Acquisitions

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Mutual Mobile — On December 23, 2022, the Company acquired 100% of the equity interest of the software company Mutual Mobile Inc. (“Mutual Mobile”). Founded in 2009, Mutual Mobile is based in the United States and India, offers end-to-end design and development of next-generation applications, combining mobile, augmented/virtual/mixed reality, and cloud edge / IoT practices. The acquisition of Mutual Mobile added approximately 180 employees to the Company’s headcount. The acquisition will accelerate Company’s strategic expansion into the India engineering market and further solidifies Grid Dynamics’ commitment to global growth. The total purchase consideration is $16.1 million and consists of cash consideration of $12.8 million paid at closing, and fair value of the contingent consideration at the date of the acquisition of $3.3 million. The maximum amount of potential contingent cash consideration is $5.0 million. The contingent consideration is payable based on revenue and gross profit metrics to be achieved by Mutual Mobile within 12 months. The Company recorded a liability for the contingent consideration amount based on the Company’s best estimate of the fair value of the expected payout. See Note 3 for further details on contingent consideration.

Tacit — On May 29, 2021, the Company acquired 100% of the equity interest of the global consultancy company Tacit Knowledge Inc. (“Tacit”). Founded in 2002, Tacit is a global provider of digital commerce solutions, serving customers across the UK, North America, Continental Europe, and Asia. The acquisition of Tacit added approximately 180 employees to the Company's headcount. The acquisition will augment the Company’s service offerings and will strengthen its competitive position within the market. Additionally, the acquisition will also enable the Company to leverage near-shore capabilities with Tacit’s presence in Mexico. The total purchase consideration is $37.6 million and consists of cash consideration of $33.6 million paid at closing, and fair value of the contingent consideration at the date of the acquisition of $4.0 million. The maximum amount of potential contingent cash consideration is $5.0 million. See Note 3 for further details on contingent consideration.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed:


	Mutual Mobile		Tacit
	(in thousands)
Current assets	$	4,982	$	9,145
Property, plant and equipment	132		466
Intangible assets	3,749		12,913
Goodwill	9,556		21,268
Other noncurrent assets	102		—
Total assets acquired	$	18,521	$	43,792

Accounts payable and accrued expenses	(1,576)		(3,675)
Deferred taxes	(875)		(2,500)
Total liabilities assumed	$	(2,451)	$	(6,175)
Purchase price allocation	$	16,070	$	37,617

Current assets acquired include cash and cash equivalents in the amount of $3.5 million for Mutual Mobile and $3.0 million for Tacit accordingly. The purchase price for both acquisitions was assigned to assets acquired and liabilities assumed based on their estimated fair values as of the date of acquisition, and any excess was allocated to goodwill, as shown in the table above. Goodwill represents the value the Company expects to achieve through the implementation of operational synergies and growth opportunities as the Company expands its global reach. Goodwill for Mutual Mobile and Tacit is not deductible for income tax purposes.

For the acquisition of Mutual Mobile, the estimated fair values of the assets acquired and liabilities assumed are provisional and based on the information that was available as of the acquisition date. The Company expects to finalize the purchase price allocations as soon as practicable but no later than one year from the acquisition date.

During the fourth quarter of 2021, the Company finalized the fair value of the assets acquired and liabilities assumed in the acquisition of Tacit.

The estimated fair value, useful lives and amortization methods of identifiable intangible assets as of the date of acquisition updated for any changes as of March 31, 2023 are as follows:


	Mutual Mobile			Tacit
	Fair Value		Useful Life	Fair Value		Useful Life
	(in thousands, except in years)
Customer relationships	$	3,453	8 years	$	11,737	12 years
Trade name	152		4 years	1,176		4 years
Non-compete agreements	144		2 years	—		—
Total identified intangible assets	$	3,749		$	12,913

The Company used the acquisition method of accounting for all acquisitions, and consequently, the results of operations for all acquisitions are reported in the consolidated financial statements from the dates of acquisition.

The following unaudited pro forma information presents the combined results of operations as if the acquisitions of Mutual Mobile had occurred at the beginning of the year preceding the acquisition date. Pre-acquisition results of business acquired have been added to the Company’s historical results. The pro forma results contained in the table below include adjustments for amortization of acquired intangibles and related income taxes. Any potential cost savings or other operational efficiencies that could result from the acquisition are not included in these pro forma results

These unaudited pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations as they would have been had the acquisitions occurred on the assumed dates, nor are they necessarily an indication of future operating results.


	Three Months Ended March 31, 2022
	(in thousands)
Revenue	$	74,402
Net loss	$	(1,970)
Diluted loss per share	$	(0.03)