Acquisition of STI

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisition of STI

Acquisition of STI On the Acquisition Date, the Company completed the STI Acquisition pursuant to the purchase agreement, dated November 10, 2021, by and among Amixa Capital, S.L. and Aurica Trackers, S.L., each a company duly organized under the laws of the Kingdom of Spain (together, the “Sellers”) and Mr. Javier Reclusa Etayo (the “STI Purchase Agreement”). The STI Acquisition was funded primarily with borrowings from the Convertible Notes (as defined below) and the issuance of Series A redeemable perpetual preferred stock of the Company, par value $0.001 per share (the “Series A Redeemable Perpetual Preferred Stock”). The STI Acquisition

provided the Company with an immediate presence in Brazil, Western Europe and South Africa. Transaction expenses incurred in connection with the acquisition are $5.6 million recorded in the general and administrative line item on the condensed consolidated statement of operations for the six months ended June 30, 2022. In accordance with the STI Purchase Agreement, the Company paid closing consideration to the Sellers consisting of $410.5 million in cash and 13,894,800 shares of the Company’s common stock. The fair value of the purchase consideration was $610.8 million and resulted in the Company owning 100% of the interests in STI. The Company has performed a valuation of the acquisition assets and liabilities and determined the related accounting impact.

The purchase price consideration to acquire STI consisted of the following (in thousands):

Cash consideration for STI	$	409,647
Cash consideration for transaction expenses of STI	896
Total cash consideration	410,543
Non-cash equity consideration	200,224
Total consideration transferred	610,767
Total purchase price consideration	$	610,767

The STI Acquisition was accounted for as a business combination applying ASC 805. The equity consideration transferred consisted of the Company’s common stock and was measured at fair value based on the closing stock price on the Acquisition Date. The purchase price was allocated to the assets acquired and liabilities assumed based on management’s estimate of the respective fair values at the Acquisition Date. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of goodwill were the expected synergies of the combined entities that are expected to be realized from the STI Acquisition. None of the goodwill is expected to be deductible for income tax purposes.

The following table summarizes the preliminary estimates of fair values of the assets acquired and liabilities assumed as of the Acquisition Date (in thousands):

Preliminary Fair Value of Net Assets Acquired and Liabilities Assumed:	Acquisition Date		Measurement Adjustment		June 30, 2022
Cash and cash equivalents	$	36,725	$	—	$	36,725
Accounts receivable	110,789		—		110,789
Inventories	47,517		—		47,517
Prepaid expenses and other	23,399		—		23,399
Property, plant and equipment	4,434		—		4,434
Other intangible assets	318,365		—		318,365
Other assets	325		—		325
Total assets acquired	$	541,554	$	—	$	541,554
Accounts payable	65,761		—		65,761
Deferred revenue	20,345		—		20,345
Short-term debt	44,338		—		44,338
Other liabilities	10,115		—		10,115
Income tax payable	7,576		—		7,576
Deferred tax liability	93,823		7,611		101,434
Other long-term liabilities	4,524		—		4,524
Long-term debt	12,053		—		12,053
Total liabilities assumed	$	258,535	$	7,611	$	266,146
Preliminary fair value of net assets acquired	283,019				275,408
Preliminary allocation to goodwill	$	327,748			$	335,359

The preliminary purchase price allocation was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement period (defined as the twelve months following the Acquisition Date). The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the valuation of identifiable intangible assets acquired, the fair value of certain tangible assets acquired and liabilities assumed as well as the tax impact. The Company expects to continue to obtain information for the purpose of determining the fair value of the assets acquired and liabilities assumed on the Acquisition Date throughout the remainder of the measurement period. The purchase price allocation is subject to further adjustment until all pertinent information regarding the assets acquired is fully evaluated by the Company, including but not limited to, the fair value accounting. For assets and liabilities excluded from the scope of the intangible asset and property, plant and equipment valuation, the Company considered net book value to be a reasonable proxy as of the acquisition close date.

The preliminary purchase price allocation includes $318.4 million of acquired identifiable intangible assets.

	Estimated Fair Value		Estimated Weighted Average Useful Life in Years
(in thousands, except useful lives)
Backlog	$	51,165	1
Customer relationships	238,770		10
Trade name	28,430		20
Total	$	318,365

The preliminary fair value of the identifiable intangible assets has been estimated using the Excess Earnings Method (customer relationships and backlog) and Relief from Royalty Method (trade name). Significant inputs using the Excess Earnings Method include estimated revenue, expenses based on actuals and forecast, and a discount rate based on a weighted average cost of capital for customer relationships of 15% for Spain, 16.5% for Brazil and 14.0% for Spain foreign sourced projects and for order backlog of 8.5% for Spain, 9.5% for Brazil and 7.5% for Spain foreign sourced projects. Significant inputs to the Relief from Royalty method model include estimates of future revenue, economic life, estimated royalty rate of 1.25%, and a discount rate based on a weighted average cost of capital 15.2%. The intangible assets are being amortized over their estimated useful lives on a straight-line basis that reflects the economic benefit of the asset. The determination of the useful lives is based upon various industry studies, historical acquisition experience, economic factors, and future forecasted cash flows of the Company following the STI Acquisition.

The amounts of revenue and net loss of STI included in the Company’s consolidated statement of operations from the Acquisition Date through June 30, 2022 are $122.6 million and $10.9 million, respectively.

Pro Forma Financial Information (Unaudited)

The following unaudited pro forma financial information presents the combined results of operations of the Company and STI as if the acquisition had occurred on January 1, 2021, after giving effect to certain unaudited pro forma adjustments. The unaudited pro forma adjustments reflected herein include only those adjustments that are directly attributable to the STI Acquisition including amortization of intangibles, debt financing expenses and tax benefits. The unaudited pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the STI Acquisition and is not necessarily indicative of the operating results that would have actually occurred had the STI Acquisition been consummated on January 1, 2021.

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2022		2021		2022		2021
Revenue	$	424.9	$	263.1	$	733.4	$	536.9
Net income (loss)	$	(2.8)	$	5.0	$	(23.9)	$	(7.3)