Business Combinations

6 Months Ended

Oct. 31, 2012

Business Combinations [Abstract]

Business Combinations

4. Business Combinations

On June 12, 2012, the Company acquired PowerReviews, Inc., or PowerReviews, for $31.1 million in cash and 6.4 million shares of the Company’s common stock. In connection with the acquisition, the Company assumed the PowerReviews option plan. After conversion, the PowerReviews options are equivalent to vested and unvested options to purchase 1.7 million shares of the Company’s common stock.

PowerReviews’ solutions are offered through two platforms, an enterprise platform that is similar to the Company’s current Conversations platform and an Express platform that provides certain ratings and reviews solutions as a turn-key offering. The Company accounted for the PowerReviews acquisition using the acquisition method of accounting.

The Company preliminarily allocated the purchase price to the assets acquired, including intangible assets, and liabilities assumed based on estimated fair values at the date of the acquisition. The Company estimated the value of tangible assets and liabilities based on purchase price and future intended use. The Company derived the value of intangible assets from the present value of estimated future benefits from the various intangible assets acquired.

While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value assets acquired and liabilities assumed at the business combination date, its estimates and assumptions are subject to refinement. As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. The Company records adjustments to assets acquired or liabilities assumed subsequent to the measurement period in its operating results in the period in which the adjustments were determined. The current period change in the allocated purchase price for PowerReviews is due to a change in estimates related to the assessment of the state sales and use tax status of our products and the associated collectibility of the unbilled amounts from clients.

The Company allocated the purchase price for PowerReviews as follows (in thousands):

Cash and cash equivalents	$	745
Restricted cash		104
Accounts receivable		497
Prepaid expenses and other current assets		156
Property and equipment		280
Current deferred tax asset		239
Intangible assets:
Domain name (Indefinite useful life)		800
Developed technology (3 year useful life)		5,400
Customer relationships (3 to 10 year useful life)		35,000
Total identified intangible assets		41,200
Goodwill		113,152
Total assets acquired		156,373
Accounts payable		(304	)
Accrued liabilities		(2,167	)
Deferred revenue		(2,627	)
Non-current deferred tax liability		(521	)
Total liabilities assumed		(5,619	)
Net assets acquired	$	150,754

Using a price of $17.20 per share of common stock issued, which was the closing price of the Company’s common stock on the Nasdaq Global Market on the date of the acquisition, the consideration paid was as follows (in thousands):

Cash	$	31,059
Common stock		109,745
Fair Value of Vested Stock Options Assumed		9,950
Total consideration	$	150,754

Goodwill represents the excess of the purchase price over the aggregate fair value of the net identifiable assets acquired and is not deductible for tax purposes. Goodwill for PowerReviews resulted primarily from the Company’s expectations that PowerReviews’ solutions will enhance the Company’s product offering and delivery. The Company integrated PowerReviews’ business into the Company’s operations. Therefore, there are no separate revenue and earnings for PowerReviews since the integration.

At October 31, 2012, the Company had goodwill in the amount of $113.2 million. The Company assesses goodwill for impairment annually on March 15, or more frequently if other indicators of potential impairment arise. There were no indicators of impairment as of October 31, 2012.

The following table reflects the changes in goodwill for the six months ended October 31, 2012:

Balance, as of April 30, 2012	$	—
Increase in goodwill related to acquisition		113,152
Balance, as of October 31, 2012, gross	$	113,152
Accumulated impairment loss		—
Balance, as of October 31, 2012, net	$	113,152

Pro Forma Adjusted Summary

The results of operations of PowerReviews have been included in the unaudited condensed consolidated financial statements subsequent to the acquisition date. The following unaudited pro forma adjusted summary for the three and six months ended October 31, 2012 and 2011 assumes that PowerReviews had been acquired on May 1, 2011 (in thousands, except per share data):

	Three Months Ended October 31,						Six Months Ended October 31,
	2012			2011			2012			2011
Pro forma adjusted total revenue	$	38,626		$	27,929		$	75,892		$	52,825
Pro forma adjusted net loss attributable to Bazaarvoice, Inc.	$	(10,259	)	$	(10,376	)	$	(27,037	)	$	(30,942	)
Pro forma adjusted net loss per share attributable to Bazaarvoice, Inc.:
Basic and Diluted	$	(0.15	)	$	(0.40	)	$	(0.40	)	$	(1.21	)

The unaudited pro forma results for the six months ended October 31, 2011 include $2.7 million of amortization charges for acquired intangible assets, adjustments for $9.8 million of incremental stock-based expense related to the acceleration of options due to the acquisition, $1.1 million of stock-based expense related to the post-combination service arrangements entered into with the continuing employees and $2.4 million of acquisition costs. The unaudited pro forma results for the three months ended October 31, 2011 include $1.4 million of amortization charges for acquired intangible assets, $0.6 million of stock-based expense related to the post-combination service arrangements entered into with the continuing employees and $1.0 million of acquisition costs.

The unaudited pro forma adjusted summary combines the historical results for Bazaarvoice for those periods with the historical results of PowerReviews for the same periods. The summary is presented for informational purposes only and is not intended to be indicative of future results of operations or whether similar results would have been achieved if the acquisition had taken place at the beginning of fiscal year 2011.