Variable Interest Entities

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

8. VARIABLE INTEREST ENTITIES

Adsmurai

On August 5, 2022, the Company made a loan (the "Adsmurai 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.

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, 2022. 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	Three-Month Period
	Ended March 31,
	2022
Pro Forma:
Total revenue	$	206,595
Net income (loss) attributable to common stockholders	$	1,896

Basic and diluted earnings per share:
Net income (loss) per share, attributable to common stockholders, basic and diluted	$	0.02

Weighted average common shares outstanding, basic		86,522,378
Weighted average common shares outstanding, diluted		88,630,216

On April 3, 2023, the Company converted the Adsmurai Loan into a 51% equity interest in Adsmurai. See Note 9 below for more details.

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.

On April 3, 2023, the Company acquired the remaining issued and outstanding stock of Jack of Digital for approximately $1.1 million. Of that amount, the Company paid an initial installment payment of approximately $0.5 million and the balance will be paid through December 2025. In addition, there is an earnout payable to the sellers, subject on certain targets being achieved.

The 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, 2022. This pro forma information was adjusted to exclude acquisition fees and costs of $0.1 million for the three-month period ended March 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	Three-Month Period
	Ended March 31,
	2022
Pro Forma:
Total revenue	$	197,734
Net income (loss) attributable to common stockholders	$	1,984

Basic and diluted earnings per share:
Net income (loss) per share, attributable to common stockholders, basic and diluted	$	0.02

Weighted average common shares outstanding, basic		86,522,378
Weighted average common shares outstanding, diluted		88,630,216