Business Combinations

12 Months Ended

Mar. 31, 2022

Business Combination and Asset Acquisition [Abstract]

During the fiscal year ended March 31, 2022, the Company completed one acquisition, which is described below.

CodeStream Inc.

On June 8, 2021, the Company acquired all of the equity interests in CodeStream Inc. (“CodeStream”), a company that provides an integrated developer collaboration platform. The aggregate purchase price of $28.6 million consisted of approximately $15.1 million in cash (of which the Company held back approximately $7.3 million from the aggregate purchase

price for 18 months after the transaction closing date), and 202,561 shares of the Company’s common stock with an aggregate fair value of approximately $13.5 million. The held back cash was accrued as a long-term liability and has been re-classed as a short-term liability as of March 31. 2022. The fair value of the consideration transferred was determined based on a $66.58 per share price of the Company’s common stock on the closing date of the acquisition. The total purchase price was allocated to the developed technology acquired with an estimated useful life of three years, net assets assumed, and a deferred tax liability related to the developed technology. The excess purchase price was recorded as goodwill. The acquisition was accounted for as a business combination in accordance with ASC 805. The estimated fair value of developed technology acquired of $10.3 million was determined through the use of a third-party valuation firm using cost approach methodology. The business combination did not have a material impact on the condensed consolidated financial statements and therefore historical and proforma disclosures have not been presented.

The acquisition also included a holdback arrangement with certain employees of CodeStream, totaling approximately 199,492 shares of the Company’s common stock, contingent upon their continued employment with the Company. The fair value of these awards, which are subject to the recipients’ continued service, was $13.3 million and was excluded from the aggregate purchase price. These awards will be recognized as stock-based compensation expense over the vesting period, which is 42 months.

The following table presents the preliminary purchase price allocation related to the acquisition (in thousands):


Cash consideration paid	$	15,140
Fair value of common shares issued	26,768
Total consideration	41,908
Post-business combination compensation expense	(13,282)
Total purchase price	28,626
Net assets assumed	(113)
Deferred tax liabilities	1,211

Developed technology acquired	(10,300)
Goodwill	$	19,424

Pixie Labs Inc.

On December 22, 2020, the Company acquired all of the equity interests in Pixie Labs Inc. (“Pixie Labs”), a company that provides a next-generation machine intelligence observability solution for developers using Kubernetes. The aggregate purchase price of $107.9 million consisted of approximately $45.6 million in cash (of which $15.0 million is being held in escrow for 12 months after the transaction closing date) and 884,269 shares of Company common stock with an aggregate fair value of approximately $62.4 million. The fair value of the consideration transferred was determined based on a $70.53 per share price of the Company’s common stock.

The total purchase price was allocated to the developed technology acquired with an estimated useful life of three years, net assets assumed, and a deferred tax liability related to the developed technology. The excess purchase price was recorded as goodwill, as set forth below. Goodwill generated from the acquisition is attributable to expected synergies from future growth and is not deductible for tax purposes.

The following table presents the purchase price allocation related to the acquisition (in thousands):


Cash consideration paid	$	45,558
Fair value of common shares issued	114,310
Total consideration	159,868
Post-business combination compensation expense	(51,943)
Total purchase price	107,925
Net assets assumed	(4,099)
Deferred tax liabilities	115

Developed technology acquired	(4,800)
Goodwill	$	99,141

The acquisition has been accounted for as a business combination. The direct transaction costs of the acquisition have been accounted for separately from the business combination and expensed as incurred. Total direct transaction costs incurred by the Company were $0.9 million, which were included in general and administrative expenses in the Company’s consolidated statement of operations for the fiscal year ended March 31, 2021. The Company paid $0.6 million in acquisition-related expenses incurred by Pixie Labs related to Pixie Labs’ advisors which were included as part of the purchase consideration. The business combination did not have a material impact on the consolidated financial statements and therefore historical and proforma disclosures have not been presented.

The acquisition also included a holdback arrangement with certain employees of Pixie Labs, totaling approximately 736,469 shares of the Company’s common stock, contingent upon their continued employment with the Company. The fair value of these awards, which are subject to the recipients’ continued service, was $51.9 million and was excluded from the aggregate purchase price. These awards will be recognized as stock-based compensation expense over the vesting period, which ranges from 18 months to 37 months.

IOPipe,Inc.

On October 31, 2019, the Company acquired certain assets of IOpipe, Inc., a company that provides monitoring tools for serverless applications, for $5.1 million in cash. The Company held back approximately $0.9 million from the aggregate purchase price which has been accrued as a liability. Of the total purchase price, $1.5 million was allocated to acquired technology with an estimated useful life of three years with the excess $3.6 million of the purchase price over the fair value of the intangible assets acquired recorded as goodwill. The acquisition has been accounted for as a business combination under the acquisition method. Goodwill and other intangibles generated from the acquisition are attributable to expected synergies from future growth and potential future monetization opportunities, and are deductible for tax purposes. The business combination did not have a material impact on the consolidated financial statements and therefore historical and proforma disclosures have not been presented.