(6)GOODWILL

Goodwill consisted of the following (in thousands):


							Effect of
	December 31,		Acquisitions /				Foreign		December 31,
	2016		Adjustments		Impairments		Currency		2017

Customer Management Services	$	42,589	$	73,934	$	—	$	2,974	$	119,497
Customer Growth Services		24,439		—		—		—		24,439
Customer Technology Services		41,500		(661)		—		—		40,839
Customer Strategy Services		21,120		—		—		799		21,919
Total	$	129,648	$	73,273	$	—	$	3,773	$	206,694


							Effect of
	December 31,		Acquisitions /				Foreign		December 31,
	2015		Adjustments		Impairments		Currency		2016

Customer Management Services	$	23,218	$	21,030	$	(1,363)	$	(296)	$	42,589
Customer Growth Services		24,439		—		—		—		24,439
Customer Technology Services		41,500		—		—		—		41,500
Customer Strategy Services		25,026		(3,033)		—		(873)		21,120
Total	$	114,183	$	17,997	$	(1,363)	$	(1,169)	$	129,648

Impairment

The Company has six reporting units with goodwill and performs a goodwill impairment test on at least an annual basis. The Company conducts its annual goodwill impairment test during the fourth quarter, or more frequently, if indicators of impairment exist.

For the annual goodwill impairment analysis, the Company elected to perform a Step 1 evaluation for all of its reporting units, which includes comparing a reporting unit’s estimated fair value to its carrying value. The determination of fair value requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term growth rates for the businesses, the useful lives over which the cash flows will occur and determination of appropriate discount rates (based in part on the Company’s weighted average cost of capital). Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. As of December 1, 2017, the date of the annual impairment testing, the Company concluded that for all six of the reporting units the fair values were in excess of their respective carrying values and the goodwill for those reporting units was not impaired.

During the Company’s annual impairment testing as of December 1, 2017, the Company identified triggering events that could lead to impairment of goodwill for the CSS reporting unit, including lower revenues and profits than had been anticipated over the past two years. The carrying value of CSS was $43.4 million at December 1, 2017, including approximately $22.0 million of goodwill. Based on the Company’s assessment, the estimated fair value of the CSS reporting unit exceeded its carrying value by approximately 44.0%, but based on additional sensitivity analysis, the amount of cushion could fall to 10% if the performance of the business does not improve as expected. The estimate of fair value was based on generally accepted valuation techniques and information available at the date of the assessment, which incorporated management’s assumptions about expected revenues and future cash flows and available market information for comparable companies.

The process of evaluating the fair value of the reporting units is highly subjective and requires significant judgment and estimates as the reporting units operate in a number of markets and geographical regions. We used a market approach and an income approach to determine our best estimates of fair value which incorporated the following significant assumptions:

Revenue projections, including revenue growth during the forecast periods ranging from (3.2)% to 7.8%;

EBITDA margin projections held relatively flat over the forecast periods ranging from 10% to 21.4%;

Estimated income tax rates of 14.6% to 34.3%;

Estimated capital expenditures ranging from $0.8 million to $40.4 million; and

Discount rates ranging from 10% to 16% based on various inputs, including the risks associated with the specific reporting units, the country of operations as well as their revenue growth and EBITDA margin assumptions.

CMS - Humanify reporting unit

As of December 1, 2016, the calculated fair value for the Humanify reporting unit was below the carrying value which necessitated an impairment analysis. The Company tested all of the assets of the reporting unit for impairment.

Definite-lived long-lived assets consisted of internally developed software and purchased IP. Based on a decision to change the strategy of this business unit in December 2016 which will not use these assets on a go forward basis, the Company has determined that there is no value associated with these assets and recorded a $10.8 million impairment in the three months ended December 31, 2016, which was included in Impairment losses in the Consolidated Statements of Comprehensive Income (Loss).

For the goodwill impairment analysis, the Company calculated the fair value of the Humanify reporting unit and compared that to the updated carrying value and determined that the fair value was not in excess of its carrying value. Key assumptions used in the fair value calculation for goodwill impairment testing include, but are not limited to, revenue growth of approximately $300 thousand to $1 million per year through 2027, a perpetual growth rate of 3%, a discount rate of 16.75%, and negative EBITDA through 2020 growing to a 15.6% EBITDA for the terminal year. Estimated future cash flows under the income approach were based on the Company’s internal business plan adjusted as appropriate for the Company’s view of market participant assumptions.

The fair value of the Humanify reporting unit was determined to be zero. Upon completing this assessment, the Company determined that the implied fair value of goodwill was below the carrying value and the entire goodwill balance of $1.4 million was impaired and expensed in the three months ended December 31, 2016 which is included in Impairment losses in the Consolidated Statements of Comprehensive Income (Loss).

CSS reporting unit

During the quarter ended September 30, 2016, the Company identified negative indicators such as lower financial performance and the reversal of contingent consideration for the CSS reporting unit and thus the Company updated its quantitative assessment for the CSS reporting unit fair value using an income based approach. The determination of fair value requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term growth rates for the businesses, the useful lives over which the cash flows will occur and determination of appropriate discount rates (based in part on the Company’s weighted average cost of capital). Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. At September 30, 2016, the fair value for the CSS reporting unit exceeded the carrying value and thus no impairment was required.

The Company also determined that effective September 30, 2016 the assets of one of the business units within the CSS reporting unit will be held for sale (see discussion in Note 2). Therefore the CSS reporting unit was separated into the component that will be held for sale and the components that will be held for use and two separate fair value analyses were completed. At September 30, 2016 the fair value for the CSS held for use component exceeded the carrying value and thus no impairment was required. The fair value for the CSS held for sale component also exceeded the carrying value and thus no impairment was required.