Annual report pursuant to Section 13 and 15(d)

Acquisitions

v3.23.1
Acquisitions
 12 Months Ended
Mar. 31, 2023
Business Combination and Asset Acquisition [Abstract]  
Acquisitions Acquisitions
Acquisition of In App Video Services UK LTD.
On November 1, 2022, the Company completed the acquisition of all outstanding ownership interests of In App Video Services UK LTD. (“In App”), pursuant to a Stock Purchase Agreement (the “In App Acquisition”). Prior to the Acquisition, In App acted as a third-party representative of the Company’s App Growth Platform (“AGP”) segment’s products and services in the United Kingdom (“UK”). The acquisition of In App is part of the Company’s strategy to make investments that provide opportunities to grow market share and increase revenue in important markets and geographies like the UK.
The Company acquired In App for total estimated consideration in the range of $2,250 to $5,500, paid as follows: (1) $2,708 paid in cash at closing, including a working capital adjustment of approximately $460, with $1,000 of that amount held in escrow for one-year and (2) potential annual earn-out payments based on meeting annual revenue targets for the calendar years ended December 31, 2022, 2023, 2024, and 2025. The annual earn-out payments are up to $250 for the year ended December 31, 2022, and $1,000 for each of the calendar years ended December 31, 2023, 2024, and 2025. Also, an incremental earn-out payment will be made for each of the calendar years ended 2023, 2024, and 2025 in an amount equal to 25% of revenue that is more than 150% of that calendar year’s revenue target.
The Company recorded the preliminary fair values of the assets acquired and liabilities assumed in the In App Acquisition, which resulted in the recognition of: (1) current assets, net of cash acquired, of $836, (2) current liabilities of $401, (3) acquisition purchase price liability of $2,738, (4) and goodwill of $4,957.
The Company recognized costs related to the In App Acquisition of $203 for the year ended March 31, 2023, in operating expenses on its consolidated statements of operations and comprehensive income (loss).
Acquisition of Fyber N.V.
On May 25, 2021, the Company completed the initial closing of the acquisition of 95.1% of the outstanding voting shares of Fyber N.V. (“Fyber”) pursuant to a Sale and Purchase Agreement (the “Fyber Acquisition”) between Tennor Holding B.V., Advert Finance B.V., and Lars Windhorst , the Company, and Digital Turbine Luxembourg S.ar.l., a wholly-owned subsidiary of the Company. The delisting of Fyber’s remaining outstanding shares on the Frankfurt Stock Exchange was completed on August 6, 2021. During the fiscal year ended March 31, 2022, the Company purchased an additional $18,341 of Fyber's outstanding shares, resulting in an ownership percentage of Fyber of approximately 99.5% as of March 31, 2023. The remaining outstanding shares in Fyber are, to the Company’s knowledge, held by other shareholders of Fyber and are presented as non-controlling interests within these financial statements.
Fyber is a leading mobile advertising monetization platform empowering global app developers to optimize profitability through quality advertising. Fyber’s proprietary technology platform and expertise in mediation, real-time bidding, advanced analytics tools, and video combine to deliver publishers and advertisers a highly valuable app monetization solution. Fyber represents an important and strategic addition for the Company in its mission to develop one of the largest full-stack, fully-independent, mobile advertising solutions in the industry. The combined platform offering is advantageously positioned to leverage the Company’s existing on-device software presence and global distribution footprint.
The fair values of the assets acquired and liabilities assumed at the date of the Fyber Acquisition are presented as follows1:
May 25, 2021 Measurement Period Adjustments May 25, 2021
(adjusted)
Assets acquired
Cash $ 71,489  $ —  $ 71,489 
Accounts receivable 64,877  166  65,043 
Other current assets 10,470  —  10,470 
Property and equipment 1,561  —  1,561 
Right-of-use asset 13,191  —  13,191 
Publisher relationships 106,400  (95) 106,305 
Developed technology 86,900  —  86,900 
Trade names 32,100  474  32,574 
Customer relationships 31,400  —  31,400 
Favorable lease 1,483  —  1,483 
Goodwill 303,015  (2,572) 300,443 
Other non-current assets 851  —  851 
Total assets acquired $ 723,737  $ (2,027) $ 721,710 
Liabilities assumed
Accounts payable $ 78,090  $ (1,501) $ 76,589 
Accrued license fees and revenue share 5,929  —  5,929 
Accrued compensation 52,929  —  52,929 
Other current liabilities 12,273  (1,739) 10,534 
Current portion of debt 25,789  —  25,789 
Deferred tax liability, net 25,213  3,627  28,840 
Other non-current liabilities 15,386  —  15,386 
Total liabilities assumed $ 215,609  $ 387  $ 215,996 
Total purchase price $ 508,128  $ (2,414) $ 505,714 
During the measurement period ended May 25, 2022, the Company recorded a cumulative net measurement period adjustment that decreased goodwill by $2,572, as presented in the table above. The Company made these measurement period adjustments to reflect facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date.
The excess of cost of the Fyber Acquisition over the net amounts assigned to the fair values of the net assets acquired was recorded as goodwill and was assigned to the AGP segment. The goodwill consists largely of the expected cash flows and future growth anticipated for the Company. The goodwill is not deductible for tax purposes.
The identifiable intangible assets consist of publisher relationships, developed technology, trade names, customer relationships, and a favorable lease. The publisher relationships, developed technology, trade names, and customer relationships intangibles were assigned useful lives of 20.0 years, 7.0 years, 7.0 years, and 3.0 years, respectively. The below-market favorable lease was derived from Fyber’s office lease in Berlin, Germany and, per
ASC 842, Leases, will be combined with Fyber's right-of-use asset for that lease and will be amortized over the remaining life of that lease. The values for the identifiable intangible assets were determined using the following valuation methodologies:
•Publisher Relationships - Multi-Period Excess Earnings Method
•Developed Technology - Relief from Royalty Method
•Trade Names - Relief from Royalty Method
•Customer Relationships - With-and-Without Method
•Favorable Lease - Income Approach
The Company recognized costs related to the Fyber Acquisition of $1,913 and $18,698 for the years ended March 31, 2023 and 2022, respectively, in operating expenses on the consolidated statements of operations and comprehensive income (loss).
Acquisition of AdColony Holding AS
On April 29, 2021, the Company completed the acquisition of AdColony Holding AS, a Norway company, pursuant to a Share Purchase Agreement (the “AdColony Acquisition”).
AdColony is a leading mobile advertising platform servicing advertisers and publishers. AdColony’s proprietary video technologies and rich media formats are widely viewed as a best-in-class technology delivering third-party verified viewability rates for well-known global brands. With the addition of AdColony, the Company expanded its collective experience, reach, and suite of capabilities to benefit mobile advertisers and publishers around the globe. Performance-based spending trends by large, established brand advertisers present material upside opportunities for platforms with unique technology deployable across exclusive access to inventory.
The fair values of the assets acquired and liabilities assumed at the date of the AdColony Acquisition are presented as follows:
April 29, 2021 Measurement Period Adjustments April 29, 2021
(adjusted)
Assets acquired
Cash $ 24,793  $ —  $ 24,793 
Accounts receivable 57,285  —  57,285 
Other current assets 1,845  —  1,845 
Property and equipment 1,566  —  1,566 
Right-of-use asset 2,460  —  2,460 
Customer relationships 102,400  (600) 101,800 
Developed technology 51,100  —  51,100 
Trade names 36,100  (100) 36,000 
Publisher relationships 4,400  —  4,400 
Goodwill 202,552  (3,502) 199,050 
Other non-current assets 131  —  131 
Total assets acquired $ 484,632  $ (4,202) $ 480,430 
Liabilities assumed
Accounts payable $ 21,140  $ —  $ 21,140 
Accrued license fees and revenue share 28,920  —  28,920 
Accrued compensation 8,453  —  8,453 
Other current liabilities 1,867  —  1,867 
Deferred tax liability, net 10,520  (2,377) 8,143 
Other non-current liabilities 1,770  —  1,770 
Total liabilities assumed $ 72,670  $ (2,377) $ 70,293 
Total purchase price $ 411,962  $ (1,825) $ 410,137 
During the measurement period ended April 29, 2022, the Company recorded a cumulative net
measurement period adjustment that decreased goodwill by $3,502, as presented in the table above. The Company made these measurement period adjustments to reflect facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date.
The excess of cost of the AdColony Acquisition over the net amounts assigned to the fair values of the net assets acquired was recorded as goodwill and was assigned to the Company’s AGP segment. The goodwill consists largely of the expected cash flows and future growth anticipated for the Company. The goodwill is not deductible for tax purposes.
The identifiable intangible assets consist of customer relationships, developed technology, trade names, and publisher relationships and were assigned useful lives of 8.0 years to 15.0 years, 7.0 years, 7.0 years, and 10.0 years, respectively. The values for the identifiable intangible assets were determined using the following valuation methodologies:
•Customer Relationships - Multi-Period Excess Earnings Method
•Developed Technology - Relief from Royalty Method
•Trade Names - Relief from Royalty Method
•Publisher Relationships - Cost Approach
The Company recognized costs related to the AdColony Acquisition of $214 and $4,214 for the years ended March 31, 2023 and 2022, respectively, in operating expenses on the consolidated statements of operations and comprehensive income (loss).
Pro Forma Financial Information (Unaudited)
The pro forma information below gives effect to the Fyber Acquisition and the AdColony Acquisition (collectively, the “Acquisitions”) as if they had been completed on the first day of each period presented. The pro forma results of operations are presented for information purposes only. As such, they are not necessarily indicative of the Company’s results had the Acquisitions been completed on the first day of each period presented, nor do they intend to represent the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the Acquisitions and does not reflect additional revenue opportunities following the Acquisitions. The pro forma information includes adjustments to record the assets and liabilities associated with the Acquisitions at their respective fair values, based on available information, and to give effect to the financing for the Acquisitions.
Year ended March 31,
2022 2021
Unaudited
(in thousands, except per share amounts)
Net revenue $ 769,993  $ 544,496 
Net income attributable to controlling interest $ 16,504  $ 47,096 
Basic net income attributable to controlling interest per common share $ 0.17  $ 0.51 
Diluted net income attributable to controlling interest per common share $ 0.16  $ 0.47