Goodwill, Indefinite-lived Intangible Asset and Business Combination (Tables)

6 Months Ended

Jun. 30, 2022

Schedule of changes in the carrying amount of goodwill and indefinite-lived intangible asset

The changes in the carrying amount of goodwill and indefinite-lived intangible asset are as follows (in thousands):


	December 31, 2021		Additions		Adjustment (1)		Impairment		June 30, 2022
Goodwill	$	26,227	$	75,536	$	1,431	$	—	$	103,194
Indefinite-lived intangible asset		390,020		—		—		—		390,020

(1)

During the quarter ended June 30, 2022, the Company recorded a purchase accounting adjustment related to contingent consideration.

Schedule of Accu-Trade Acquisition purchase price allocation

The Accu-Trade Acquisition purchase price allocation is as follows (in thousands):


	Preliminary Acquisition-date Fair Value
Cash consideration	$	64,770
Other consideration (1)		5,300
Contingent consideration (2) (3)		23,936
Total purchase consideration (3)	$	94,006

Assets acquired (4)	$	1,595
Identified intangible assets (5)		15,679
Total assets acquired		17,274
Total liabilities assumed (6)		(235	)
Net identifiable assets		17,039
Goodwill (3)		76,967
Total purchase consideration (3)	$	94,006

(1)

In connection with the Accu-Trade Acquisition, the Company entered into an agreement to provide one of the former owners with a one-year license to a certain product. The preliminary fair value of the license was determined to be $6.5 million, of which the Company received $1.2 million in cash upon the close of the Accu-Trade Acquisition. The $5.3 million difference between the fair value of $6.5 million and the $1.2 million in cash was recorded as non-cash consideration and the $6.5 million license fee was recorded in Other accrued liabilities as a contract liability on the Consolidated Balance Sheets and will be amortized into Other revenue on the Consolidated Statements of Income over the one-year contract term. The current period revenue related to the non-cash consideration of $5.3 million is a non-cash reconciling item titled Amortization of deferred revenue related to Accu-Trade Acquisition on the Consolidated Statements of Cash Flows.

(2)

As part of the Accu-Trade Acquisition, the Company may be required to pay additional consideration to the former owners based on achievement of certain financial targets, which would result in a variable number of shares being issued. The Company has the option to pay consideration in cash or stock. The actual amount to be paid will be based on the acquired business’ future performance to be attained over a three-year performance period. The contingent consideration is classified as Level 3 in the fair value hierarchy. The fair value is measured based on a Monte Carlo simulation based on the following significant inputs: volatility, discount rate and projected financial information. Any changes in the fair value will be recorded within the General and Administrative line on the Consolidated Statements of Income.

(3)

During the quarter ended June 30, 2022, the Company recorded a $1.4 million purchase accounting adjustment.

(4)

Assets acquired primarily consist of accounts receivable.

(5)

Preliminary information regarding the identifiable intangible assets acquired is as follows:

(6)

Total liabilities assumed primarily consist of accounts payable.

Schedule Of CIQ Acquisition purchase price allocation

The CIQ Acquisition purchase price allocation is as follows (in thousands):


	Preliminary Acquisition-date Fair Value
Cash consideration (1)	$	29,965
Contingent consideration (2)		23,805
Cash settlement of CIQ Acquisition's unvested equity awards (3)		(9,626	)
Total purchase consideration	$	44,144

Assets acquired (4)	$	193
Identified intangible assets (5)		19,900
Total assets acquired		20,093
Total liabilities assumed (6)		(2,176	)
Net identifiable assets		17,917
Goodwill		26,227
Total purchase consideration	$	44,144

(1)

A reconciliation of cash consideration to Payments for the CIQ Acquisition, net of cash acquired is as follows (in thousands):


Cash consideration	$	29,965
Less: Cash settlement of CIQ Acquisition's unvested equity awards (3)		(9,626	)
Less: Cash acquired		(81	)
Payments for CIQ Acquisition, net of cash acquired	$	20,258

(2)

As part of the CIQ Acquisition, the Company may be required to pay up to an additional $50.0 million in cash consideration to the former owners based on two earn-out achievement objectives, including an earnings-related metric and lender market share. The actual amount to be paid will be based on the acquired business’ future performance to be attained over a three-year performance period with a mutually agreed-upon option for a fourth year. The contingent consideration is classified as Level 3 in the fair value hierarchy. The fair value is measured based on a Monte Carlo simulation or a scenario-based method based on the following significant inputs: volatility, discount rate and projected financial information. No significant changes in fair value of the contingent consideration have occurred since the CIQ Acquisition. Any changes in the fair value will be recorded within the General and Administrative line on the Consolidated Statements of Income.

(3)

In connection with the CIQ Acquisition, CreditIQ’s unvested equity awards were cash-settled. The fair value of these awards was $9.6 million and was based on the price paid per common share to the owners of the acquired business and recognized immediately after the CIQ Acquisition in November 2021 as compensation expense in General and administrative expense on the Company’s Consolidated Statements of Income.

(4)

Assets acquired primarily consist of cash and cash equivalents and accounts receivable.

(5)

Preliminary information regarding the identifiable intangible assets acquired is as follows:

(6)

Total liabilities assumed includes accounts payable, deferred income tax liabilities, net and other liabilities.

Acquisition-Date
Fair Value
(in thousands)

Amortization Period
(in years)

Acquired software

Trade name

Customer relationships