Business Combinations, Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

Business Combinations, Goodwill and Intangible Assets

Business Combinations, Goodwill and Intangible Assets

RPM Direct LLC and RPM Data Solutions, LLC.

On March 20, 2015 the Company completed its acquisition of RPM Direct LLC and RPM Data Solutions, LLC (each a “Target Company” and together the “Target Companies” or “RPM”), pursuant to a Securities Purchase Agreement dated February 23, 2015 (the “Purchase Agreement”). Under the terms of the Purchase Agreement, the Company acquired all of the issued and outstanding limited liability company membership interests of the Target Companies (the “Securities”) from the security holders of each of the Target Companies.

The initial purchase consideration consisted of $46,925 in cash including working capital adjustments of $75, contingent cash consideration of up to $23,000, as described below, and 122,131 restricted shares of common stock of the Company and certain adjustments related to the financial performance of the Target Companies for 2014. There are no adjustments to the purchase price related to the financial performance of the Target Companies for 2014.

The purchase agreement allows sellers the ability to earn up to an additional $23,000 (the “earn-out”) based on the achievement of certain performance goals by the Target Companies during the 2015 and 2016 calendar years. The earn-out has an estimated fair value of $4,060. As noted above, the Company issued 122,131 restricted shares of common stock with an aggregate fair value of $4,150 to certain key members of the Target Companies, each of whom have accepted employment positions with the Company upon consummation of the combination. The Company also granted 113,302 restricted stock units with an aggregate fair value of $3,850 to certain employees of Target Companies, who have also accepted employment with the Company. The fair value of these grants will be recognized as compensation expense over the vesting period.

RPM specializes in analyzing large consumer data sets to segment populations, predict response rates, forecast customer lifetime value and design targeted, multi-channel marketing campaigns. RPM has focused on the insurance industry, including Property & Casualty ("P&C"), life and health, since its inception in 2001. The quantity and combination of data attributes managed by RPM drives optimal, data-driven decision-making and enables it to build models that analyze prospects individually. RPM employs proprietary predictive analytics and domain-specific pattern recognition algorithms to deliver results through a flexible, on-demand service model. Accordingly, the Company paid a premium for the acquisition which is being reflected in the goodwill recognized from the purchase price allocation of the total consideration paid by the Company.

During the three months ended December 31, 2015, the Company finalized its purchase price allocation for the acquisition, which is as follows:

	Amount
	(In thousands)
Net tangible assets	$	1,790
Identifiable intangible assets:
Customer Relationships	13,260
Trade Names	680
Developed Technology	1,420
Non-Compete Agreements	680
Goodwill	33,155
Total purchase price*	$	50,985

* Includes amount of $4,125 deposited in escrow accounts in connection with the acquisition.

The customer relationships from the RPM acquisition are being amortized over the weighted average useful life of 5.7 years. Similarly, trade-names are being amortized over a useful life of 3 years, developed technology are being amortized over a useful life of 5 years and non-compete agreements are being amortized over a useful life of 4.6 years.

During the year ended December 31, 2015, the Company recognized $303 of acquisition related costs. Such amounts are included in general and administrative expenses in the consolidated statements of income. The Company’s results of operations for the year ended December 31, 2015 includes revenues of $32,818 for RPM since March 20, 2015, the date on which the acquisition was consummated. It is not practicable to disclose the net earnings since management does not allocate or evaluate operating expenses and income taxes to its domestic entities.

The amount of goodwill recognized from the RPM acquisition is deductible for tax purposes.

Goodwill

The following table sets forth details of the Company’s goodwill balance as of December 31, 2015:

	Operations Management			Analytics		Total
Balance at January 1, 2014	$	90,622		$	16,785	$	107,407
Goodwill arising from Blue Slate acquisition (1)	4,554			—		4,554
Goodwill arising from Overland acquisition	28,667			—		28,667
Currency translation adjustments	(529		)	—		(529		)
Allocation on sale of a business unit (2)	(500		)	—		(500		)
Balance at December 31, 2014	$	122,814		$	16,785	$	139,599
Goodwill arising from RPM acquisition	—			33,155		33,155
Currency translation adjustments	(1,219		)	—		(1,219		)
Balance at December 31, 2015	$	121,595		$	49,940	$	171,535

(1) Goodwill arising from the Company's acquisition of Blue Slate Solutions, LLC (“Blue Slate”) in 2014 was reclassified into Operations Management segment because of Company's change in segment reporting.

(2) Relates to the sale of a business unit (acquired with the acquisition of Business Process Outsourcing Inc.). The net loss recognized from the sale of this business unit is $149 and is included under “other income, net” in the consolidated statements of income for the year ended December 31, 2014.

Based on the results of the impairment testing performed during the year ended December 31, 2015, the Company’s goodwill was not impaired. The Company makes every reasonable effort to ensure that it accurately estimates the fair value of the reporting units. However, future changes in the assumptions used to make these estimates could result in the recording of an impairment loss.

Intangible Assets

Information regarding the Company’s intangible assets is set forth below:

	As of December 31, 2015
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	$	64,816	$	(24,215	)	$	40,601
Leasehold benefits	2,789		(2,109		)	680
Developed technology	12,234		(4,363		)	7,871
Non-compete agreements	2,045		(1,451		)	594
Trade names and trademarks	5,670		(2,683		)	2,987
	$	87,554	$	(34,821	)	$	52,733

	As of December 31, 2014
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	$	51,598	$	(16,836	)	$	34,762
Leasehold benefits	2,927		(2,004		)	923
Developed technology	10,814		(2,402		)	8,412
Non-compete agreements	1,365		(1,323		)	42
Trade names and trademarks	4,990		(2,150		)	2,840
	$	71,694	$	(24,715	)	$	46,979

Amortization expense for the years ended December 31, 2015, 2014 and 2013 was $10,226, $6,623 and $6,300, respectively. The remaining weighted average life of intangible assets was 6.3 years for customer relationships, 3.4 years for leasehold benefits, 4.5 years for developed technology, 3.5 years for non-compete agreements and 6.0 years for trade names and trademarks excluding indefinite life trade names and trademarks. The Company had $900 of indefinite lived trade names and trademarks as of December 31, 2015 and 2014.

Estimated amortization of intangible assets during the year ending December 31,
2016	$	10,869
2017	$	10,792
2018	$	10,469
2019	$	9,707
2020	$	9,996