Business Acquisitions

9 Months Ended

Sep. 30, 2020

Acquisition of EASE Applications, LLC

On August 18, 2020, the Company acquired all of the outstanding equity interest of EASE Applications for $24.2 million in cash, net of $0.3 million of cash acquired. EASE Applications, now called Vocera Ease, offers a cloud-based communication platform and mobile application built to improve the patient experience by enabling friends and family members to receive timely updates about the progress of their loved one in the hospital. Vocera Ease enables nurses and other care team members to send Health Insurance and Portability and Accountability Act (HIPAA)-compliant texts, photos, and video updates to patients’ loved ones, putting them at ease and saving valuable time. With this acquisition, Vocera further strengthened its ability to fulfill its mission to improve the lives of patients, families and care teams.

The following table presents the preliminary fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date:



(in thousands, except useful lives)	Fair value acquired		Useful life (years)
Assets
Current Assets
Accounts receivable, net	$	444
Prepaid expenses and other current assets	18
Total current assets	462
Intangibles assets
Customer relationships	5,430		8
Developed technology	2,310		3
Trademarks	660		3
Backlog	840		4
Goodwill	19,922
Total assets	$	29,624
Liabilities
Current liabilities
Accounts payable	$	6
Accrued payroll and other current liabilities	22
Deferred revenue, current	1,011
Total current liabilities	1,039
Deferred revenue, long term	149

Other long-term liabilities	4,218
Total liabilities	5,406
Net assets acquired	$	24,218

The estimated fair values of identifiable intangible assets were primarily determined using discounted cash flow models. The estimation of the fair value of the intangible assets required the use of valuation techniques and entailed consideration of all the relevant factors that might affect the fair value, such as present value factors and estimates of future revenues and costs. The amortization of developed technology and backlog is recorded in "cost of revenues" for product and the amortization for the remaining intangibles is recorded in "sales and marketing" expenses on the consolidated statement of operations.

The excess of the acquisition consideration over the fair values of the underlying net assets acquired was recorded as goodwill. Goodwill is largely attributed to the synergy of EASE Applications proprietary solutions with the Company’s existing customer base, dedicated sales force and cross selling opportunities with the Company’s other solutions. Goodwill is not amortized but instead is tested for impairment at least annually or more frequently if indicators of impairment are present.

The agreement also included contingent payments to the owners of EASE Applications, payable based on achievement of post-acquisition financial metrics as of December 31, 2021 and December 31, 2022. If these financial metrics are achieved the Company will owe additional purchase price consideration of $2.5 million as of December 31, 2021 and 2022. This contingent consideration was fair valued in connection with the acquisition and resulted in a liability of $2.2 million as of the acquisition date. The estimated fair value was determined using a Monte Carlo valuation model. The fair value of this liability will be remeasured each reporting period and the change in fair value will be recorded as other income and expense. For the three month period ended September 30, 2020 this fair value adjustment was minimal.

The Company incurred $0.5 million of acquisition-related costs that were expensed as incurred. These costs are recorded as general and administrative expenses in the consolidated statement of operations. Additionally, in connection with the acquisition the Company established a retention bonus plan for continuing EASE Applications employees with potential additional compensation over a two-year period of approximately $5.0 million, based on achievement of financial metrics and continued employment. Such amounts are not considered part of the purchase consideration and are being recorded as compensation expense as earned. During the three-months ended September 30, 2020, $0.4 million of this retention bonus was recorded as compensation expense.

The acquisition did not result in material contributions to revenue or net income in the consolidated financial statements at the acquisition date. Additionally, pro forma financial information is not provided for consolidated revenue and net income as such amounts attributable to EASE Applications were insignificant.