On August 2, 2023, SimplePractice, LLC ("SimplePractice"), a wholly owned subsidiary of the Company, entered into an asset purchase agreement (the “APA”) with Luminello, Inc., a California corporation, engaged in the sale, hosting, distribution and licensing of practice management software ("Luminello"), and certain key holders (collectively, the “Seller”), pursuant to which SimplePractice agreed to purchase certain assets of the Seller for aggregate base cash consideration of up to $16.0 million, subject to purchase price adjustments including working capital, indebtedness, and a holdback amount up to an aggregate of $3.6 million, consisting of $1.2 million to be paid one year after closing and $2.4 million to be paid two years after closing, pursuant to the terms of the APA. In addition, Seller may receive contingent payments up to $2.0 million, subject to the satisfactory achievement of certain defined performance metrics. In connection with the closing, SimplePractice and the Seller entered into certain intellectual property agreements pursuant to which SimplePractice licensed certain acquired assets back to Seller. In addition, the parties entered into a transition services agreement ("TSA") pursuant to which Seller will continue to operate its platform for a period of time.

The acquisition has been accounted for as a business combination and the Company has recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The purchase price allocation is considered preliminary subject to the finalization of the valuation and acquired working capital amounts. The Company may record adjustments to the purchase price allocation as additional information relevant to the acquisition becomes available during the remainder of the measurement period, which will not exceed 12 months from the acquisition date. The following tables summarizes the preliminary purchase price allocation (in thousands):


Fair value of consideration transferred:
Cash paid, net of cash acquired	$	11,782
Fair value of contingent consideration		1,475
Fair value of future holdback payments		3,300
Total purchase price consideration	$	16,557

Fair value of assets acquired and liabilities assumed:
Intangible assets	$	4,400
Goodwill		12,804
Total assets acquired	$	17,204
Deferred revenue		(647	)
Net assets acquired	$	16,557

The Company engaged a third-party valuation firm to assist in the valuation of intangible assets. The significant intangible assets identified in the purchase price allocation include customer relationships, developed technology, trade names and a favorable contract asset, each of which are amortized on a straight-line basis. Customer relationships represent the underlying relationships with certain customers to provide ongoing services for products sold, and were valued using the income approach, specifically a discounted cash-flow method known as the excess earnings method. Developed technology consists of products that have reached technological feasibility and trade names represent acquired company and product names, and were valued using a relief-from-royalty method. The favorable contract asset relates to the TSA, and was valued using an income approach. The significant assumptions and estimates utilized to value the intangible assets acquired include forecasted revenue and expenses, customer attrition rates, royalty rates, and discount rates.

The following table presents the fair values and useful lives of the identifiable intangible assets acquired and risk-adjusted discount rates used in the valuation:


	Amount		Weighted Average Useful Life		Risk-Adjusted Discount Rates Used in Valuation
	(in thousands)		(in years)
Customer relationships	$	3,600		10		22	%
Developed technology		400		1		17	%
Trade names		30		1		17	%
Other		370		1		17	%
Total identifiable intangible assets	$	4,400

In connection with the acquisition of Luminello, goodwill of $12.8 million was recognized for the excess purchase price over the fair value of the net assets acquired. The Company believes the goodwill from the acquisition is primarily

attributable to product and customer-related synergies. Goodwill from the acquisition of Luminello is included within the Company’s SMB Solutions segment and is deductible for tax purposes.

Additionally, the Company utilized a third-party valuation firm to assist in the valuation of the future contingent payments. The Company recognized a contingent consideration liability equal to the acquisition date fair value of expected contingent payments utilizing a Monte Carlo simulation model. The significant assumptions and estimates utilized in the model include forecasted revenue, subscribers, volume, and discount rates.

In connection with the acquisition of Luminello, the Company incurred acquisition-related expenses of $0.4 million and $0.6 million for the three and nine months ended September 30, 2023, respectively, which are primarily recorded within general and administrative expenses in the condensed consolidated statements of operations and comprehensive income.

The operating results of Luminello have been included in the Company's SMB Solutions segment and condensed consolidated statements of operations and comprehensive income since the date of acquisition. Revenue, earnings, and pro forma information have not been presented, as the operating results of Luminello are not significant.

On August 2, 2023, Invoice Cloud, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Invoice Cloud”), completed the divestiture of IMAGEVISION.NET, LLC, the entity that operates the HealthPay24 solution to Waystar, Inc. for $30.0 million, net of cash sold, in an all-cash transaction. The proceeds from this transaction were recorded within the proceeds from sale of business, net of cash sold line on the condensed consolidated statement of cash flows. The divestiture resulted in a gain of $10.5 million which was recorded within gain on sale of business on the condensed consolidated statements of operations and comprehensive income. As a result of the transaction, the Company disposed of $15.1 million of goodwill and $3.5 million of intangible assets, net from the Enterprise Solutions segment. The divestiture was not considered a strategic shift that would have a major effect on the Company’s operations or financial results, and as a result was not reported as discontinued operations.