Business Combinations and Disposals

Acquisition of HealthFusion

On January 4, 2016, we completed our acquisition of HealthFusion Holdings, Inc. ("HealthFusion") pursuant to the Agreement and Plan of Merger (the “Merger Agreement"), dated October 30, 2015. HealthFusion provides Web-based, cloud computing software for physicians, medical billing service providers, and hospitals. Its flagship product, MediTouch, is a fully-integrated, cloud-based software suite consisting of clearinghouse, practice management, electronic health records, and patient portals with rich functionality to enable mobility, workflow automation, and advanced reporting and analytics aimed primarily at small-to-mid-size physician practices. The acquisition of HealthFusion is part of our strategy to expand its client base and cloud-based solution capabilities in the ambulatory market. Over time, we plan to expand the HealthFusion platform to satisfy the needs of practices of increasing size and complexity.

The preliminary purchase price totaled $183,049, which includes preliminary working capital and other customary adjustments and the fair value of contingent consideration related to an additional $25,000 of cash in the form of an earnout, subject to HealthFusion achieving certain revenue targets through December 31, 2016. The initial estimated fair value of contingent consideration of $16,700 was estimated using a Monte Carlo-based valuation model that considered, among other assumptions and inputs, our estimate of projected HealthFusion revenues.

The acquisition was initially funded by a draw against the revolving credit agreement (see Note 9), a portion of which was subsequently repaid from existing cash on hand.

We accounted for the HealthFusion acquisition as a purchase business combination using the acquisition method of accounting. The preliminary purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their preliminary estimated fair values as of the acquisition date. The preliminary fair values of acquired assets and liabilities assumed represent management’s estimate of fair value and are subject to change if additional information, such as changes to deferred taxes and/or working capital, becomes available. We expect to finalize the purchase price allocation as soon as practicable within the measurement period, but not later than one year following the acquisition date.

The preliminary estimated fair value of the acquired tangible and intangible assets and liabilities assumed were determined using multiple valuation approaches depending on the type of tangible or intangible asset acquired, including but not limited to the income approach, the excess earnings method and the relief from royalty method approach.

The preliminary amount of goodwill represents the excess of the preliminary purchase price over the preliminary net identifiable assets acquired and liabilities assumed. Goodwill primarily represents, among other factors, the value of synergies expected to be realized and the assemblage of all assets that enable us to create new client relationships, neither of which qualify as separate amortizable intangible assets. Goodwill arising from the acquisition of HealthFusion was determined as the excess of the preliminary purchase price over the net acquisition date fair values of the acquired assets and the liabilities assumed, and is not deductible for tax purposes. HealthFusion operates under the NextGen Division.

We incurred $3,217 in acquisition-related transaction costs, which are included in selling, general, and administrative expense on our consolidated statements of comprehensive income for the year ended March 31, 2016.

The total preliminary purchase price for the HealthFusion acquisition is summarized as follows:



Initial purchase price	$	165,000
Contingent consideration	16,700
Preliminary working capital and other adjustments	1,349
Total preliminary purchase price	$	183,049



	January 4, 2016
Preliminary fair value of the net tangible assets acquired and liabilities assumed:
Acquired cash and cash equivalents	$	2,225
Accounts receivable, net	1,514
Prepaid expenses and other current assets	4,645
Equipment and improvements, net	767
Capitalized software costs, net	307
Other assets	700
Accounts payable	(1,085		)
Accrued compensation and related benefits	(533		)
Deferred revenue	(1,067		)
Deferred income taxes, net	(12,027		)
Other liabilities	(2,721		)
Total preliminary net tangible assets acquired and liabilities assumed	(7,275		)
Preliminary fair value of identifiable intangible assets acquired:
Software technology	42,500
Customer relationships	28,500
Trade name	4,000
Goodwill	115,324
Total preliminary identifiable intangible assets acquired	190,324
Total preliminary purchase price	$	183,049

Including the effect of certain acquisition-related fair value adjustments, amortization of acquired intangible assets, and interest expense associated with the revolving credit agreement, the acquisition of HealthFusion contributed revenues of $8,781 and estimated net loss of $1,149 to our consolidated results for the year ended March 31, 2016.

The following table presents unaudited supplemental pro forma consolidated revenue and net income as if the acquisition of HealthFusion had occurred on April 1, 2014 (the beginning of the comparable prior annual reporting period).



	Pro forma year ended March 31, 2016 (unaudited)	Pro forma year ended March 31, 2015 (unaudited)
Combined revenues	518,708	516,579
Combined net income	134	12,471

The pro forma revenue and net income were derived by combining our historical results with HealthFusion's historical results, after applying our accounting policies and making adjustments related to the amortization of acquired intangible assets and interest expense associated with the revolving credit agreement. Specifically, the pro forma combined net income for the year ended March 31, 2016 includes $14,900 of estimated amortization of acquired intangible assets and $3,600 of estimated interest expense. For the year ended March 31, 2015, the pro forma combined net income includes $15,800 of estimated amortization of acquired intangible assets, $8,300 of estimated acquisition-related fair value adjustments, and $5,200 of estimated interest expense. Acquisition-related transaction costs incurred prior to the acquisition date have been eliminated from pro forma combined net income and we also considered the estimated inconsequential tax effects of the acquisition for the purposes of preparing the unaudited supplemental pro forma information.

Hospital Disposition

On October 22, 2015, we closed an Asset Purchase Agreement (the “Purchase Agreement”) with Quadramed Affinity Corporation in which we sold and assigned substantially all assets and liabilities of the Hospital Solutions Division. We believe that the Hospital disposition will allow us to focus our efforts and resources on our core ambulatory business. The financial terms of the transaction and the amount of consideration received were not significant. Since the Hospital disposition did not and is not expected to have a major effect on our operations and financial results, separate discontinued operations reporting is not provided.

We incurred a preliminary loss on the Hospital disposition of $1,366 in the year ended March 31, 2016, which was recorded in our consolidated statements of comprehensive income as a component of selling, general and administrative expense. The loss was measured as the total consideration received and expected to be received less the lower of carrying value or fair value of the Hospital Solutions Division. Additionally, we incurred $387 in direct incremental costs of disposition and $335 in severance and other employee-related costs in connection with the Hospital disposition during the year ended March 31, 2016, which were recorded in our consolidated statements of comprehensive income as a component of selling, general and administrative expense.

Pursuant to the Purchase Agreement, the initial purchase price is subject to certain purchase price adjustments for changes in Net Tangible Assets (as defined in the Purchase Agreement) and future collections of the assigned accounts receivable through July 2016. Accordingly, the preliminary loss on the Hospital disposition may change.

Acquisition of Gennius

On March 11, 2015, the Company acquired Gennius, a leading provider of healthcare data analytics. The Gennius purchase price totaled $2,345. We accounted for the Gennius acquisition as a purchase business combination. The purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair values of acquired assets and liabilities assumed represent management’s estimate of fair value. The estimated fair value of the acquired tangible and intangible assets and liabilities assumed were determined using multiple valuation approaches depending on the type of tangible or intangible asset acquired, including but not limited to the income approach, the excess earnings method and the relief from royalty method approach. Goodwill arising from the acquisition of Gennius was determined as the excess of the purchase price over the net acquisition date fair values of the acquired assets and the liabilities assumed, and is not deductible for tax purposes. The Gennius goodwill represents the expected future synergies resulting from the integration of the Gennius healthcare data analytics technology, which will enhance our current enterprise analytics competencies and broaden our business intelligence capabilities for addressing new value-based care requirements. Gennius operates under the NextGen Division.

During the year ended March 31, 2016, we recorded a $58 adjustment to goodwill based on additional information that became available during the measurement period about certain liabilities that had existed as of the acquisition date.

The following table summarizes the purchase price allocation for the Gennius acquisition:



	March 11, 2015
Fair value of the net tangible assets acquired and liabilities assumed:
Other assets	$	4
Deferred revenues	(37		)
Other liabilities	(131		)
Total net tangible assets acquired and liabilities assumed	(164		)
Fair value of identifiable intangible assets acquired:
Software technology	1,800
Goodwill	709
Total identifiable intangible assets acquired	2,509
Total purchase price	$	2,345

The actual results to date and pro forma effects of the Gennius acquisition would not have been material to our results of operations and are therefore not presented.