Acquisitions

12 Months Ended

Sep. 30, 2020

Fiscal 2020 Acquisition

Acquisition of Opengear, Inc.

On December 13, 2019, we completed our acquisition of Opengear, Inc. ("Opengear"), a New Jersey-based provider of secure IT infrastructure products and software. Opengear results are included in our consolidated financial statements within our IoT Products & Services segment.

The terms of the acquisition included an upfront cash payment as well as contingent consideration comprised of future earn-out payments. We funded the closing of the acquisition with cash of $148.1 million comprised of cash on hand and proceeds from our credit facility (see Note 8 to the consolidated financial statements). The earn-out payments are based on revenue performance from Opengear for the twelve-month periods ended December 31, 2019 and ending December 31, 2020. The cumulative amount of these earn-outs for the periods ended December 31, 2019 and December 31, 2020, will not exceed $5.0 million and $10.0 million, respectively. We paid the first installment of $0.9 million for the period ended December 31, 2019 during the third quarter of fiscal 2020. The fair value of the remaining contingent consideration was $4.2 million at September 30, 2020 (see Note 8 to the consolidated financial statements).

For tax purposes, this acquisition is treated as a stock acquisition. The goodwill therefore is not deductible. We believe this is a complementary acquisition for us as it significantly enhances our IoT Products & Services segment by providing secure, resilient access and automation to critical IT infrastructure.

The Opengear acquisition has been accounted for using the acquisition method of accounting. This requires, among other things, that assets acquired and liabilities assumed pursuant to the purchase agreement be recognized at fair value as of the acquisition date.

2. ACQUISITIONS (CONTINUED)

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


Cash	$	148,058

Contingent consideration	5,100


Total	$	153,158

Fair value of net tangible assets acquired	$	19,217
Identifiable intangible assets:
Customer relationships	79,000
Purchased and core technology	18,100
Trademarks	8,000
Deferred tax liability on identifiable intangible assets	(27,401)
Goodwill	56,242
Total	$	153,158

The Consolidated Balance Sheet as of September 30, 2020 reflects the final allocation of the purchase price to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Included in the fair value of net tangible assets acquired are $1.4 million of right-of-use assets included in other non-current assets and $1.7 million of lease liability included in other current and non-current liabilities associated with Opengear's operating leases.

The weighted average useful life for all the identifiable intangibles listed above is estimated to be 13.4 years. For purposes of determining fair value, the existing customer relationships identified above are assumed to have a useful life of 14.5 years, purchased and core technology is assumed to have useful life of 9.0 years and trademarks are assumed to have a useful life of 12.0 years. Useful lives for identifiable intangible assets are estimated at the time of acquisition based on the periods of time from which we expect to derive benefits from the identifiable intangible assets. The identifiable intangible assets are amortized using the straight-line method. This reflects the pattern in which the assets are expected to be consumed.

Costs directly related to the acquisition of $0.3 million incurred in the fourth quarter of fiscal 2019 and $2.7 million incurred in fiscal 2020 have been charged directly to operations and are included in general and administrative expenses in our Consolidated Statements of Operations. These acquisition costs include legal, accounting, integration, valuation and investment banking fees.

The following consolidated pro forma information is presented as if the acquisition had occurred on October 1, 2018 (in thousands):


	Fiscal year ended September 30,
		2020		2019
Net sales		$	294,167	$	308,986
Net income		$	14,366	$	10,417
Net income per share - basic		$	0.50	$	0.37
Net income per share - diluted		$	0.49	$	0.36

Pro forma net income has been adjusted to include interest expense related to debt incurred as a result of the acquisition as well as amortization on the fair value of the intangibles acquired. It also has been adjusted to assume the acquisition-related costs of $3.1 million were incurred as of the first quarter of fiscal 2019.

Given the success of our efforts to rapidly integrate the workforce, customer offerings, technology, and reporting capabilities of Opengear with that of our other components in our IoT Products & Services business, along with the inherent complementary synergies gained from doing so, it is impractical for us to present Opengear specific results otherwise required by GAAP.

2. ACQUISITIONS (CONTINUED)

Fiscal 2018 Acquisitions

Acquisition of Accelerated Concepts, Inc.

On January 22, 2018, we purchased all the outstanding stock of Accelerated Concepts, Inc. ("Accelerated"), a Tampa-based provider of secure, enterprise-grade, cellular (LTE) networking equipment for primary and backup connectivity applications, for cash of $16.4 million (excluding cash acquired of $0.2 million) and future earn-out payments. Purchase accounting related to the acquisition of Accelerated was finalized during the fourth quarter of fiscal 2018.

The earn-out payments were scheduled to be paid in two installments and the payment amount, if any, was to be calculated based on the revenue performance of Accelerated products. The first installment was based on revenues from January 22, 2018 through January 21, 2019 and the second installment was based on revenues from January 22, 2019 through January 21, 2020. If certain revenue thresholds were met, the cumulative amount of these earn-outs could have been $6.5 million. In April 2019, we paid $3.5 million for the first installment. In April 2020, we paid $2.4 million for the remaining contingent consideration (see Note 8 to the consolidated financial statements).

Acquisition of TempAlert LLC

On October 20, 2017, we purchased all the outstanding interests of TempAlert LLC ("TempAlert"), a Boston-based provider of automated, real-time temperature monitoring and task management solutions for cash of $40.7 million (excluding cash acquired of $0.6 million) and future earn-out payments. Purchase accounting related to the acquisition was finalized during the first quarter of fiscal 2019.

The first earn-out payment was scheduled to be paid after December 31, 2018 and the second earn-out payment was scheduled to be paid after December 31, 2019, which was the end of the earn-out periods. No payment was earned for the periods ended December 31, 2018 or December 31, 2019.