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Acquisitions
12 Months Ended
Dec. 31, 2021
Business Combinations [Abstract]  
Acquisitions

3.

Acquisitions

StarDust SAS (“StarDust”)

 

On March 3, 2020, the Company acquired 100% of the equity of StarDust, for approximately $6.1 million (€5.5 million based on a EUR into USD exchange rate of 1.1145). The acquisition was funded using cash on hand and borrowings under the Credit and Security Agreement. The France-based StarDust, is a leading provider of testing and quality assurance for digital services with offices in Marseille, France, and Montreal, Canada. StarDust offers a complete range of testing services, including functional, multilingual, operational, environmental, regression, and application benchmarking, covering digital services and website, software, mobile applications, and Internet of Things connected objects. The acquisition expanded the Company’s global testing capabilities.

 

The results of operations of StarDust have been included in the Company’s consolidated financial results since the date of acquisition. As the Company has determined that the acquisition is not material to its existing operations, certain disclosures, including pro forma financial information, have not been included in this annual report on Form 10-K.

 

An earn-out of up to $1.1 million (€1.0 million based on a EUR into USD exchange rate of 1.1145) can be earned, a portion of which will be payable in each period subject to the achievement of consolidated direct profit targets for fiscal 2020 and 2021. Additionally, for each €10,000 of consolidated direct profit achieved above the target, an additional €1,000 can be earned, with no maximum limit. There is no payout if the achievement is below the target threshold. The fair value as of the March 3, 2020 acquisition date was determined to be $0.1 million. During 2021, the Company paid $0.3 million

relating to the earn-out based on the achievement by StarDust of consolidated direct profit targets for the fiscal year 2020. As of December 31, 2021, the fair value of the remaining contingent consideration liability was determined to be zero as the consolidated direct profit targets were not met by StarDust for the fiscal year 2021.

 

The acquisition date fair value of the consideration for the acquisition of StarDust consisted of the following as of March 3, 2020:

 

(amounts in thousands)

 

 

 

 

Cash consideration

 

$

6,122

 

Fair value of contingent consideration

 

 

111

 

Fair value of purchase consideration

 

$

6,233

 

 

 

The following table summarizes the allocation of the aggregate purchase consideration to the fair value of the assets acquired and liabilities assumed as of March 3, 2020:

 

(amounts in thousands)

 

 

 

Assets Acquired:

 

 

 

Cash

$

1,798

 

Accounts receivable

 

1,303

 

Prepaids & other

 

71

 

Property & equipment, net

 

327

 

Acquired intangibles

 

1,282

 

Goodwill

 

2,757

 

Total assets acquired

$

7,538

 

 

 

 

 

Liabilities Assumed:

 

 

 

Accounts payable

$

285

 

Accrued compensation

 

307

 

Taxes payable

 

222

 

Other liabilities

 

163

 

Deferred income taxes

 

328

 

Total liabilities assumed

 

1,305

 

Net assets acquired

$

6,233

 

 

The purchase consideration for the acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values. The excess consideration was recorded as goodwill, which is not deductible for income tax purposes.

(amounts in thousands)

 

Fair Value

 

 

Estimated

Economic Life

Trademarks

 

$

100

 

 

2 years

Technology

 

 

591

 

 

10 years

Customer relationships

 

 

591

 

 

7 years

Fair value of purchase consideration

 

$

1,282

 

 

 

 

The Company incurred acquisition-related legal and consulting fees, adjustments to the fair value of the earn-out liability, and amortization of intangible assets of approximately $(0.2) million and $0.6 million in 2021 and 2020, respectively, which were recorded as a component of selling, general, and administrative expenses in the consolidated statements of operations. The purchase price allocation for this acquisition has been finalized.

 

 

Tech-IT PSF S.A. (“Tech-IT”)

On February 6, 2019, the Company acquired 100% of the equity of Tech-IT for approximately $9.7 million. The acquisition was funded using cash on hand and borrowings under the Credit and Security Agreement. Tech-IT, located in Bertrange, Luxembourg, is a leading provider of software and hardware services, including consulting, infrastructure and software design and development, infrastructure integration, project management, and training. The acquisition of Tech-IT enabled the Company to strengthen its market position in Luxembourg and broaden its portfolio to offer end-to-end IT solutions.

The results of operations of Tech-IT have been included in the Company’s consolidated financial results since the date of acquisition. As the Company has determined that the acquisition is not material to its existing operations, certain disclosures, including pro forma financial information, have not been included in this annual report on Form 10-K.

An earn-out of up to a maximum of $1.7 million (€1.5 million based on a EUR into USD exchange rate of 1.1386 at the time of acquisition) can be earned, a portion of which will be payable in each period subject to the achievement of direct profit targets for fiscal 2019 and 2020.  There is no payout if the achievement is below the target threshold. The fair value as of the February 6, 2019 acquisition date was determined to be $0.6 million. In the 2020 fourth quarter, the Company paid approximately $0.3 million relating to the earn-out based on the achievement by Tech-IT of direct profit targets for the fiscal year 2019. The fair value of the remaining contingent consideration liability was determined to be zero as of December 31, 2020 as the direct profit target threshold was not met by Tech-IT for the fiscal year 2020.

The acquisition date fair value of the consideration for the above transaction consisted of the following as of February 6, 2019:

 

(amounts in thousands)

 

 

 

 

Cash consideration

 

$

9,678

 

Fair value of contingent consideration

 

 

569

 

Fair value of purchase consideration

 

$

10,247

 

 

The following table summarizes the allocation of the aggregate purchase consideration to the fair value of the assets acquired and liabilities assumed as of February 6, 2019:

 

(amounts in thousands)

 

 

 

Assets Acquired:

 

 

 

Cash

$

1,217

 

Accounts receivable

 

4,491

 

Prepaids & other

 

1,122

 

Property & equipment, net

 

98

 

Acquired intangibles

 

4,099

 

Goodwill

 

5,331

 

Total assets acquired

$

16,358

 

 

 

 

 

Liabilities Assumed:

 

 

 

Accounts payable

$

2,378

 

Accrued compensation

 

172

 

Other short-term liabilities

 

2,447

 

Deferred income taxes

 

1,114

 

Total liabilities assumed

 

6,111

 

Net assets acquired

$

10,247

 

 

The purchase consideration for the acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values. The excess consideration was recorded as goodwill, which is not deductible for income tax purposes.

The intangible assets acquired in this acquisition consisted of the following:

 

(amounts in thousands)

 

Fair Value

 

 

Estimated

Economic Life

Trademarks

 

$

683

 

 

2 years

Customer relationships

 

 

3,416

 

 

8 years

Fair value of purchase consideration

 

$

4,099

 

 

 

 

The Company incurred adjustments to the fair value of the earn-out liability and amortization of intangible assets of approximately $0.5 million and $0.4 million in 2021 and 2020, respectively, which were recorded as a component of selling, general, and administrative expenses in the consolidated statements of operations. The purchase price allocation for this acquisition has been finalized.