On September 1, 2022, the Company completed the acquisition of Blanton & Associates (“Blanton”), an environmental consulting, planning, and project management firm headquartered in Austin, Texas. Blanton brings proven domain expertise in environmental regulatory compliance and permitting for the transportation, renewable energy, water, and resource management sectors and adds technically strong and specialized staff in all aspects of environmental services to the Company. The Company initially recorded net working capital of $5.0 million, property and equipment of $0.2 million at their fair value at the acquisition date except for contract assets and contract liabilities which were measured in accordance with Accounting Standards Codification (“ASC”) 606, Revenue Recognition, and also allocated $5.8 million to goodwill and $11.4 million to intangible assets. Intangible assets consist of $10.9 million related to existing customer relationships, $0.5 million related to contract backlog, and $0.1 million related to trade names and trademarks. The fair value was based on the best available information as of September 1, 2022, the date of acquisition, and any adjustments to the Company’s estimates of purchase price allocation will be made in the periods in which the adjustments are determined, and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date. The Company expects to finalize its purchase price allocation within one year of the acquisition date. The acquisition of Blanton is not material to the Company’s results of operations.

On July 13, 2022, the Company completed the acquisition of SemanticBits, LLC (“SemanticBits”), a 450-person Virginia limited liability company. SemanticBits is a premier partner to U.S. federal health agencies for mission-critical digital modernization solutions and provides a full suite of scalable digital modernization services using open-source frameworks, including end-to-end agile scale development capabilities, cloud-native solutions, data analytics and human-centered designs. The acquisition provides synergies and scalabilities to support federal agencies with advanced IT solutions, digital modernization, and health expertise to solve complex customer challenges. As a result of the acquisition, SemanticBits became a wholly-owned subsidiary of the Company.

The acquisition was accounted for as a business combination under ASC 805, Business Combination. The preliminary purchase price was $220.0 million in cash, subject to post-closing working capital adjustments of $2.3 million, and was funded by the existing Credit Facility. The purchase price was initially allocated to the tangible and intangible assets acquired and liabilities assumed based on the fair value on the acquisition date, with the exception of contract assets and contract liabilities which were measured in accordance with ASC 606, Revenue Recognition. The Company also engaged an independent valuation firm to assist management in the allocation of the purchase price to goodwill and other acquired intangible assets.

The preliminary purchase price allocation is summarized as follows:


Contract receivables, net	$	12,699
Contract assets		6,071
Customer-related intangibles		62,967
Trade names and trademarks		1,120
Other current and non-current assets		411
Accrued salaries and benefits		(3,998	)
Accrued expenses and other liabilities		(6,169	)
Net assets acquired		73,101
Goodwill		144,609
Purchase consideration	$	217,710

The excess of the purchase price over the estimated fair value of the net tangible assets acquired was approximately $208.7 million, and the Company allocated $63.0 million related to existing customer relationships and $1.1 million related to trade names and trademarks intangible assets, respectively, and $144.6 million to goodwill. Goodwill is reflective of the existing workforce of SemanticBits and the expected synergies created with the Company as part of the acquisition. The amortization periods for the amount allocated to customer-related intangible asset and trade names and trademarks are 4.0 years and 0.7 years from the acquisition date, respectively. The goodwill and intangible assets are not deductible for income tax purposes.

The estimates and assumptions underlying the preliminary valuations are subject to collection of information necessary to complete the valuations within the measurement periods, which are up to one year from the respective acquisition dates. Although the Company does not currently expect material changes to the initial value of net assets acquired, the Company continues to evaluate assumptions related to the valuation of the assets acquired and liabilities assumed. Such assumptions include a final net working capital adjustment to be completed within ninety days of the purchase closing date, and tax-related adjustments for accrued payroll and vacation benefits. The adjustments to the Company’s initial estimates of purchase price allocation will be made in the periods in which the adjustments are determined, and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date. The Company expects to finalize its purchase price allocation within one year of the acquisition date.

Acquisition-related costs and integration totaled $4.2 million and are included as part of indirect and selling expenses in the Company’s consolidated statements of comprehensive income.

The results of SemanticBits’ operations have been included in the Company’s consolidated financial statements from the date of its acquisition. For the three and nine months ended September 30, 2022, SemanticBits contributed revenues of $30.1 million and gross profit of $9.5 million. Computation of an earnings measure other than gross profit is impracticable due to SemanticBits’ operations and financial systems being integrated with those of the Company.

The following unaudited condensed pro forma information presents combined financial information as if the acquisition of SemanticBits had been effective at January 1, 2021, the beginning of the 2021 fiscal year. As a result, fiscal year 2022 represents the pro forma results for year two of the acquisition. The pro forma information includes alignment of SemanticBits’ revenue recognition policy, corrections of employee-related expenses, and adjustments reflecting changes in the amortization of intangibles, acquisition-related costs, interest expense, and records income tax effects as if SemanticBits had been included in the Company’s results of operations. The pro forma information is not intended to reflect the actual combined results of operations that would have occurred if the acquisition was completed on January 1, 2021, nor is it indicative of future operating results after the acquisition date of July 13, 2022.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2022		2021		2022		2021
Revenue	$	473,366	$	423,491	$	1,380,789	$	1,246,447
Net income		21,445		22,972		66,744		59,464

On December 31, 2021, the Company acquired Creative Systems and Consulting (”Creative”), a premier provider of IT modernization and digital transformation solutions to federal agencies, with an initial cash purchase price of approximately $159.5 million, subject to working capital adjustments of $2.9 million, for a final purchase price of $156.6 million. The Company recognized fair value of the assets acquired and liabilities assumed and allocated $128.1 million to goodwill and $28.9 million to intangible assets. Intangible assets consist of $24.5 million in customer relationships, $3.7 million related to developed technology, $0.6 million related to trade names and trademarks, and $0.1 million related to non-compete agreements. The allocation of the total purchase price to the tangible and intangible assets and liabilities of Creative was based on management’s preliminary estimate of fair value, based on the best available information as of December 31, 2021 when the purchase price allocation was determined. During the nine months ended September 30, 2022, the Company recorded $1.9 million to goodwill as part of the measurement period adjustments (see Note 4—Goodwill). As of September 30, 2022, the Company completed the purchase price accounting for the acquisition of Creative. The pro-forma impact of the acquisition was not material to the Company’s results of operations.

A prior acquisition’s purchase agreement included additional consideration in the form of warranty and indemnity hold back payments. During the third quarter ended September 30, 2022, the Company made the final remaining payment of $1.0 million.