Goodwill And Intangible Assets

12 Months Ended

Apr. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 6: GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the years ended April 30, 2020 and 2019 are as follows:



(in 000s)
	Goodwill			Accumulated Impairment Losses			Net
Balances as of May 1, 2018	$	540,168		$	(32,297	)	$	507,871
Acquisitions	13,656			—			13,656
Disposals and foreign currency changes, net	(1,590		)	—			(1,590		)
Impairments	—			—			—
Balances as of April 30, 2019	552,234			(32,297		)	519,937
Acquisition of Wave	300,560			—			300,560
Other acquisitions	23,795			—			23,795
Disposals and foreign currency changes, net	(26,154		)	—			(26,154		)
Impairments	—			(106,000		)	(106,000		)
Balances as of April 30, 2020	$	850,435		$	(138,297	)	$	712,138

We tested goodwill for impairment in the fourth quarter of fiscal year 2020, and, except as discussed below, no impairment was identified.

As a result of the COVID-19 pandemic and its impact on Wave’s small business customers, we evaluated the Wave reporting unit’s goodwill for impairment during our fourth quarter. Wave has experienced lower than expected revenues since mid-March and we expect lower revenues than originally projected to continue in the near term. In evaluating goodwill for impairment, we compared the estimated fair value of this reporting unit, which was determined using both an income and market approach, to its carrying value. The fair value was less than the carrying value, therefore resulting in a goodwill impairment loss of $106.0 million. The remaining balance of goodwill for the Wave reporting unit, inclusive of unrealized foreign currency translation losses, was $169.8 million as of April 30, 2020.

Components of intangible assets are as follows:



(in 000s)
As of April 30,	2020							2019
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Reacquired franchise rights	$	365,062	$	(159,754	)	$	205,308	$	350,410	$	(136,345	)	$	214,065
Customer relationships	314,191		(227,445		)	86,746		274,838		(195,174		)	79,664
Internally-developed software	154,083		(113,698		)	40,385		139,239		(109,885		)	29,354
Noncompete agreements	41,072		(33,639		)	7,433		33,376		(31,446		)	1,930
Franchise agreements	19,201		(14,614		)	4,587		19,201		(13,334		)	5,867
Purchased technology	122,700		(57,548		)	65,152		54,700		(43,518		)	11,182
Trade name	5,800		(483		)	5,317		—		—			—
Acquired assets pending final allocation ⁽¹⁾	48		—			48		431		—			431
	$	1,022,157	$	(607,181	)	$	414,976	$	872,195	$	(529,702	)	$	342,493

⁽¹⁾Represents recent business acquisitions for which final purchase price allocations have not yet been determined.

Amortization of intangible assets of continuing operations for the years ended April 30, 2020, 2019 and 2018 was $83.6 million, $73.2 million and $79.9 million, respectively. Estimated amortization of intangible assets for fiscal years 2021, 2022, 2023, 2024 and 2025 is $76.0 million, $59.6 million, $41.8 million, $30.9 million and $17.7 million, respectively.

TAX OFFICE ACQUISITIONS – We acquired approximately 238 offices which were added to our company-owned and franchise network for the fiscal year ended April 30, 2020. The amounts and weighted-average lives of assets acquired during fiscal year 2020, including amounts capitalized and placed in service related to internally-developed software, are as follows:



(dollars in 000s)
	Amount		Weighted-Average Life (in years)
Reacquired franchise rights	$	14,756	4
Customer relationships	19,080		5
Internally-developed software	14,196		3
Noncompete agreements	679		5
Total	$	48,711	4

WAVE ACQUISITION – During the fiscal year ended April 30, 2020, we acquired Wave HQ Inc. (formerly known as Wave Financial Inc.) and its subsidiaries (collectively, Wave) for $408.4 million. The acquisition was funded with available cash. Wave is a provider of software solutions and related services specifically designed to help small business owners manage their finances. Major revenue sources include fees earned by providing payment processing, payroll services, and bookkeeping services. We believe the acquisition of Wave enhances our position in the small business market.

Included in the transaction price is $8.2 million which will be treated as compensation expense over the next two years as certain key employees are required to remain employees to receive payment. Additionally, key employees are participating in a management incentive program consisting of cash performance incentives and stock-based compensation which will be earned over the next three years and is not considered part of the purchase price.

The assets acquired, net of liabilities assumed on the acquisition date, and the identified intangible assets and goodwill, are as follows:



($ in 000s)
	Amount Acquired			Weighted-Average Life (in years)
Assets acquired and liabilities assumed, net	$	3,928
Deferred tax liability	(8,126		)
Purchased technology	68,000			10
Customer relationships	23,000			5
Non-compete agreements	7,070			5
Trade name	5,800			10
Total identifiable net assets	99,672
Goodwill ⁽¹⁾	300,560
Total identifiable assets and goodwill	$	400,232

⁽¹⁾See discussion of Wave's goodwill impairment of $106.0 million above.

The acquired identifiable assets and goodwill are only tax deductible for Global Intangible Low-Taxed Income (GILTI) purposes.

Revenues of $36.7 million and pretax losses of $154.7 million were recognized by Wave from the period of June 28, 2019 through April 30, 2020, which are included in our consolidated statement of operations for the year ended April 30, 2020. Had we acquired Wave as of May 1, 2018, we would have reported, on a pro-forma basis, consolidated revenues of $2.65 billion and $3.13 billion for the years ended April 30, 2020 and 2019, respectively, and consolidated pretax loss from continuing operations of $13.4 million in fiscal year 2020 and pretax income from continuing operations of $496.9 million in 2019. Pro-forma adjustments primarily include amortization of intangible assets and certain compensation expenses.