Quarterly report pursuant to Section 13 or 15(d)

Note 3 - Business Combinations

Note 3 - Business Combinations
3 Months Ended
Apr. 30, 2023
Notes to Financial Statements  
Business Combination Disclosure [Text Block]

(3)    Business Combinations


Ryzac, Inc. (Codecademy)


On April 4, 2022, the Company acquired Ryzac, Inc (“Codecademy”). Codecademy is a learning platform providing high-demand technical skills to approximately 40 million registered learners in nearly every country worldwide. The platform offers interactive, self-paced courses and hands-on learning in 14 programming languages across multiple domains such as application development, data science, cloud and cybersecurity.


The acquisition was accounted for as a business combination under ASC 805, Business Combinations, utilizing the acquisition method. Under the acquisition method, the acquisition date fair value of the consideration paid by the Company was allocated to the assets acquired and the liabilities assumed based on their estimated fair values.


The following summarizes the purchase consideration (in thousands):






Cash payments

  $ 202,119  

Class A common stock issued


Cash settlement of seller transaction costs and other


Total purchase price

  $ 385,984  


The Company recorded the fair value of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed as follows (in thousands):




Final Purchase




Price Allocation


Cash, cash equivalents and restricted cash

  $ 4,053  

Current assets


Property and equipment


Intangible assets


Total assets acquired


Current liabilities

    (6,166 )

Deferred revenue

    (18,396 )

Deferred tax liabilities

    (21,621 )

Total liabilities assumed

    (46,183 )

Net assets acquired




Total purchase price

  $ 385,984  


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






Life (in years)



  $ 44,000       13.8  

Developed technology

    43,000       5.0  


    17,000       5.0  

Customer relationships

    15,000       5.8  


  $ 119,000          


Values and useful lives assigned to intangible assets were based on estimated value and use of these assets by a market participant. The customer relationships were valued using the income approach. The trade name was valued using the relief from royalty method. The courseware and proprietary delivery software were valued using the replacement cost approach.


Goodwill represents the excess of the purchase price over the net identifiable tangible and intangible assets acquired. The Company determined that the acquisition of Codecademy resulted in the recognition of goodwill primarily because the acquisition is expected to help the Company to meet its long-term operating profitability objectives through achievement of synergies. The majority of goodwill is not deductible for tax purposes.


The acquired intangible assets and goodwill are subject to review for impairment if indicators of impairment develop and otherwise at least annually.


In the three months ended April 30, 2022, the Company incurred $7.7 million in acquisition-related costs, which primarily consisted of transaction fees and legal, accounting, and other professional services. These costs are included in the "acquisition-related costs" in the accompanying condensed consolidated statement of operations.


Unaudited Pro Forma Financial Information


The unaudited pro forma financial information below is presented in accordance with Regulation S-X, Article 11 to enhance comparability for all periods by including operating results for Codecademy as if the merger had closed on February 1, 2022 (in thousands):



Unaudited Pro Forma


Statement of Operations


Three Months Ended April 30,





  $ 142,896  

Net loss from continuing operations

    (19,251 )


The unaudited pro forma financial information does not assume any impacts from revenue, cost, or other operating synergies that could be generated as a result of the acquisition. The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition been consummated on February 1, 2022. The unaudited pro forma financial information includes adjustments to reflect intangible asset amortization based on the economic values derived from definite-lived intangible assets and interest expense on the new debt financing. The pro forma results of operations also exclude acquisition-related costs other than the transaction costs specific to the business combinations occurring in April 2022. These transaction costs are presented as if they occurred in February 2022.