Note 4 - Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

4. GOODWILL AND INTANGIBLE ASSETS

Goodwill

As of December 31, 2019, the carrying value of goodwill relating to business acquisitions is $219,341. Following the internal re-organisation and revised operating model explained within note 14, we have determined our new reporting units to be as follows:

Reporting Units:	Amount
Americas		64,315
India		31,000
Malaysia		47,543
Saudi Arabia		54,840
South Africa		5,910
Argentina		4,991
Australia		10,742
Ending balance, December 31, 2019	$	219,341

We perform a goodwill impairment analysis at least annually (in the fourth quarter of each year) unless indicators of impairment exist in interim periods. The Goodwill was allocated to new reporting units using a relative fair value allocation approach. We performed a quantitative assessment to determine if the fair value of each of our reporting units with goodwill exceeded its carrying value.

The assumptions used in the analysis are based on the Company’s internal budget. The Company projected revenue, operating margins and cash flows for a period of five years, and applied a perpetual long-term growth rate using discounted cash flows (DCF) method. These assumptions are reviewed annually as part of management’s budgeting and strategic planning cycles. These estimates may differ from actual results. The values assigned to each of the key assumptions reflect the management’s past experience as their assessment of future trends, and are consistent with external/internal sources of information.

As of December 31, 2019, based on the quantitative assessment, we concluded that goodwill was partly impaired. Our annual impairment testing resulted in an impairment loss of $7,146 in Argentina owing primarily to the devaluation of the local currency and South Africa due to the business outlook. 

The following table presents the changes in goodwill during the period:

	Amount
As at December 31, 2018		225,450
Measurement period adjustments		1,037
Impairment		(7,146	)
As at December 31, 2019	$	219,341

Intangible assets, net

The following table presents our intangible assets as of December 31, 2019:

	Gross Intangibles		Accumulated Amortization		Net Intangibles		Weighted Average Amortization Period (years)
Customer relationships		66,220		10,681	$	55,539		6.60
Brand		49,500		7,733		41,767		7.10
Trademark		13,210		1,275		11,935		7.50
Other Intangibles		2,130		564		1,566		4.90
	$	131,060	$	20,253	$	110,807

Expected future amortization of intangible assets as of December 31, 2019 is as follows:

Year ending December 31,	Amount
2020		10,350
2021		10,350
2022		10,350
2023		10,306
2024		10,252
Thereafter		59,199

Amortization expense of intangible assets was $10,497 and $7,031 for the year ended December 31, 2019 and the nine months ended December 31, 2018 respectively.

We had intended to phase out `Aegis` brand and use only `Startek` as a common brand across its geographies, as disclosed in its previous fillings. However, basis client feedback, an internal reassessment of the relative strengths of both brands and our specific management focus on respective geographies, we currently plan to continue using both the brands in the foreseeable future.