Goodwill and Other Long-Lived Assets

12 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

As of December 31, 2023, the Company's intangible assets are primarily associated with the purchase of distribution rights from Kognitive Networks Inc. in October 2023 and the purchase of Virtek Communication (now known as KVH Industries Norway AS) in September 2010.

Prior to the fourth quarter of 2023, the Company’s goodwill and intangible assets were also associated with the purchase of Headland Media Limited (now known as the KVH Media Group) in May 2013.

In the third quarter of 2023, the Company observed a sustained stock price decline resulting in a significant shortfall in market capitalization when compared to the aggregate carrying value of our net assets. These circumstances led us to conclude that quantitative goodwill impairment assessments of the Mobile Broadband (MBB) and KVH Media Group (Media) reporting units were required.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding future plans, as well as industry and economic conditions. These assumptions and estimates include estimated future cash flows, income tax rates, discount rates, growth rates, and other market factors. In performing the quantitative assessment, the Company estimated the fair value of its reporting units using the income approach, also known as the discounted cash flow ("DCF") method, which utilizes the present value of estimated future cash flows to estimate fair value. The DCF method involves estimating the discounted cash flows of a reporting unit by forecasting cash flows each year, calculating a terminal value, and discounting all of the cash flows to present value at an appropriate discount rate (in consideration of the time value of money, the risk inherent in the cash flow stream, and in the context of current rates of return for equity and debt capital). The final determination of fair value was based on a probability-weighted approach comparing management’s forecasts with a market expectation forecast.

As of September 30, 2023, the determined fair values of the MBB and Media reporting units were lower than their carrying values. After recognition of a long-lived asset impairment charge (as discussed below), the Company recognized goodwill impairment charges equal to the total amount of goodwill attributed to the MBB and Media reporting units, which were approximately $4,400 and $900, respectively.

The Company also determined that the sustained decrease in stock price and shortfall in market capitalization indicated that the carrying amounts of our asset groups (MBB and Media) may not be recoverable. The Company therefore performed impairment tests on the long-lived assets in each asset group, including definite-lived intangible assets using an undiscounted cash flow analysis over the estimated remaining useful life of the primary asset, to determine whether the carrying amounts of each asset group were recoverable. As of September 30, 2023, our analysis indicated that the carrying amount of the MBB asset group was recoverable, and therefore no fair value estimate was required. The Media asset group failed the undiscounted cash flow recoverability test and therefore the Company estimated the fair value of the asset group to determine whether any asset impairment was present. Our estimation of the fair value of the long-lived assets included the use of discounted cash flow and cost analyses, reflecting estimates of future revenues, cost factors, cash flows, discount rates, and obsolescence. Based on these analyses, the Company concluded that the fair values of certain assets were lower than their carrying amounts. As of September 30, 2023, the Company recognized long-lived asset impairment charges totaling approximately $400 and $300 for the KVH Media Group’s internally developed software assets and acquired subscriber relationships, respectively, reducing the carrying amounts to zero.

Intangible Assets

Intangible assets arose from the purchase of distribution rights from Kognitive Networks Inc., the purchase of KVH Industries Norway AS and the acquisition of KVH Media Group. The assets related to the distribution rights with Kognitive Networks are being amortized on a straight-line basis over the estimated useful life of 3 years. The assets related to the purchase of KVH Industries Norway AS for acquired intellectual property are fully amortized, while the assets related to acquisition of KVH Media Group were previously being amortized on a straight-line basis over the estimated useful life of 10 years.

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. 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. The amounts payable under the contingent consideration arrangement, if any, will be included in the measurement of the cost of the acquired subscriber relationships.

Acquired intangible assets are subject to amortization. The following table summarizes acquired intangible assets at December 31, 2023 and 2022, respectively:


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
December 31, 2023
Subscriber relationships	$	11	$	1	$	10
Distribution rights	1,250		66		1,184
Internally developed software	—		—		—
Proprietary content	—		—		—
Intellectual property	2,284		2,284		—
	$	3,545	$	2,351	$	1,194
December 31, 2022
Subscriber relationships	$	7,649	$	7,245	$	404
Distribution rights	315		315		—
Internally developed software	446		446		—
Proprietary content	153		153		—
Intellectual property	2,284		2,284		—
	$	10,847	$	10,443	$	404

Amortization expense related to intangible assets was $234 and $499 for years ended December 31, 2023 and 2022, respectively, and was categorized as general and administrative expense.

As of December 31, 2023, the total weighted average remaining useful lives of the definite-lived intangible assets was 3.0.

Estimated future amortization expense for intangible assets recorded by the Company at December 31, 2023 is as follows:


Years ending December 31,	Amortization Expense
2024	$	398
2025	398
2026	398



Total amortization expense	$	1,194

The changes in the carrying amount of intangible assets during the year ended December 31, 2023 is as follows:


	2023
Balance at December 31, 2022	$	404
Amortization expense	(234)
Intangible assets acquired in asset acquisition	1,296

Impairment	(274)
Foreign currency translation adjustment	2
Balance at December 31, 2023	$	1,194

Goodwill

Goodwill is recorded when the consideration for an acquisition exceeds the fair value of net tangible and identifiable intangible assets acquired. None of the Company's goodwill is deductible for tax purposes. The changes in the carrying amount of goodwill during the year ended December 31, 2023 is as follows:


	Goodwill
Balance at December 31, 2022	$	5,308
Impairment	(5,333)

Foreign currency translation adjustment	25
Balance at December 31, 2023	$	—