5. ACQUISITION

On April 4, 2017, the Company completed the acquisition of 100% of the stock of Headway, a provider of mobile, programmatic, data and performance digital marketing solutions primarily in the United States, Mexico and other markets in Latin America. The Company acquired Headway in order to acquire additional digital media platforms that the Company believes will enhance its offerings to the U.S. Hispanic marketplace as well as expand the Company’s international footprint. The transaction was funded from the Company’s cash on hand, for an aggregate cash consideration of $7.5 million, net of $4.5 million of cash acquired, and contingent consideration with a fair value of $18.0 million as of the acquisition date.

The following is a summary of the initial purchase price allocation for the Company’s acquisition of Headway (unaudited; in millions):

Accounts receivable	$	20.1
Intangible assets subject to amortization		17.1
Goodwill		18.9
Current liabilities		(24.0)
Deferred Tax		(6.6)

The acquisition of Headway includes a contingent consideration arrangement that requires additional consideration to be paid by the Company to Headway based upon the achievement of certain annual performance benchmarks over a three-year period. The range of the total undiscounted amounts the Company could pay under the contingent consideration agreement over the three-year period is between $0 and $31.5 million. The fair value of the contingent consideration recognized on the acquisition date of $18.0 million was estimated by applying the real options approach. The agreement also includes a payment of approximately $2.0 million to certain key employees if they remain with the Company for a period of 18 months, which will be treated as post-acquisition compensation expense and accrued as earned.

The fair value of the assets acquired includes trade receivables of $20.1 million. The gross amount due under contract is $21.2 million, of which $1.1 million is expected to be uncollectable.

During the three-month period ended September 30, 2017, Headway generated net revenue of $12.7 million and a net loss of $0.2 million, which are included in the Consolidated Statements of Operations. During the nine-month period ended September 30, 2017, Headway generated net revenue of $23.8 million and a net loss of $0.7 million, which are included in the Consolidated Statements of Operations.

The goodwill, which is not expected to be deductible for tax purposes, is assigned to the digital media segment and is attributable to Headway’s workforce and expected synergies from combining Headway’s operations with those of the Company. The changes in the carrying amount of goodwill for each of the Company’s operating segments for the nine-month period ended September 30, 2017 are as follows (in thousands):

		December 31,				September 30,
		2016		Acquisition		2017
Television	$	35,912	$	-	$	35,912
Digital		14,169		18,961		33,130
Consolidated	$	50,081	$	18,961	$	69,042

The fair value of the acquired intangible assets and contingent consideration is provisional pending receipt of the final valuations for those assets.

The following unaudited pro forma information for the three- and nine-month periods ended September 30, 2017 and 2016 has been prepared to give effect to the acquisition of Headway as if the acquisition had occurred on January 1, 2016. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had this acquisition occurred on such date, nor does it purport to predict the results of operations for any future periods.

	Three-Month Period				Nine-month Period
	Ended September 30,				Ended September 30,
	2017		2016		2017		2016
Pro Forma:
Total revenue	$	334,555	$	73,324	$	472,132	$	207,319
Net income (loss)	$	157,208	$	5,508	$	163,761	$	12,135

Basic and diluted earnings per share:
Net income per share, basic	$	1.74	$	0.06	$	1.81	$	0.14
Net income per share, diluted	$	1.71	$	0.06	$	1.78	$	0.13

Weighted average common shares outstanding, basic		90,517,492		89,590,135		90,370,679		89,208,732
Weighted average common shares outstanding, diluted		92,161,108		91,489,975		91,985,946		91,188,958

The unaudited pro forma information for the nine-month periods ended September 30, 2017 and 2016, was adjusted to exclude acquisition fees and costs of $0.5 million in 2017 and $0 in 2016, which were expensed in connection with the acquisition.