Acquisition of SpringCM Inc.

12 Months Ended

Jan. 31, 2020

On September 4, 2018, we completed the acquisition of SpringCM Inc. (“SpringCM”), a cloud-based document generation and contract lifecycle management software company based in Chicago, Illinois. With the addition of SpringCM's capabilities in document generation, redlining, advanced document management and end-to-end agreement workflow, the acquisition further accelerates the broadening of our solution beyond e-signature to the rest of the agreement process—from preparing to signing, acting-on and managing agreements. Under the terms of the merger agreement, we acquired SpringCM for approximately $218.8 million in cash, excluding cash acquired, working capital and transaction cost adjustments. Of the cash paid at closing, $8.2 million is held in escrow until 18 months after closing to partially secure our indemnification rights under the merger agreement.

Additionally, we granted certain continuing employees of SpringCM RSUs with service and performance conditions covering up to 0.5 million shares of our common stock with an aggregate grant date fair value of $26.5 million that will be accounted for as a post-acquisition compensation expense over the vesting period. The performance-based condition was partially met upon SpringCM meeting certain revenue targets for the year ended January 31, 2020.

We accounted for the transaction as a business combination using the acquisition method of accounting. We allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date. Fair values were determined using the valuation performed by management, using the income approach. Excess purchase price consideration was recorded as goodwill and is primarily attributable to the assembled workforce and expanded market opportunities when integrating SpringCM’s capabilities in document generation, redlining, advanced document management and end-to-end agreement workflow with our other offerings.

The following table summarizes the acquisition date fair values of assets acquired and liabilities assumed at the date of acquisition:


(in thousands)	September 4, 2018
Cash and cash equivalents	$	6,950
Accounts receivable and other assets	10,542
Property and equipment	6,108
Goodwill	159,097
Intangible assets	73,000
Contract liabilities	(9,973)
Other liabilities	(12,948)
Deferred tax liability	(7,047)
	$	225,729

None of the goodwill recognized upon acquisition was deductible for U.S. federal income tax purposes.

The estimated useful lives, primarily based on the expected period of benefit to us, and fair values of the identifiable intangible assets at acquisition date were as follows:


(in thousands, except years)	Estimated Fair Value		Expected Useful Life
Existing technology	$	11,900	3 years
Customer relationships—subscription	54,200		9 years
Backlog—subscription	6,400		2 years
Tradenames / trademarks	500		1 year
Total intangible assets	$	73,000

In the year ended January 31, 2019, we incurred acquisition costs of $1.8 million. These costs included legal, accounting fees and other costs directly related to the acquisition and are recognized within operating expenses in our consolidated statements of operations.

The following unaudited pro forma information has been prepared for illustrative purposes only and assumes the acquisition occurred on February 1, 2017. It includes pro forma adjustments related to the amortization of acquired intangible assets, stock-based compensation expense, professional services revenue and contract acquisitions costs adjustments under the new revenue recognition standard, and contract liabilities fair value adjustment. The unaudited pro forma results have been prepared based on estimates and assumptions, which we believe are reasonable, however, they are not necessarily indicative of the consolidated results of operations had the acquisition occurred on February 1, 2017, or of future results of operations:


	(Unaudited)
	Year Ended January 31,
(in thousands, except per share data)	2019		2018
Revenue	$	720,321	$	544,680
Net loss	(459,895)		(69,078)
Net loss per share attributable to common stockholders, basic and diluted	(3.40)		(2.18)