Acquisitions

9 Months Ended

Sep. 30, 2021

For the nine months ended September 30, 2021 and the year ended December 31, 2020, the Company completed a number of acquisitions, for an aggregate purchase price of $1,269,584 and $102,094, respectively. On June 17, 2021, the Company completed the acquisition of Seequent, a leader in software for geological and geophysical modeling, geotechnical stability, and cloud services for geodata management and collaboration, for $910,997 in cash, net of cash acquired, plus 3,141,342 shares of the Company’s Class B Common Stock. The operating results of the acquired businesses, except for Seequent, were not material, individually or in the aggregate, to the Company’s consolidated statements of operations and financial position.

The aggregate details of the Company’s acquisition activity are as follows:


	Acquisitions Completed in
	Nine Months Ended		Year Ended
	September 30, 2021		December 31, 2020
Number of acquisitions	12		6
Cash paid at closing (1)	$	1,071,532	$	98,298
Cash acquired	(37,837)		(5,266)
Net cash paid	$	1,033,695	$	93,032

(1)Of the cash paid at closing for the nine months ended September 30, 2021, $7,050 was deposited into an escrow account to secure any potential indemnification and other obligations of the seller.

The fair value of the contingent consideration from acquisitions is included in the consolidated balance sheets as follows:


	September 30, 2021		December 31, 2020
Accruals and other current liabilities	$	6,900	$	2,884
Other liabilities	2,133		1,415
Contingent consideration from acquisitions	$	9,033	$	4,299

The fair value of non-contingent consideration from acquisitions is included in the consolidated balance sheets as follows:


	September 30, 2021		December 31, 2020
Accruals and other current liabilities	$	5,911	$	685
Other liabilities	5,876		1,774
Non-contingent consideration from acquisitions	$	11,787	$	2,459

The operating results of the acquired businesses are included in the Company’s consolidated financial statements from the closing date of each respective acquisition. The purchase price for each acquisition has been allocated to the net tangible and intangible assets and liabilities based on their estimated fair values at the respective acquisition date.

In connection with the purchase price allocations related to the Company’s acquisitions, the Company has estimated the fair values of the support obligations assumed relative to acquired deferred revenue. The estimated fair values of the support obligations assumed were determined using a cost‑build‑up approach. The cost‑build‑up approach determines fair value by estimating the costs related to fulfilling the obligations plus a normal profit margin. These fair value adjustments reduce the revenues recognizable over the remaining support contract term of the Company’s acquired contracts. For the three months ended September 30, 2021 and 2020, the fair value adjustments to reduce revenue were $2,914 and $288, respectively, and $3,924 and $483 for the nine months ended September 30, 2021 and 2020, respectively.

The purchase accounting for the 12 acquisitions completed for the nine months ended September 30, 2021 are not yet completed. Identifiable assets acquired and liabilities assumed were provisionally recorded at their estimated fair values on the respective acquisition date. The initial accounting for these business combinations is not complete because the evaluation necessary to assess the fair values of certain net assets acquired is still in process. The provisional amounts are subject to revision until the evaluations are completed to the extent that additional information is obtained about the facts and circumstances that existed as of the acquisition date. The allocation of the purchase price may be modified from the date of the acquisition as more information is obtained about the fair values of assets acquired and liabilities assumed, however such measurement period cannot exceed one year.

Acquisition and integration costs are expensed as incurred and are recorded in General and administrative in the consolidated statements of operations. For the three months ended September 30, 2021 and 2020, the Company incurred acquisition and integration costs of $943 and $531, respectively, and $18,037 and $1,609 for the nine months ended September 30, 2021 and 2020, respectively, which include costs related to legal, accounting, valuation, general administrative, and other consulting fees. For the three and nine months ended September 30, 2021, $389 and $16,285, respectively, of the Company’s acquisition and integration costs related to the acquisition of Seequent.

The following summarizes the fair values of the assets acquired and liabilities assumed, as well as the weighted average useful lives assigned to acquired intangible assets at the respective date of each acquisition (including contingent consideration):


	Acquisitions Completed in
	Nine Months Ended		Year Ended
	September 30, 2021		December 31, 2020
Consideration:
Cash paid at closing	$	1,071,532	$	98,298
Shares issued at closing (1)(2)	182,390		—
Contingent consideration	5,581		2,380
Deferred, non-contingent consideration, net	10,081		1,416
Total consideration	$	1,269,584	$	102,094
Assets acquired and liabilities assumed:
Cash	$	37,837	$	5,266
Prepaid and other current assets	23,709		8,701
Operating lease right-of-use assets	12,074		2,529
Property and equipment	4,383		499
Investments	—		—
Other assets	874		36
Software and technology (weighted average useful life of 5 and 3 years, respectively)	45,753		2,207
Customer relationships (weighted average useful life of 9 and 6 years, respectively)	143,794		11,371
Trademarks (weighted average useful life of 10 and 7 years, respectively)	42,444		3,953
Non-compete agreement (useful life of 5 years)	—		200
In-process research and development	4,400		—
Total identifiable assets acquired excluding goodwill	315,268		34,762
Accruals and other current liabilities	(28,065)		(4,991)
Deferred revenues	(18,412)		(5,351)
Operating lease liabilities	(11,966)		(2,529)
Deferred income taxes	(48,374)		(1,701)
Other liabilities	(716)		(86)
Total liabilities assumed	(107,533)		(14,658)
Net identifiable assets acquired excluding goodwill	207,735		20,104
Goodwill	1,061,849		81,990
Net assets acquired	$	1,269,584	$	102,094

(1)Of the total 3,141,342 shares issued at closing, 83,627 shares are subject to forfeiture if post‑closing employment service conditions are not met. Accordingly, $5,452 is being recorded as stock‑based compensation expense over the related forfeiture period of two years (see Note 15).

(2)A fair value adjustment of $16,943 was applied to the stock consideration due to restrictions on the transfer of securities.

The fair values of the working capital, other assets (liabilities), and property and equipment approximated their respective carrying values as of the acquisition date.

As discussed above, the fair values of deferred revenues were determined using the cost‑build‑up approach.

The fair values of the intangible assets were primarily determined using the income approach. When applying the income approach, indications of fair values were developed by discounting future net cash flows to their present values at market‑based rates of return. The cash flows were based on estimates used to price the acquisitions and the discount rates applied were benchmarked with reference to the implied rate of return from the Company’s pricing model and the weighted average cost of capital.

Goodwill recorded in connection with the acquisitions was attributable to synergies expected to arise from cost saving opportunities, as well as future expected cash flows. Of the goodwill recorded as of September 30, 2021, $16,244 is expected to be deductible for tax purposes.

Unaudited Pro Forma Financial Information

Had the acquisition of Seequent been made at the beginning of 2020, unaudited pro forma total revenues for the three months ended September 30, 2021 and 2020 would have been $248,480 and $220,828, respectively, and $746,025 and $640,008 for the nine months ended September 30, 2021 and 2020, respectively. Net (loss) income, net (loss) income per share, basic, and net (loss) income per share, diluted for the three and nine months ended September 30, 2021 and 2020 would not have been materially different than the amounts reported primarily due to the pro forma adjustments to reflect the amortization of purchased intangibles and the cost to finance the transaction, net of the related tax effects.

The unaudited pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of 2020. The unaudited pro forma financial information combines the historical results of the Company, the adjusted historical results of Seequent considering the date the Company completed the acquisition of Seequent, and the effects of the pro forma adjustments described above.