Acquisitions

6 Months Ended

Sep. 30, 2021

Business Combination and Asset Acquisition [Abstract]

TrafficCast Acquisition

On December 7, 2020, the Company completed the acquisition of the assets of TrafficCast, a privately held company headquartered in Madison, Wisconsin that provides travel information technology, applications and content to media, mobile technology, automotive and public sector customers throughout North America. Under the TCI Purchase Agreement, Iteris

purchased from TrafficCast substantially all of the assets used in the conduct of the Business and assumed certain specified liabilities of the Business.

The aggregate acquisition-date fair value of the consideration transferred of $16 million in addition to liabilities assumed of $1.7 million totaled approximately $17.7 million, which consisted of the following:


	Fair Value
	(in thousands)
Cash	$	15,000
Security hold back	1,000
Acquisition-related liabilities	1,131
Contingent consideration	600
Total	$	17,731

The security hold back relates to amounts held back as security for certain post-closing adjustments and post-closing indemnity obligations of TrafficCast, and is included in accrued liabilities on the unaudited condensed consolidated balance sheets. Acquisition-related liabilities include customary post-closing adjustments, as well as short term liabilities related to certain ancillary agreements that will provide Iteris with ongoing access to mapping and monitoring services. These items are included in accrued liabilities on the unaudited condensed consolidated balance sheets. Contingent consideration relates to a $1 million earn out, that if earned, will be paid over two years based on the Business’ achievement of certain revenue targets. This item is included in other long-term liabilities on the unaudited condensed consolidated balance sheets.

The acquisition of TrafficCast has been accounted for as a business combination. We estimated the fair values of net assets acquired, and the excess of the consideration transferred over the aggregate of such fair values was recorded as goodwill. The Company believes the goodwill related to the acquisition was a result of the ability of the Company to leverage its technology in the broader market, as well as offering cross-selling market exposure opportunities. Goodwill from the acquisition of TCI is included in the Company's consolidated balances and is included in the annual review for impairment. The goodwill is fully deductible for tax purposes. The earnout consideration was valued using a Monte Carlo simulation. The fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. We believe the assumptions are representative of those a market participant would use in estimating fair value.

The following tables summarize the purchase price allocation (in thousands) as of December 7, 2020:


Trade accounts receivable	$	2,087
Unbilled accounts receivable	596
Inventories	941
Right-of-use assets	193
Property and equipment	233
Intangible assets	9,500
Goodwill	7,750
Other assets	242
Total assets acquired	21,542
Accounts payable	1,026
Deferred revenue	2,460
Lease liabilities	193
Other liabilities	132
Total liabilities assumed	3,811
Total purchase price	$	17,731

The fair values of the TrafficCast assets and liabilities noted above approximate their carrying values at December 7, 2020. There was no difference between the fair value of trade accounts receivables and the gross contractual value of those receivables. There are no contractual cash flows related to these receivables that are not expected to be collected. The Company believes the goodwill related to the acquisition was a result of the ability of the Company to leverage its technology in the broader market, as well as offering cross-selling market exposure opportunities. Goodwill from the acquisition of TrafficCast was initially allocated to the Company's Roadway Sensors and Transportation Systems reporting units and upon the reorganization described in Note 12, Business Segments, the goodwill has been reallocated to the Company's three new reporting units and will be included in the annual review for impairment. The goodwill is fully deductible for tax purposes. The significant intangible assets identified in the purchase price allocation include customer relationship and developed technology, which are amortized over their respective useful lives on a straight line basis which approximates the underlying cash flows. To value the customer relationships, the Company utilized the income approach, specifically a discounted cash-flow method known as the excess earnings method. The Company used the replacement cost method with consideration of opportunity costs to estimate the fair value of the technology. The fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. We believe the assumptions are representative of those a market participant would use in estimating fair value.

The following table presents the fair values and useful lives of the identifiable intangible assets acquired:


	Amount		Weighted Average Useful Life
	(in thousands)		(in years)
Customer relationships	$	5,800	7
Technology	3,700		4
Total intangible assets assumed	$	9,500