Business Combination

12 Months Ended

Jun. 30, 2024

BUSINESS COMBINATION

Fiscal 2022 Acquisition

On September 1, 2021, the Company acquired 100% of the outstanding equity interests of Invoice2go, LLC, and Cimrid Pty, Ltd (together, Invoice2go). The results of Invoice2go's operations have been included in the accompanying consolidated financial statements since the acquisition date. Invoice2go provides mobile-first accounts receivable software that empowers SMBs and freelancers to grow their client base, manage invoicing and payments, and build their brand. Invoice2go has operations in the U.S. and in Australia, and serves a large global customer base of SMBs. The acquisition of Invoice2go will enhance the Company’s ability to provide an expanded product solution to enable SMBs to manage accounts payable, corporate card spend, and accounts receivable all in one place. Additionally, the acquisition will expand the market opportunity for the Company by offering Invoice2go's product to its existing customers and network members and vice versa.

The acquisition purchase consideration totaled $674.3 million, which consisted of the following (in thousands):


Equity consideration (1)	$	510,218
Cash	164,087
Total	$	674,305

(1) This includes 1,788,372 shares of the Company’s common stock issued with a fair value based upon the opening market price on the acquisition date. This also includes the stock options assumed to replace stock options that were outstanding on the acquisition date under Invoice2go's 2014 Equity Incentive Plan. The fair value of these stock options was $21.7 million, which was the amount attributable to the pre-combination requisite service period.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):


Cash and cash equivalents	$	19,738
Accounts receivable and other assets	4,518
Intangible assets	91,219
Total identifiable assets acquired	115,475
Accounts payable and other liabilities	(26,618)
Net identifiable assets acquired	88,857
Goodwill	585,448
Net assets acquired	$	674,305

The preliminary fair values allocated to the identifiable intangible assets (in thousands) and their estimated useful lives are as follows:


	Preliminary fair value		Weighted average useful life (in years)
Customer relationships	$	61,269	10.0
Developed technology	15,908		3.0
Trade name	14,042		3.0
Total	$	91,219

Customer relationships were measured at fair value using the multiple-period excess earnings method under the income approach. Significant inputs used to measure the fair value include an estimate of projected revenue and costs associated with existing customers, and a discount rate of 12.3%.

Developed technology was measured at fair value using the relief-from-royalty method of the income approach. Significant inputs used to measure the fair value include an estimate of projected revenue from existing technology, a pre-tax royalty rate of 15.0%, and a discount rate of 12.3%.

Trade name was measured at fair value using the relief-from-royalty method under the income approach. Significant inputs used to measure the fair value include an estimate of projected revenue from the trade name, a pre-tax royalty rate of 2.5%, and a discount rate of 12.3%.

The $585.4 million goodwill is attributable primarily to the expected synergies and economies of scale expected from combining the operations of both entities, and intangible assets that do not qualify for separate recognition, including assembled workforce acquired through the acquisition. None of the goodwill is expected to be deductible for income tax purposes. As a result of the adoption of ASU 2021-08 Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers on October 1, 2021, retrospectively to September 1, 2021, the Company recorded adjustments of $8.0 million to increase goodwill and deferred revenue, and an immaterial amount to deferred income tax liability. The amounts recorded as measurement period adjustments were not material during the 12-month measurement period.

The Company recognized $3.7 million of acquisition-related costs that were expensed during the year ended June 30, 2022. These costs are shown as part of general and administrative expenses in the accompanying consolidated statements of operations.

The amount of Invoice2go’s revenue and net loss, which includes amortization of intangible assets, from the acquisition date of Invoice2go that were included in the Company’s consolidated statements of operations during the year ended June 30, 2022 were approximately $32.9 million and $32.0 million, respectively.