Acquisitions

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 (“CMR”), 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 provided 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 Consolidated Balance Sheets as of March 31, 2015, and the results of operations of the RPD business are included in our Consolidated Statement of Operations since the closing date of the acquisition. The 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 Fiscal 2015, we included $2.9 million in revenue and $4.3 million in net losses related to the RPD Business since the acquisition date which includes $4.4 million of acquisition and transition costs, and amortization expense of $0.2 million relating to the intangible assets acquired. CMR provided services related to operating the RPD Business and fulfilling obligations of the acquired client contracts. These services included personnel, systems, and related support and maintenance. These costs are included in selling, general and administrative expenses in our Consolidated Statements of Operations. As of March 31, 2015, our transition services agreement is substantially complete.

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



	For the Year Ended March 31,
	2015			2014
Total revenue	$	108,716		$	82,313
Net loss attributable to Rentrak Corporation	(7,479		)	(13,629		)
Basic earnings per share	(0.49		)	(0.93		)
Diluted earnings per share	(0.49		)	(0.93		)

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 as noted in Note 2. 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 our expanded relationship with GroupM and WPP.

iTVX

In August 2013, we acquired the outstanding stock of iTVX, a provider of branded entertainment analytics, insight and research, for $2.8 million. iTVX is reported as a component of our TV Essentials^®product line and expands our product and service offerings. We made an initial payment of $0.8 million, of which approximately $383,000 was paid in cash and $405,000 was paid with 17,209 shares of our common stock. The acquisition also includes contingent consideration which, if earned, will be paid in January 2016, and is based on future revenue achieved after the completion of approximately 2 years. The range of the undiscounted amounts we could pay under the contingent consideration arrangement are between $0.5 million and $7.0 million. The fair value of the contingent consideration as of the acquisition date was $2.0 million. The contingent consideration payment will be paid in the form of cash (25% of the total contingent consideration) and shares of our common stock (75% of the total contingent consideration).

We estimated the fair value of the contingent consideration using a beta probability distribution approach. Acquisition related contingent consideration liabilities are classified as Level 3 liabilities, because we use unobservable inputs to value them, reflecting our assessment of the assumptions market participants would use to value these liabilities. Changes in the fair value of contingent consideration arrangements are recorded as income or expense in our Consolidated Statements of Operations. See Note 6 for additional disclosures regarding our fair value methodologies. As of March 31, 2015, the fair value of the estimated contingent consideration arrangement decreased by $0.2 million. As of March 31, 2014, the fair value of the estimated contingent consideration arrangement increased by $2.7 million from the date of acquisition. The changes were a result of a decrease at March 31, 2015 and an increase at March 31, 2014, in the value of our common stock price. The associated credit or expense has been included in selling, general and administrative expenses in our Consolidated Statements of Operations. The common stock portion of the contingent consideration arrangement has a fixed price of $21.795 per share, and any fluctuation in our common stock price above or below this amount will impact the fair value of the payment and our results of operations. There have been no changes to the other assumptions used in our valuation that would indicate a change in value is necessary. The fair value of the estimated contingent consideration as of March 31, 2015 is $4.5 million and is included in accrued compensation in our Consolidated Balance Sheets.

In allocating the purchase price consideration based on fair values, we recorded $0.9 million of acquired intangible assets with useful lives of 1 to 6 years, $1.9 million of goodwill, $0.3 million of net tangible assets and $0.3 million of deferred tax liabilities. The goodwill recorded in connection with this business combination is primarily related to the synergies to be achieved that are unique to our business. Goodwill is not amortized and will be evaluated annually for potential impairment in accordance with our policies related to Goodwill and Intangible Assets as described in Note 2. The goodwill will not be deductible for tax purposes.

The deferred tax liabilities acquired have been applied against our fully reserved deferred tax assets and, accordingly, we lowered our valuation allowance and recorded a tax benefit of $0.3 million for the period ended March 31, 2014.

For the period ended March 31, 2015 and 2014, we included $1.3 million and $0.7 million in revenue and $1.5 million and $0.9 million in net losses related to iTVX since the acquisition date, excluding the adjustments for the contingent consideration as a result of the changes in our common stock price as noted above. For the period ended March 31, 2015 and 2014, we incurred acquisition costs of zero and $0.2 million, respectively, as well as amortization expense of $0.2 million and $0.1 million, respectively, relating to the intangible assets acquired, which are included in selling, general and administrative expenses in our Consolidated Statements of Operations.