Business Combinations

6 Months Ended

Jun. 30, 2024

Business Combination and Asset Acquisition [Abstract]

Business Combinations

6. Business Combinations

In June 2024, the Company acquired all outstanding shares of Device42, an IT asset management company. The total purchase price consideration is $238.1 million, which consists of $225.3 million in cash paid, including cash acquired, $8.9 million in issuance of common stock, and $3.9 million in assumed and converted stock option awards. The purchase price is subject to customary post-closing adjustments and conditions.

As part of the business combination, the Company assumed certain unvested, in-the-money options held by Device42's founder, which were converted into 511,770 replacement stock option awards issued pursuant to the Company's 2021 Equity Incentive Plan. These awards will vest two years from the closing date subject to continued employment The total fair value of the stock option awards was $5.7 million. The portion of the fair value of the assumed and converted awards that was related to pre-combination vesting was $3.9 million and is included as part of the consideration discussed above and the remaining $1.8 million is considered post-combination expense and will be recognized as compensation expense over the remaining service period. Refer to Note 10—Stockholders' Equity and Stock-Based Compensation for valuation of options.

The transaction costs associated with the acquisition were approximately $2.0 million and were recorded in general and administrative expense.

The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the date of acquisition:

	Amount
	(in thousands)
Assets acquired:
Cash	$	11,432
Trade accounts and other receivables	8,916
Prepaid expenses and other current assets	1,792
Customer relationships	67,600
Developed technology	30,700
Trademarks	700
Goodwill	140,833
Total	$	261,973
Liabilities assumed:
Accounts payable and other current liabilities	$	3,510
Deferred revenue	6,080
Deferred tax liability	14,278
Total	$	23,868
Total purchase price consideration	$	238,105

The excess of the purchase consideration over the fair value of net tangible and identifiable intangible assets and liabilities acquired was recorded as goodwill. The goodwill recognized is not deductible for U.S. income tax purposes. The Company expects to derive value from the combination of Device42’s existing customer base, IT asset management technology, and trademarks, as well as through other synergies. Deferred tax liability was primarily driven by the fair value of intangible assets. The fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions as of the acquisition date and are considered preliminary pending finalization of the valuation pertaining to intangible assets acquired, liabilities assumed, including deferred tax liabilities.

The customer relationships, developed technology, and trademarks will be amortized on a straight-line basis over their estimated useful lives of 8 years, 6 years, and 1 year, respectively. The Company used the income approach to estimate the fair value of intangible assets acquired.

The Company has included the operating results of Device42 in its condensed consolidated financial statements since the date of the acquisition. The revenue and net income of Device42 included in the condensed consolidated statement of operations from the date of acquisition to June 30, 2024 were not material.

The following unaudited supplemental pro forma financial information is provided for informational purposes only and summarizes the Company's combined results of operations as if the acquisition had occurred on January 1, 2023 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue	$	180,588	$	153,690	$	354,445	$	300,038
Net loss	$	(20,129)	$	(40,985)	$	(47,195)	$	(86,699)

The unaudited supplemental pro forma results reflect certain adjustments for the amortization of acquired intangible assets, recognition of stock-based compensation, and acquisition-related transaction expenses. Such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisition been completed on the date indicated, nor is it indicative of the Company's future operating results.