Business Combination (Notes)

9 Months Ended

Sep. 30, 2017

Business Acquisition [Line Items]

Business Combination Disclosure [Text Block]

Business Combination

On August 3, 2017, the Company acquired Vayant Travel Technologies, Inc. ("Vayant"), a privately held company based in Sofia, Bulgaria, for total cash consideration, net of cash acquired, of approximately $34.1 million. Vayant is a cloud software company that provides advanced shopping, merchandising and inspirational travel solutions. The acquisition of Vayant strengthens the Company's modern commerce solutions for the travel industry and positions it to deliver greater value to its travel customers through an end-to-end offer optimization solution designed to help travel companies deliver personalized offers and expanded choices that drive loyalty and growth.

Since the acquisition date, the Company has included $1.3 million of revenue and $0.5 million of net loss related to Vayant in its consolidated income statement. During the quarter ended September 30, 2017, the Company incurred acquisition-related costs of $0.6 million consisting primarily of advisory, legal fees, and retention of key employees.

All of the assets acquired and the liabilities assumed in the transaction have been recognized at their acquisition date fair values at August 3, 2017.

The preliminary allocation of the total purchase price for Vayant is as follows (in thousands):

Cash	$	1,822
Other current assets	1,235
Noncurrent assets	86
Intangibles	18,600
Goodwill	17,052
Accounts payable and accrued liabilities	(1,668		)
Deferred revenue	(600		)
Deferred tax liability	(526		)
Noncurrent liabilities	(49		)
Net assets acquired	$	35,952

The following are the identifiable intangible assets acquired (in thousands) and their respective useful lives:

			Useful Life
	Amount		(years)
Developed technology	$	11,600	7
Customer relationships	7,000		5
Total	$	18,600

In performing the preliminary purchase price allocation, the Company considered, among other factors, its anticipated future use of the acquired assets, analysis of historical financial performance, and estimates of future cash flows from Vayant's products and services. The allocation resulted in acquired intangible assets of $18.6 million. The acquired intangible assets consisted of developed technology and customer relationships and were valued using the income approach in which the after-tax cash flows are discounted to present value. The cash flows are based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model as well as the weighted average cost of capital. Additionally, the Company assumed certain liabilities in the acquisition, including deferred revenue to which a fair value of $0.6 million was ascribed using a cost-plus profit approach.

The Company has made a preliminary determination that $0.5 million of net deferred tax liabilities were assumed on the acquisition date. The deferred tax liability is comprised of the value of intangible assets partially offset by a deferred tax asset related to net operating losses.

The excess of the purchase price over the estimated amounts of net assets as of the effective date of the acquisition was allocated to goodwill. The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the Vayant acquisition. These benefits include the expectation that the combined company’s complementary products will strengthen the Company's modern commerce solutions for the travel industry.

The Company believes the combined company will benefit from a broader global presence and, with the Company’s direct sales force and larger channel coverage, significant cross-selling opportunities. None of the goodwill is expected to be currently deductible for tax purposes. In accordance with applicable accounting standards, goodwill will not be amortized but instead will be tested for impairment at least annually, or more frequently if certain indicators are present. In the event that the management of the combined company determines that the value of goodwill has become impaired, the combined company will incur an accounting charge for the amount of the impairment during the fiscal quarter in which the determination is made.

Pro Forma Financial Information

The unaudited financial information in the table below summarizes the combined results of operations of the Company and Vayant, on a pro forma basis, as though the Company had acquired Vayant on January 1, 2016. The pro forma information for all periods presented also includes the effect of business combination accounting resulting from the acquisition, including amortization charges from acquired intangible assets.

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except earnings per share)	2017			2016			2017			2016
Total revenue	$	42,738		$	40,316		$	127,522		$	118,770
Net loss	(23,150		)	(17,081		)	(64,496		)	(61,815		)
Earnings per share - basic and diluted	$	(0.73	)	$	(0.56	)	$	(2.05	)	$	(2.04	)