.


In thousands, except share and per share data	Year Ended
	December 31,
	2022		2021
Pro Forma:
Total revenue	$	959,693	$	761,130
Net income (loss) attributable to common stockholders	$	18,602	$	29,285

Basic and diluted earnings per share:
Net income (loss) per share, attributable to common stockholders, basic	$	0.22	$	0.34
Net income (loss) per share, attributable to common stockholders, diluted	$	0.21	$	0.33

Weighted average common shares outstanding, basic		85,391,163		85,301,603
Weighted average common shares outstanding, diluted		87,769,762		87,910,603

The table below presents the reconciliation of changes in noncontrolling interests (in thousands):


	Year Ended December 31,
	2022
Beginning balance	$	-
Initial fair value of noncontrolling interests		12,897
Net income (loss) attributable to noncontrolling interest		2,050
Ending balance	$	14,947