Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The following table sets forth the changes in the carrying amount of goodwill for the nine months ended September 30, 2021:


	Amounts
Balance at December 31, 2020	$	6,592
Foreign currency translation adjustment	(30)
Balance at September 30, 2021	$	6,562

Intangible Assets

The changes in the carrying amount of intangible assets during the nine months ended September 30, 2021 are as follows:


	Amounts
Balance at December 31, 2020	$	2,254
Amortization expense	(833)
Intangible assets acquired in asset acquisition	47

Foreign currency translation adjustment	(6)
Balance at September 30, 2021	$	1,462

Intangible assets arose from an acquisition made prior to 2013 and the acquisition of KVH Media Group (acquired as Headland Media Limited) in May 2013. Intangibles arising from the acquisition made prior to 2013 were amortized on a straight-line basis over an estimated useful life of 7 years. Intangibles arising from the acquisition of KVH Media Group are being amortized on a straight-line basis over the estimated useful life of: (i) 10 years for acquired subscriber relationships and (ii) 15 years for distribution rights. Due to the impairment of distribution rights during the Company's 2020 annual impairment test, the estimated useful life of distribution rights was reduced from 15 years to 1 year. The intangibles arising from the KVH Media Group acquisition were recorded in pounds sterling and fluctuations in exchange rates cause these amounts to increase or decrease from time to time.

In January 2017, the Company completed the acquisition of certain subscriber relationships from a third party. This acquisition did not meet the definition of a business under ASC 2017-01, Business Combinations (Topic 805)-Clarifying the Definition of a Business, which the Company adopted on October 1, 2016. The Company ascribed $100 of the initial purchase price to the acquired subscriber relationships definite-lived intangible assets with an initial estimated useful life of 10 years. Under the asset purchase agreement, the purchase price includes a component of contingent consideration under which the Company is required to pay a percentage of recurring revenues received from the acquired subscriber relationships through 2026 up to a maximum annual payment of $114. As of September 30, 2021, the carrying value of the intangible assets acquired in the asset acquisition was $393. As the acquisition did not represent a business combination, the contingent consideration arrangement is recognized only when the contingency is resolved and the consideration is paid or becomes payable. The amounts payable under the contingent consideration arrangement, if any, will be included in the measurement of the cost of the acquired subscriber relationships. An additional $47 and $58 of consideration was earned under the contingent consideration arrangement during the nine months ended September 30, 2021 and 2020, respectively.

Acquired intangible assets are subject to amortization. The following table summarizes acquired intangible assets at September 30, 2021 and December 31, 2020, respectively:


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
September 30, 2021
Subscriber relationships	$	8,014	$	6,552	$	1,462
Distribution rights	315		315		—
Internally developed software	446		446		—
Proprietary content	153		153		—
Intellectual property	2,284		2,284		—

	$	11,212	$	9,750	$	1,462
December 31, 2020
Subscriber relationships	$	7,977	$	5,958	$	2,019
Distribution rights	311		76		235
Internally developed software	446		446		—
Proprietary content	153		153		—
Intellectual property	2,284		2,284		—

	$	11,171	$	8,917	$	2,254

Amortization expense related to intangible assets was $277 and $251 for the three months ended September 30, 2021 and 2020, respectively, and $833 and $740 for the nine months ended September 30, 2021 and 2020, respectively. Amortization expense was categorized as general and administrative expense.

As of September 30, 2021, the total weighted average remaining useful lives of the definite-lived intangible assets was 1.8 years.

Estimated future amortization expense remaining at September 30, 2021 for intangible assets acquired was as follows:

Years ending December 31,


Remainder of 2021	$	194
2022	774
2023	312
2024	57
2025	57
Thereafter	68
Total future amortization expense	$	1,462

For definite-lived intangible assets, the Company assesses the carrying value of these assets whenever events or circumstances indicate that the carrying value may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset, or asset group, to the future undiscounted cash flows expected to be generated by the asset, or asset group. The COVID-19 pandemic has impacted various aspects of the Company's operations, and the Company has been monitoring the impact of this global crisis carefully. The Company has particularly monitored the operations of KVH Media Group, which depends heavily on travel and travel-related industries. The revenues and cash flows of KVH Media Group have been significantly impacted by the global reduction in travel since the start of the pandemic. Prior to the Company's 2020 annual impairment test in the fourth quarter of 2020, based on the Company's quarterly review of the impact of this global crisis on the Company's forecasted revenues and cash flows, there were no indication of impairment to the carrying value of goodwill or other intangible assets. However, in the fourth quarter of 2020, there were increases in the number of reported COVID-19 cases, and substantial shutdowns were reinstated in the United States, UK and Europe, which caused continued disruptions to our KVH Media Group business as the global travel and related industries remained at historically depressed levels. In response to the impact of the pandemic, particularly with respect to the Company's KVH Media Group business, during the Company's 2020 annual budgeting and long-term planning process, the Company conducted detailed discussions with many of the Company's largest customers in the KVH Media Group to validate the Company's assumptions, which indicated further expected delays in recovery, and certain areas of the KVH Media Group business that may not recover completely or at all. Accordingly, the Company updated its long-term revenue and cash flow forecast to reflect these most recent observations. Based on the Company's other long-lived asset impairment analysis and annual goodwill impairment test, the Company recognized an intangible asset impairment charge of $1,758 and a goodwill impairment charge of $8,732 for the year ended December 31, 2020 related to KVH Media Group.

As of September 30, 2021, the Company has reviewed, and will continue to review, the forecasted revenues and cash flows of our content business for possible indications that the goodwill or other intangible assets associated with this component of our business might be impaired. However, it is uncertain how long the global pandemic will continue to disrupt global businesses, particularly travel, and therefore it is possible that the value of these assets may become impaired in the future if the COVID-19 pandemic worsens or continues for a prolonged period. The Company's review indicates that, as of September 30, 2021, there are no indications of further impairment.