Business Combinations and Asset Acquisitions

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

Business Combination Disclosure

.     BUSINESS COMBINATIONS

Our acquisitions were accounted for as business combinations and the total purchase consideration of each was allocated to the net tangible and intangible assets and liabilities acquired based on their fair values on the acquisition dates with the remaining amounts recorded as goodwill. The values assigned to the assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the date of this Annual Report on Form 10-K may be adjusted during the measurement period for each acquisition of up to 12 months from the dates of acquisition as further information becomes available. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.

During the year ended December 31, 2021 we incurred $24.4 million of costs in connection with the acquisitions of Dosh and Bridg. These costs are included in acquisition and integration costs on our consolidated statements of operations. Acquisition costs primarily represent diligence efforts, legal and advisory costs, broker fees and insurance premiums. Integration costs primarily represent integration-related employee compensation, advisory costs, and travel costs. The results of Dosh and Bridg have been included in the consolidated financial statements since their respective dates of acquisition. For the year ended December 31, 2021, Dosh and Bridg's combined revenue included in the consolidated statement of operations were approximately 8% of consolidated revenue. Due to the continued integration of the combined businesses, it was impractical to determine the earnings.

For both the acquisitions of Dosh and Bridg, as applicable, the estimated fair values of merchant relationships, partner relationships, and the card-linked subscriber user base were determined using the replacement cost method and lost profits, as applicable, which required us to estimate the costs to recreate an asset of equivalent utility at prices available at the time of the valuation analysis and the lost profits over the period of time to recreate the asset. Trade names were valued using the "relief-from-royalty" approach. This method assumes that trademarks and trade names have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method required us to estimate the future revenues for the related brands, the appropriate royalty rates and the weighted-average costs of capital. Developed technology was valued using the excess earnings method, an income approach. Under the excess earnings method, the fair value of an intangible asset is equal to the present value of the asset’s projected incremental after-tax cash flows (excess earnings) remaining after deducting the market rates of return on the estimated value of contributory assets (contributory charge) over its remaining useful life.

Acquisition of Bridg

On May 5, 2021, we completed the acquisition of Bridg for purchase consideration of $578.9 million, as presented below (in thousands):

	May 5, 2021
Cash paid to common and preferred stockholders, warrant holders and vested option holders	$	337,166
Cash paid to extinguish acquiree debt	1,949
Cash paid to settle pre-acquisition liabilities and acquiree deal-related costs	8,012
Fair value of contingent consideration	230,921
Fair value of assumed options attributable to pre-combination service	841
Total purchase consideration	$	578,889

The following table presents the preliminary purchase consideration allocation recorded on our consolidated balance sheet as of the acquisition date (in thousands):

	May 5, 2021
Cash and cash equivalents	$	1,630
Accounts receivable and other assets	1,989
Intangible assets	64,700
Goodwill	536,826
Accounts payable and other liabilities	(20,694)
Deferred tax liabilities	(5,562)
Total purchase consideration	$	578,889

The goodwill was primarily attributed to the value of future growth expected for the Bridg platform and of synergies created with our current and future offerings. Goodwill is not expected to be deductible for income tax purposes. During the fourth quarter of 2021, we recorded a measurement period adjustment to our income tax provision resulting in $5.6 million of additional goodwill. See Note 11—Income Taxes for further details.

We will owe a brokerage fee derived from the amount of the First Anniversary Payment and the Second Anniversary Payment, if any. As of December 31, 2021, the brokerage fee of the First Anniversary Payment is expected to be $12.3 million, reflected in accrued expenses on our consolidated balance sheet, and the brokerage fee of the Second Anniversary Payment is expected to be $4.5 million, reflected in other long-term liabilities on our consolidated balance sheet.

The following table presents the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands):

	Fair Value		Useful life (in years)
Trade name	$	200	2.0
Developed technology	53,500		6.0
Merchant relationships	11,000		5.0

Acquisition of Dosh

On March 5, 2021, we completed our acquisition of Dosh for purchase consideration of $277.6 million, as presented below (in thousands):

	March 5, 2021
Cash paid to common and preferred stockholders, warrant holders and vested option holders	$	136,626
Cash paid to extinguish acquiree debt	16,574
Cash paid to settle pre-acquisition liabilities and acquiree deal-related costs	3,463
Fair value of common stock transferred	117,354
Fair value of assumed options attributable to pre-combination service	3,593
Total purchase consideration	$	277,610

The following table presents the preliminary purchase consideration allocation recorded on our consolidated balance sheet as of the acquisition date (in thousands):

	March 5, 2021
Cash and cash equivalents	$	7,323
Accounts receivable and other assets	6,146
Intangible assets	80,000
Goodwill	205,690
Accounts payable and other liabilities	(4,146)
Consumer Incentive liability	(15,101)
Deferred tax liabilities	(2,302)
Total purchase consideration	$	277,610

The goodwill was primarily attributed to the value of synergies created with the Company’s current and future offerings and of future growth expected from the labor force of Dosh. Goodwill is not expected to be deductible for income tax purposes. During

the fourth quarter of 2021, we recorded a measurement period adjustment of $1.5 million of additional fair value of developed technology. During the fourth quarter of 2021, we recorded a measurement period adjustment to our income tax provision resulting in $2.3 million of additional goodwill. See Note 11—Income Taxes for further details.

The following table presents the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands):

	Fair Value		Useful life (in years)
Trade name	$	2,500	3.0
Developed technology	37,500		6.0
Merchant relationships	21,000		5.0
Partner relationships	2,000		7.0
Card-linked subscriber user base	$	17,000	5.0

Pro forma consolidated results of operations

The following unaudited pro forma financial information presents combined results of operations for each of the periods presented as if the acquisitions of Bridg and Dosh had been completed on January 1, 2020. The pro forma information includes adjustments to depreciation expense for property and equipment acquired, to amortize expense for the intangible assets acquired, and to eliminate the acquisition transaction expenses recognized in the period. The pro forma financial information is for informational purposes only and is not necessarily indicative of the consolidated results of operations of the combined business had the acquisitions of Bridg and Dosh actually occurred on January 1, 2020, or the results of future operations of the combined business. For instance, planned or expected operational synergies following the acquisitions are not reflected in the pro forma information. Consequently, actual results will differ from the unaudited pro forma information presented below.

	Year Ended December 31,
	2020		2021
Revenue	$	223,259	$	274,486
Net loss	(92,883)		(138,422)