Acquisitions

9 Months Ended

Sep. 30, 2021

Business Combination and Asset Acquisition [Abstract]

Assets acquired and liabilities assumed in a business combination are recorded at their estimated fair value on the date of the acquisition. The difference between the purchase price amount and the net fair value of assets acquired and liabilities assumed is recognized as goodwill on the balance sheet if the purchase price exceeds the estimated net fair value or as a bargain purchase gain on the income statement if the purchase price is less than the estimated net fair value. The allocation of the purchase price may be modified up to one year after the acquisition date as more information is obtained about the fair value of assets acquired and liabilities assumed.

VisitPay

On July 1, 2021, the Company completed the acquisition of VisitPay. The purchase price for the VisitPay Acquisition was $305.4 million. The Company funded the purchase price for the VisitPay Acquisition and the Company’s associated transaction expenses with a combination of cash on hand and the incurrence of additional indebtedness (see Note 10, Debt).

The purchase price has been provisionally allocated to assets acquired and liabilities assumed based on their established fair value as of the acquisition date. The fair value estimate of assets acquired and liabilities assumed is pending the completion of multiple elements, including gathering further information about the identification and completeness of all assets and liabilities acquired, the finalization of an independent appraisal and valuation of fair value of the assets acquired and liabilities assumed, and final review by the Company's management. Accordingly, management considers the balances shown in the following table to be preliminary. Some of the more significant amounts that are not yet finalized relate to the fair value of intangible assets and income and non-income related taxes. Accordingly, there could be adjustments to the consolidated financial statements, including changes in our amortization expense related to the valuation of intangible assets acquired and their respective useful lives, among other adjustments.

The preliminary fair value of assets acquired and liabilities assumed is (in millions):



	Purchase Price Allocation
Total purchase consideration	$	305.4

Allocation of consideration to assets acquired and liabilities assumed:
Cash and cash equivalents	$	10.7
Accounts receivable	4.7
Prepaid expenses and other current assets	0.4
Property, equipment and software	0.3
Operating lease right-of-use assets	1.7
Deferred income tax assets	0.9
Intangible assets	117.3
Goodwill	176.4
Accounts payable	(0.5)
Current portion of customer liabilities	(1.1)
Accrued compensation and benefits	(0.7)
Current portion of operating lease liabilities	(0.4)
Other accrued expenses	(2.0)
Non-current portion of customer liabilities	(1.0)
Non-current portion of operating lease liabilities	(1.3)
Net assets acquired	$	305.4

The intangible assets preliminarily identified in conjunction with the VisitPay Acquisition are as follows:


	Useful Life	Gross Carrying Value
Customer Relationships	10 years	$	2.3
Technology	11 years	$	114.0
Tradename	3 years	$	1.0

The goodwill recognized is primarily attributable to synergies that are expected to be achieved from the integration of VisitPay. The goodwill recognized in the acquisition will be partially deductible for income tax purposes.

Included in the Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2021 are net sales of $5.2 million and net loss before income taxes of $3.5 million related to the operations of VisitPay since the acquisition date of July 1, 2021.

During 2020, the Company acquired the following businesses:


Company Name	Description of the Business	Description of the Acquisition
SCHEDULING.COM, INC. d/b/a SCI Solutions, Inc. (“SCI”)	Provider of software-as-a-service (“SaaS”)-based scheduling and patient access solutions	Purchased all outstanding equity interests
RevWorks services business (acquired from Cerner Corporation)	Provider of revenue cycle management services	Purchased certain assets relating to the RevWorks services business

There have been no significant purchase accounting adjustments to the fair value of assets acquired or the liabilities assumed in connection with the SCI and RevWorks acquisitions as disclosed in Note 5 of the Company’s 2020 Form 10-K.

The purchase price for SCI included contingent consideration that was based on achieving certain revenue and operational targets in the year following the acquisition, which had a fair value of $4.8 million at the time of acquisition. During the nine months ended September 30, 2021, the maximum amount of contingent consideration of $10.0 million was finalized and paid. Changes to the fair value of the contingent consideration were recorded as a component of other expenses.

With respect to the RevWorks acquisition, the Company paid the first deferred payment of $12.5 million in the third quarter of 2021. There is one remaining deferred payment of $12.5 million which is payable on the second anniversary of the closing date (August 2022), and is included in other accrued expenses on the Consolidated Balance Sheets as of September 30, 2021. At the time of the acquisition, the Company recorded a present value liability for the contractual deferred payments of $24.3 million.

The two deferred payments related to the RevWorks acquisition are contractual obligations of the Company; however, they are potentially fully refundable to the Company if certain RevWorks customer revenue targets defined in the purchase agreement for the first two years following the acquisition are not achieved. The Company has recorded an asset for the fair value of the contingently returnable consideration of $22.3 million, including $10.5 million in prepaid expenses and other current assets and $11.8 million in other assets on the Consolidated Balance Sheets as of September 30, 2021.

Pro Forma Results

The following table summarizes, on a pro forma basis, the combined results of the Company as though the VisitPay Acquisition had occurred as of January 1, 2020 and the SCI and RevWorks acquisitions had occurred as of January 1, 2019. These pro forma results are not necessarily indicative of the actual consolidated results had the acquisitions occurred as of those dates or of the future consolidated operating results for any period. Pro forma results are (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

Net services revenue	$	379.7	$	310.6	$	1,083.0	$	998.1
Net income (loss)	$	18.7	$	(4.0)	$	56.9	$	34.8

Adjustments were made to earnings to adjust depreciation and amortization to reflect the fair value of identified assets acquired, to record the effects of extinguishing the debt of the acquired companies and replacing it with the debt of the Company, to adjust timing of acquisition related costs incurred by the Company, and to record the income tax effect of these adjustments.