Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, Net

Goodwill

The changes in the carrying amount of goodwill for the nine months ended September 30, 2023 are as follows:


	Consolidated
	(In thousands)
Balance as of December 31, 2022	$	296,214
Adjustments to goodwill:
Goodwill impairment (1)	$	(11,895)
Foreign exchange adjustment	(560)
Balance as of September 30, 2023	$	283,759

(1)The amount represents the entire accumulated goodwill impairment balance as of September 30, 2023.

Goodwill is not amortized, but is tested for impairment at the reporting unit level using either a qualitative or quantitative assessment on an annual basis during third quarter of each fiscal year, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment of goodwill is measured at the reporting unit level by comparing the carrying amount, including goodwill, to the fair market value of the reporting unit. As of September 30, 2023, our reporting units consisted of Business and WildHealth.

In connection with the annual impairment test completed as of September 30, 2023 using the quantitative “Step 1” assessment, we determined the fair value of our reporting units, using both an income approach and a market approach. The income approach uses a discounted cash flow model that reflects our assumptions regarding revenue growth rates, operating margins, risk-adjusted discount rate, terminal period growth rate, economic and market trends and other expectations about the anticipated operating results of the reporting units. Under the market approach, we estimate the fair value based on market multiples of revenues derived from comparable publicly traded companies with operating characteristics similar to the reporting units.

Based on our 2023 annual goodwill impairment test, the Company recorded a non-cash impairment charge of $11.9 million in our condensed consolidated statements of operations, representing a portion of goodwill related to the WildHealth reporting unit. This conclusion was primarily based upon slower growth in existing revenue streams and strategic decisions to reduce or eliminate investment in new and existing revenue streams previously planned for expansion. Our latest available financial forecasts at the time of the annual goodwill impairment test reflected lower cash flows than previously projected related to the WildHealth reporting unit.

There were no impairments of our Business reporting unit, as the fair value of this reporting unit substantially exceeded its carrying value.

In connection with the divestiture of Kasamba under the Consumer segment, the Company recorded a reduction to its goodwill of $8.0 million during the year ended December 31, 2022, based on the relative fair value of the segment. See Note 20 - Divestiture, for additional information.

Intangible Assets, Net

Intangible assets are summarized as follows:


	As of September 30, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Useful Life

	(In thousands)						(In years)
Amortizing intangible assets:
Technology	$	97,475	$	(59,936)	$	37,539	5.0
Customer relationships	32,004		(18,982)		13,022		10.0
Patents	14,342		(1,770)		12,572		12.9
Trademarks	1,388		(608)		780		5.0
Trade names	1,044		(627)		417		2.8
Other	776		(325)		451		4.1
Total	$	147,029	$	(82,248)	$	64,781


	As of December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Useful Life

	(In thousands)						(In years)
Amortizing intangible assets:
Technology	$	97,454	$	(45,907)	$	51,547	5.0
Customer relationships	31,987		(17,392)		14,595		10.0
Patents	11,088		(1,419)		9,669		12.8
Trademarks	1,044		(364)		680		5.0
Trade names	1,378		(402)		976		2.8
Other	979		(343)		636		4.1
Total	$	143,930	$	(65,827)	$	78,103

Amortization expense is calculated over the estimated useful life of the asset. Aggregate amortization expense for intangible assets and finance leases, net, including impairments, was $8.4 million and $5.7 million for the three months ended September 30, 2023 and 2022, respectively, and $19.3 million and $16.5 million for the nine months ended September 30, 2023 and 2022, respectively, a portion of this amortization was included in cost of revenue in the condensed consolidated statements of operations.

Our intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable and the carrying amount of the asset exceeds the estimated expected undiscounted future cash flows that are expected to result from the use of the asset. Based on our impairment test as of September 30, 2023, the Company recognized a immaterial non-cash impairment charge of $3.0 million in the cost of revenue line in our condensed consolidated statements of operations, related to our intangible assets - developed technology associated with WildHealth, due to updated forecasts as explained above. The fair value of our intangible assets as of September 30, 2023 was estimated using a relief from royalty method. A terminal multiple was applied on an assumed sale of the asset group subsequent to the life of the primary asset.

There were no impairments of intangible assets during the three and nine months ended September 30, 2022.

As of September 30, 2023, estimated annual amortization expense for the next five years and thereafter is as follows:


	Estimated Amortization Expense
	(In thousands)
Remainder of 2023	$	4,283
2024	15,355
2025	14,912
2026	12,211
2027	1,436
Thereafter	16,584
Total	$	64,781