Goodwill, Intangible Assets and Acquisition Activity

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill, Intangible Assets and Acquisition Activity

Goodwill

The Company’s goodwill balance is attributable to its Bigstock, Editorial, Music and WebDAM reporting units and is tested for impairment at least annually on October 1 or upon a triggering event. Bigstock, Music and Editorial are included in the Company's “Content Business” reporting segment while WebDAM is included in the non-reportable “Other Category”. The following table summarizes the changes in the Company’s goodwill balance by reportable and non-reportable segments through June 30, 2016 (in thousands):



	Consolidated		Content Business		Other Category
Balance as of December 31, 2015	$	50,934	$	42,171	$	8,763
Foreign currency translation adjustment	489		489		—
Balance as of June 30, 2016	$	51,423	$	42,660	$	8,763

No triggering events were identified during the six months ended June 30, 2016.

Other Intangible Assets

Intangible assets consisted of the following as of June 30, 2016 and December 31, 2015 (in thousands):



	As of June 30, 2016						As of December 31, 2015
	Gross Carrying Amount		Accumulated Amortization			Weighted Average Life (Years)	Gross Carrying Amount		Accumulated Amortization
Amortizing intangible assets:
Customer relationships	$	18,287	$	(3,692	)	9	$	19,523	$	(3,089	)
Trade name	6,837		(1,636		)	7	7,111		(1,188		)
Developed technology	3,457		(1,566		)	4	3,734		(1,129		)
Contributor content	6,340		(693		)	9	5,138		(567		)
Patents	209		(46		)	18	193		(40		)
Domain name	160		(39		)	11	120		(25		)
Total	$	35,290	$	(7,672	)		$	35,819	$	(6,038	)

Amortization expense was $1.3 million for both of the three months ended June 30, 2016 and 2015 and $2.5 million and $2.2 million for the six months ended June 30, 2016 and 2015, respectively. The Company determined that there was no indication of impairment of the intangible assets for any period presented. Estimated amortization expense for the next five years is: $2.5 million for the remaining six months of 2016, $5.0 million in 2017, $4.1 million in 2018, $3.9 million in 2019, $3.3 million in 2020, $2.8 million in 2021 and $5.9 million thereafter.

Acquisition Activity

Rex Features

On January 19, 2015, the Company acquired all of the shares of Rex Features (Holdings) Limited, or Rex Features, pursuant to a stock purchase agreement. The total purchase price consisted of a cash payment of $32.7 million subject to certain working capital adjustments. The transaction was accounted for using the acquisition method and, accordingly, the results of the acquired business have been included in the Company’s results of operations from the acquisition date.

Goodwill related to the acquisition of Rex Features is attributable to its ability to serve as the foundation of the Company’s editorial offering, serving as a base for accelerating the growth of the offering by leveraging Rex Features’ editorial expertise and the Company’s technical capabilities and position in the marketplace, and is not deductible for tax purposes.

PremiumBeat

On January 22, 2015, the Company acquired substantially all of the assets and certain liabilities of Arbour Interactive, Inc., or PremiumBeat, pursuant to an asset purchase agreement. The total purchase price of $35.4 million consisted of a cash payment of $31.7 million and $3.7 million in contingent consideration based on certain performance criteria. As of June 30, 2016, the fair value of the contingent consideration related to the PremiumBeat acquisition was $9.6 million, which represents the present value of the amount that will be paid, and is included in other liabilities. During the six months ended June 30, 2016, the Company recorded a change in the fair value of the contingent consideration in the amount of $2.5 million, of which $0.8 million was recorded as a component of other (expense) income, net related to the passage of time and $1.7 million was recorded as a component of general and administrative expense related to a modification of the terms of the contingent consideration agreement. The transaction was accounted for using the acquisition method and, accordingly, the results of the acquired business have been included in the Company’s results of operations from the acquisition date.

Goodwill related to the acquisition of PremiumBeat is attributable to expected synergies from future growth and the ability to accelerate the growth of the Company’s music offering by leveraging PremiumBeat’s experience in the music market, and is deductible for tax purposes.

2015 Acquisition Activity

The fair value of consideration transferred in the acquisitions of Rex Features and PremiumBeat was allocated to the intangible and tangible assets acquired and liabilities assumed at the acquisition date, with the remaining unallocated amount recorded as goodwill. The fair values of intangible assets were determined primarily using the income approach.

The aggregate purchase price was allocated to the assets acquired and liabilities assumed as follows (in thousands):



	Acquisition Activity
Assets acquired:
Cash	$	1,525
Accounts receivable	2,908
Other assets	1,319
Fixed assets	297
Intangible assets⁽¹⁾	27,433
Goodwill	44,767
Deferred tax asset	229
Total assets acquired	$	78,478
Liabilities assumed:
Accounts payable	$	(253	)
Contributor payable	(3,145		)
Accrued expenses	(2,431		)
Deferred revenue	(23		)
Deferred tax liability	(4,454		)
Total liabilities assumed	$	(10,306	)
Total	$	68,172

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(1)	Identifiable intangible assets include customer relationships, trade names, developed technology and content libraries and are being amortized on a straight-line basis over a weighted average life of approximately eight years.

As a result of the acquisitions of Rex Features and PremiumBeat, the Company recorded $0.4 million of professional fees in the six months ended June 30, 2015. There were no professional fees related to these acquisitions in the three and six months ended June 30, 2016 or the three months ended June 30, 2015. The professional fees are included in general and administrative expense.

Pro forma results of operations have not been presented because the effect of these business combinations was not material to the Company’s pro forma consolidated results of operations for any of the periods presented.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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