2. Acquisitions

2018 Acquisitions

On March 21, 2018, the Company’s wholly owned subsidiary, PowerSteering Software Limited, a limited liability company organized and existing under the laws of England and Wales (“PowerSteering UK”), completed its purchase of the shares comprising the entire issued share capital of Interfax Communications Limited ("Interfax"), an Irish-based software company providing secured cloud-based messaging solutions, including enterprise cloud fax and secure document distribution. In connection with this acquisition, the Company also acquired certain assets related to Interfax’s business from a United States based reseller of Interfax’s products. The purchase price consideration paid for Interfax was $35.0 million in cash at closing, net of cash acquired, and a $5.0 million cash holdback payable over 18 months (subject to reduction for indemnification claims). In conjunction with the acquisition of Interfax, certain assets and customer relationships of their U.S. reseller ("Marketech") were purchased for $2.0 million, and excludes any potential earnout payments tied to performance-based goals. Revenues recorded since the acquisition date through June 30, 2018 were approximately $4.0 million.

On June 28, 2018, the Company completed its purchase of RO Innovation, Inc. ("RO Innovation"), a cloud-based customer reference solution for creating, deploying, managing, and measuring customer reference and sales enablement content. The purchase price consideration paid was approximately $12.5 million in cash payable at closing and a $1.8 million cash holdback payable in one year (subject to reduction for indemnification claims) and excludes potential future earn-out payments tied to additional performance-based goals. No revenues have been recorded since the acquisition of RO Innovation through June 30, 2018.

2017 Acquisitions

On January 10, 2017, the Company completed its purchase of Omtool, Ltd ("Omtool"), a document capture, fax and workflow solution company. The purchase price consideration paid was approximately $19.3 million in cash payable at closing (net of $3.0 million of cash acquired).

On April 21, 2017, the Company acquired RightAnswers, Inc. ("RightAnswers"), a cloud-based knowledge management system. The purchase price was $17.4 million, in cash at closing (net of $0.1 million cash acquired) and a $2.5 million cash holdback payable in one year (subject to reduction for indemnification claims) and excludes potential future earn-out payments tied to additional performance-based goals.

On July 12, 2017, the Company acquired Waterfall International Inc. (“Waterfall”), a cloud-based mobile messaging platform. The purchase price consideration paid was approximately $24.4 million in cash at closing (net of $0.4 million of cash acquired) and a $1.5 million cash holdback payable in 18 months (subject to reduction for indemnification claims). The foregoing excludes additional potential $3.0 million in earnout payments tied to performance-based conditions.

On November 16, 2017, the Company completed its acquisition of Qvidian Corporation, a Delaware corporation (“Qvidian”), a Massachusetts-based provider of cloud-based RFP and sales-proposal automation software. The purchase price consideration paid by the Company was $50 million in cash.

The pro forma statements of operations data for three and six months ended June 30, 2018 and June 30, 2017 shown in table below, give effect to the Qvidian acquisition, described above, as if it had occurred at January 1, 2016. These amounts have been calculated after applying our accounting policies and adjusting the results of Qvidian to reflect: the costs of debt financing incurred to acquire Qvidian, the additional intangible amortization and the adjustments to acquired deferred revenue that would have been occurred assuming the fair value adjustments had been applied and incurred since January 1, 2016. This pro forma data is presented for informational purposes only and does not purport to be indicative of our future results of operations. The table below shows the Pro forma statements of operations data for the three and six months ended June 30, 2018 and June 30, 2017 (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Revenue	$	35,946		$	28,127		$	67,561		$	53,262
Loss from continuing operations⁽¹⁾	$	(5,230	)	$	(3,512	)	$	(8,391	)	$	(8,023	)

(1) While some recurring adjustments impact the pro forma figures presented, the decrease in pro forma loss from continuing operations compared to our loss from continuing operations presented on the consolidated statements of operations for the three and six months ended June 30, 2018 and June 30, 2017 includes nonrecurring adjustments removing acquisition costs from 2017 and reflects these costs in the year ended 2016, the year the acquisition was assumed to be completed for pro forma purposes.

The following condensed table presents the preliminary and finalized acquisition-date fair value of the assets acquired and liabilities assumed for the acquisitions in 2017 and through the six months ended June 30, 2018, as well as assets and liabilities (in thousands):



	Preliminary									Finalized
	RO Innovation			Interfax			Qvidian			Waterfall			RightAnswers			Omtool
Year Acquired	2018			2018			2017			2017			2017			2017

Cash	$	1,427		$	2,675		$	468		$	100		$	139		$	2,957
Accounts receivable	1,807			1,713			1,907			1,477			2,164			784
Other current assets	22			—			334			608			246			464
Property and equipment	51			286			108			23			408			58
Customer relationships	8,596			21,093			30,160			6,400			10,500			4,400
Trade name	65			638			227			110			180			170
Technology	1,636			4,360			5,739			2,800			2,300			3,180
Goodwill	3,170			16,141			21,225			18,575			15,680			14,081
Other assets	—			14			8			—			—			33
Total assets acquired	16,774			46,920			60,176			30,093			31,617			26,127
Accounts payable	(232		)	(737		)	(388		)	(605		)	(139		)	(219		)
Accrued expense and other	(679		)	(3,122		)	(399		)	(1,136		)	(2,108		)	(915		)
Deferred tax liabilities	—			(3,061		)	—			—			—			—
Deferred revenue	(1,613		)	—			(9,389		)	(1,220		)	(5,479		)	(2,779		)
Total liabilities assumed	(2,524		)	(6,920		)	(10,176		)	(2,961		)	(7,726		)	(3,913		)
Total consideration	$	14,250		$	40,000		$	50,000		$	27,132		$	23,891		$	22,214

Tangible assets were valued at their respective carrying amounts, which approximates their estimated fair value. The valuation of identifiable intangible assets reflects management’s estimates based on, among other factors, use of established valuation methods. Customer relationships were valued using an income approach, which estimates fair value based on the earnings and cash flow capacity of the subject asset. The value of the marketing-related intangibles was determined using a relief-from-royalty method, which estimates fair value based on the value the owner of the asset receives from not having to pay a royalty to use the asset. Developed technology was valued using a cost-to-recreate approach.

The Company recorded the purchase of the acquisitions described above using the acquisition method of accounting and, accordingly, recognized the assets acquired and liabilities assumed at their fair values as of the date of the acquisition. The purchase price allocations for the 2017 acquisitions of Omtool, RightAnswers, and Waterfall are final, and Qvidian, Interfax, and RO Innovation are preliminary as the Company has not obtained and evaluated all of the detailed information necessary to finalize the opening balance sheet amounts in all respects. Management has recorded the purchase price allocations based upon acquired company information that is currently available. Management expects to complete its purchase price allocations for Qvidian in the second half of 2018 and Interfax, and RO Innovation in the first half of 2019.

Changes in the preliminary acquisition-date fair value of assets and liabilities for Qvidian during the three months ended June 30, 2018 included a $0.1 million reduction in accrued expense and other and a $0.1 million reduction in deferred revenue. Changes in the preliminary acquisition-date fair value of assets and liabilities for Interfax during the three months ended June 30, 2018 included a $4.2 million reduction in intangibles (customer relationships, trade name and technology) due to a change in estimates during the three months ended June 30, 2018, a $3.1 million increase to deferred tax liabilities as a result of book-tax difference from amortization of intangibles, a $0.1 million decrease in other current assets and $0.1 million increase in accounts payable and accrued expenses and other.

The goodwill of $88.9 million for the above acquisitions is primarily attributable to the synergies expected to arise after the acquisition. Goodwill deductible for tax purposes is $3.7 million for Waterfall, $2.3 million (at the time of the acquisition) for Interfax, and $2.7 million for RO Innovation. There was no Goodwill deductible for tax purposes for our Omtool, RightAnswers, and Qvidian acquisitions. Measurement period expenses recorded to other income (expense), net, related to acquisitions that took place within a prior period for the three months ended June 30, 2018 and the three months ended June 30, 2017 were net expense of $0.1 million and none, respectively, and for the six months ended June 30, 2018 and the six months ended June 30, 2017, were net income of $0.2 million and none, respectively.

Total one-time transaction costs, excluding one-time restructuring costs, incurred with respect to acquisition activity in the three months ended June 30, 2018 and the three months ended June 30, 2017 were $1.2 million and $1.0 million and for the six months ended June 30, 2018 and the six months ended June 30, 2017 were $2.6 million in both periods.