Acquisition of Kantar Media's U.S. Based Television Measurement Assets

9 Months Ended

Dec. 31, 2014

Business Combinations [Abstract]

Acquisition of Kantar Media's U.S. Based Television Measurement Assets

Acquisition of Kantar Media’s U.S. Based Television Measurement Assets

On December 1, 2014, we acquired the U.S. television measurement business of WPP’s Kantar business unit (a unit of Competitive Media Reporting, LLC, an affiliate of WPP plc (“WPP”)). The agreement consists of customer contracts and relationships in the U.S. television measurement market related to television tuning analytics utilizing return path data (the “RPD Business”). The RPD Business is reported as a component of TV Everywhere^™, expands our product and service offerings and provides us with a platform from which we can pursue new business opportunities.

The purchase price for the RPD Business consisted of $0.2 million cash and 1,526,790 shares of unregistered common stock with a fair market value of $114.1 million. We also entered into a Transition Services Agreement that provides certain services to us on a transitional basis.

The purchase consideration was allocated based on the estimated fair value of the tangible and identifiable intangible assets acquired and liabilities assumed. The excess of the purchase price over the estimated fair value of the tangible and intangible assets acquired and liabilities assumed was allocated to goodwill. In performing our purchase price allocation, we considered, among other factors, our intention for future use of the acquired assets, analysis of historical financial performance and estimates of future performance of the RPD Business. The fair value of the intangible assets was calculated primarily using an income approach with estimates and assumptions provided by management. The rates utilized to discount net cash flows to their present values were based on a range of discount rates of 13.5% to 15.6%.

On October 8, 2014, we also entered into a stock purchase agreement with WPP Luxembourg Gamma Three S.à r.l., an affiliate of WPP . Pursuant to this agreement, on December 1, 2014, in connection with the closing of the acquisition of the RPD Business, we issued 943,834 shares of unregistered common stock in exchange for $55.8 million in cash. As of the date of issuance, the difference between the fair market value of the shares issued and the cash received was $20.3 million and has been recorded as additional purchase consideration and allocated to goodwill.

The assets purchased and liabilities assumed of the RPD business have been reflected in our Condensed Consolidated Balance Sheet as of December 31, 2014, and the results of operations of the RPD business are included in our Condensed Consolidated Statement of Operations since the closing date of the acquisition. We are in the process of finalizing the purchase accounting related to the acquisition, including goodwill and other intangible assets; thus, the estimated amounts presented herein are subject to change. The preliminary allocation of the purchase price is as follows (dollars in thousands):

				Useful Life
Accounts receivable	$	821		—
Goodwill	129,406			Indefinite
Other intangible assets:
Customer relationships	5,000			10 years
	135,227
Accounts Payable	(543		)	—
Deferred revenue	(71		)	—
	(614		)
	$	134,613

Goodwill of $129.4 million was recorded as a result of consideration paid in excess of the fair value of the net tangible and intangible assets acquired and liabilities assumed, which resulted from the expected future strategic position by eliminating a competitor in the market and anticipated future synergies. Goodwill is not amortized, and will be evaluated annually for potential impairment. In the U.S. goodwill is deductible for income tax purposes.

For the three months ended December 31, 2014, we included $0.8 million in revenue and $0.5 million in net losses related to the RPD Business since the acquisition date. For the three and nine months ended December 31, 2014, we incurred $0.7 million and $1.0 million of acquisition and transition costs, respectively, and for the three months ended December 31, 2014, we incurred amortization expense of $42,000 relating to the intangible assets acquired. These costs are included in selling, general and administrative expenses in our Condensed Consolidated Statements of Operations.

Unaudited preliminary pro forma results of operations as if the RPD Business had been acquired as of April 1, 2013, were as follows (in thousands, except for per share amounts):

	For the Three Months Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2014			2013
Total revenue	$	28,322		$	21,195		$	80,253		$	59,077
Net loss attributable to Rentrak Corporation	(1,868		)	(1		)	(1,952		)	(982		)
Basic earnings per share	(0.12		)	—			(0.13		)	(0.07		)
Diluted earnings per share	(0.12		)	—			(0.12		)	(0.07		)

This pro forma information is still in the process of finalization; thus, the estimated amounts presented herein are subject to change.

The Company also entered into agreements with GroupM and The Kantar Group, which are related WPP entities, to provide ongoing TV Essentials^® and OnDemand Essentials^® services. We have evaluated the terms and economic benefits of these agreements and have concluded these are not part of the consideration transferred for the RPD Business. As such, we have accounted for these separately from the business combination and in accordance with our revenue recognition policies. Overall, we believe this acquisition and the additional agreements give us better scale to rapidly innovate our products and services in the U.S., and we expect the agreements to produce multiple long-term revenue streams as a result of the company’s expanded relationship with GroupM and WPP.