GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company has one reporting unit. Goodwill is tested for impairment at a reporting unit level at least annually, as of January 31, or on an interim basis if an event occurs or circumstances change (a "triggering event") that would, more likely than not, reduce the fair value of the reporting unit below its carrying value.

As a result of the sustained decline in the Company's stock price and overall market capitalization during the third quarter of fiscal year 2024, along with other qualitative considerations including the continued impact from the conditions in the macroeconomic environment, it was determined a triggering event occurred, indicating goodwill may be impaired. Accordingly, the Company conducted a quantitative impairment test of its goodwill at December 31, 2023. The Company estimated the implied fair value of its goodwill using a market approach. As a result of the quantitative impairment test performed during the third quarter of fiscal year 2024, the Company determined goodwill was impaired and recorded a goodwill impairment charge of $167.1 million during the periods ended December 31, 2023.

The key assumption in the market approach was the company-specific control premium, which was estimated using expected synergies that would be realized by a hypothetical buyer. The Company also compared its implied control premium to recent control premiums paid in the industry, as evidenced by guideline public company comparable transactions. Changes in the estimates or assumptions used in its quantitative impairment test could materially affect the determination of fair value and the associated goodwill impairment assessment. Potential events and circumstances that could have an adverse impact on our estimates and assumptions include, but are not limited to, continued increases in costs, and rising interest rates and other macroeconomic factors. An increase or decrease of 1% in the company-specific control premium used in the determination of the fair value of the reporting unit under the market approach would have resulted in an increase or decrease in the goodwill impairment recorded of approximately $15.6 million.

The Company will complete its annual goodwill impairment test at January 31, 2024. Throughout the fourth quarter of fiscal year 2024, the Company will continue to monitor relevant facts and circumstances, including future changes in its stock price. The Company may be required to record additional goodwill impairment charges. While management cannot predict if or when additional goodwill impairments may occur, future goodwill impairments could have material adverse effects on the Company's results of operations and financial condition.

At December 31, 2023 and March 31, 2023, the carrying amounts of goodwill were $1.6 billion and $1.7 billion, respectively. The change in the carrying amount of goodwill for the nine months ended December 31, 2023 was due to the impairment of goodwill, the divestiture of the TO business, and the impact of foreign currency translation adjustments related to asset balances that are recorded in currencies other than the U.S. Dollar.

The following table summarizes the changes in the carrying amount of goodwill for the nine months ended December 31, 2023 as follows (in thousands):

Balance at March 31, 2023	$	1,724,404
Goodwill impairment	(167,106)
Divestiture of a business	(4,259)
Foreign currency translation impact	(1,498)
Balance at December 31, 2023	$	1,551,541

Intangible Assets

The net carrying amounts of intangible assets were $323.9 million and $366.6 million at December 31, 2023 and March 31, 2023, respectively. Intangible assets acquired in a business combination are recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition. The Company amortizes acquired intangible assets over their estimated useful lives.

The Company reviews definite-lived intangible assets for impairment when an event occurs that may indicate potential impairment. The sustained decline in the Company's stock price and market capitalization during the third quarter of fiscal year 2024 was considered a triggering event. As such, the Company conducted an impairment test of its definite-lived intangible assets at December 31, 2023. Based on this assessment, the Company concluded that the carrying values of the Company's definite-lived intangible assets were recoverable as of December 31, 2023. However, if future events occur or if business conditions deteriorate, the Company may be required to record an impairment loss, and or accelerate the amortization of definite-live intangible assets in the future, which could be material to its results of operations and financial condition.

Intangible assets include the following amortizable intangible assets at December 31, 2023 (in thousands):

	Estimated Useful Life in Years	Cost		Accumulated Amortization		Net
Developed technology	3 - 13 years	$	248,827	$	(237,264)	$	11,563
Customer relationships	8 - 18 years	765,515		(464,928)		300,587
Distributor relationships and technology licenses	1 - 6 years	7,812		(7,219)		593
Definite-lived trademark and trade name	2 - 9 years	57,768		(46,803)		10,965
Core technology	10 years	7,192		(7,192)		—
Capitalized software	3 years	3,317		(3,317)		—
Other	1 - 20 years	1,208		(1,017)		191
		$	1,091,639	$	(767,740)	$	323,899

Intangible assets include the following amortizable intangible assets at March 31, 2023 (in thousands):

	Estimated Useful Life in Years	Cost		Accumulated Amortization		Net
Developed technology	3 - 13 years	$	249,903	$	(233,440)	$	16,463
Customer relationships	8 - 18 years	768,179		(433,876)		334,303
Distributor relationships and technology licenses	1 - 6 years	11,547		(10,133)		1,414
Definite-lived trademark and trade name	2 - 9 years	57,694		(43,489)		14,205
Core technology	10 years	7,192		(7,192)		—
Non-compete agreements	3 years	292		(292)		—
Capitalized software	3 years	3,317		(3,317)		—
Other	1 - 20 years	1,208		(1,002)		206
		$	1,099,332	$	(732,741)	$	366,591

Amortization included as cost of product revenue consists of amortization of developed technology, and distributor relationships and technology licenses. Amortization included as operating expense consists of all other intangible assets. The following table provides a summary of amortization expense for the three and nine months ended December 31, 2023 and 2022, respectively (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2023		2022		2023		2022
Amortization of intangible assets included as:
Cost of product revenue	$	1,907	$	2,627	$	5,733	$	7,908
Operating expense	12,538		13,823		37,805		41,515
	$	14,445	$	16,450	$	43,538	$	49,423

The following is the expected future amortization expense at December 31, 2023 for the fiscal years ending March 31 (in thousands):

2024 (remaining three months)	$	14,485
2025	50,915
2026	46,544
2027	43,660
2028	40,699
Thereafter	127,596
	$	323,899