XML 28 R14.htm IDEA: XBRL DOCUMENT v3.22.1
Business Combination
12 Months Ended
Jan. 31, 2022
Business Combination and Asset Acquisition [Abstract]  
Business Combination
5. Business Combination
On December 3, 2021, the Company completed the acquisition of Opstrace, Inc., a technology company based in San Francisco, California. The Company anticipates that this acquisition will provide an out-of-the-box, tested, integrated observability platform deployed within The DevOps Platform.
The transaction was accounted for as a business combination. The acquisition date fair value of the consideration transferred consisted of the following (in thousands):
Cash consideration$2,970 
Fair value of common stock issued on closing959 
Contingent common stock consideration (classified under additional paid-in capital)1,754 
Contingent cash consideration (classified under accrued expenses and other current liabilities)3,007 
Contingent cash consideration (classified under other long-term liabilities)4,893 
Total consideration$13,583 
Cash consideration includes $2.5 million held back as partial security for post-closing indemnification claims made within 18 months of the acquisition date recorded in other long-term liabilities on consolidated balance sheet as of January 31, 2022.
The Company issued 26,574 shares of the Company’s Class B common stock paid as of the closing date, of which 15,673 shares issued to the founders and employees will have to vest over four years. The $1.4 million fair value of 15,673 unvested restricted stock is not included as purchase consideration above, as it has a post-combination service requirement and will be accounted for separately from the business combination as stock compensation expense.
The contingent cash consideration is determined based upon the satisfaction of certain defined operational milestones and will be remeasured at fair value at each reporting period through earnings. As the fair value is based on unobservable inputs, the liabilities are included in Level 3 of the fair value measurement hierarchy. The unobservable inputs used in the determination of the fair value of the contingent cash considerations include managements assumptions about the likelihood of payment
based on the satisfaction of certain defined operational milestones and discount rates based on cost of debt. The change in the fair value recorded in fiscal year 2022 was not material.
Contingent stock consideration is classified as equity and will not be remeasured.
Acquisition related costs of approximately $0.5 million were expensed by the Company in general and administrative expenses in its consolidated statement of operations for the year ended January 31, 2022.
The Company recorded the assets acquired and liabilities assumed at their estimated fair values, with the difference between the fair value of the net assets acquired and the purchase consideration reflected in goodwill. The total purchase price of $13.6 million was allocated using information currently available to the Company. As a result, the Company may continue to adjust the preliminary purchase price allocation after obtaining more information regarding asset valuations, liabilities assumed, and revisions of preliminary estimates. The following table reflects the preliminary fair values of assets acquired and liabilities assumed (in thousands):
Cash and cash equivalents$147 
Developed technology6,200 
Goodwill8,145 
Accrued expenses and payroll(178)
Deferred tax liability (731)
Net assets acquired$13,583 
As of December 3, 2021, developed technology of the acquired business had an estimated useful life of three years. The goodwill is primarily attributed to the synergies expected to be realized following the acquisition and the assembled workforce. Goodwill is not deductible for U.S. federal income tax purposes.
Non-cash investing activities involving this acquisition as reflected in the consolidated statements of cash flows for the fiscal year 2022 were as follows (in thousands):
Supplemental disclosure of non-cash investing activities:
Consideration withheld in an escrow$2,500 
Issuance of common stock in connection with business combination$959 
Contingent cash consideration in connection with business combination$7,900 
Contingent stock consideration in connection with business combination$1,754 
Results of operations of the business acquired have been included in our consolidated financial statements subsequent to the date of acquisition. The revenue and net income (loss) earned by the business acquired following the acquisition are not material to our consolidated results of operations. Pro forma statements have not been presented because they are not material to our consolidated results of operations.