Note 5 - Business Combinations

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Business Combination Disclosure [Text Block]

 Note 5 – Business Combinations

On January 22, 2021, the Company acquired all of the outstanding shares of 3D Hubs, Inc. (Hubs), for $294.1 million, consisting of $127.4 million in cash and 863,995 shares of the Company's common stock valued at $166.7 million on the closing date. The purchase agreement included additional contingent consideration of up to $52.8 million subject to the achievement of performance-based targets during fiscal 2021 and fiscal 2022. The contingent consideration consisted of up to $25.0 million in cash and up to 143,983 shares of the Company's common stock valued at $27.8 million on the closing date.

Hubs is based in Amsterdam, Netherlands and is a leading online manufacturing platform that provides customers with on-demand access to a global network of premium manufacturing partners. The acquisition enhances the Company’s value proposition by expanding the customer offerings, enabling the Company to more holistically serve its customers.

The fair value of the consideration paid for this acquisition has been allocated to the assets purchased and liabilities assumed based on their fair values as of the acquisition date, with any excess recorded as goodwill.  The goodwill associated with the acquisition represents both the strategic and growth opportunities by significantly expanding the customer offering with a network of premium manufacturing partners. The goodwill related to the acquisition is not deductible for tax purposes. 

The Company recorded a contingent consideration liability of $13.6 million as of the acquisition date representing the estimated fair value of the amounts payable to former shareholders, as outlined under the terms of the merger agreement, payable subject to the satisfaction of performance-based targets during fiscal year 2021 and fiscal year 2022, as noted above. The fair value of the contingent consideration (Level 3) was determined using a Monte Carlo pricing model. During the year ended December 31, 2021, the Company reversed all previously recorded contingent consideration due to the performance-based targets not being met for fiscal 2021 and those targets would not be met during fiscal 2022. The reversal of the contingent consideration was recorded as a decrease in general and administrative expense in the Consolidated Statements of Comprehensive Income.

The results of Hubs since the date of acquisition have been included within the Company's results. Pro forma disclosures of the consolidated results of the Company with the full year effects of Hubs, as if the acquisition had occurred on January 1, 2020, are not required and have not been separately presented since the impact to the Company's results of operations was not material.

The acquisition has been accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. Throughout fiscal 2021 the Company recorded adjustments to the preliminary allocation of the purchase price due to changes to the preliminary valuation and finalization of the working capital calculation. Adjustments from the original amounts recorded included a $3.9 million decrease to intangible assets, a $5.5 million increase to goodwill, a $3.3 million increase to contingent consideration, a $1.4 million decrease to deferred tax liabilities, and a decrease to cash paid of $0.3 million. The final purchase price allocation is as follows:

(in thousands)
Assets acquired:
Current assets	$	2,497
Intangible assets		30,770
Goodwill		280,925
Other long-term assets		1,139
Total assets acquired		315,331
Liabilities assumed:
Current contingent consideration		7,093
Current liabilities		5,666
Long-term contingent consideration		6,507
Long-term deferred tax liabilities		1,688
Other long-term liabilities		255
Total liabilities assumed		21,209
Net assets acquired	$	294,122
Cash paid	$	133,847
Cash acquired		(6,434	)
Net cash consideration		127,413
Equity portion of purchase price		166,709
Total purchase consideration	$	294,122