Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

NOTE 5 — GOODWILL AND INTANGIBLE ASSETS

The following table summarizes goodwill and intangible assets, net as of December 31, 2022 and 2021:

	December 31,
	2022		2021
	(in millions)
Intangible assets:
Customer relationships	$	50	$	—
Developed technology	41		9
Non-compete agreements	1		1
Intangible assets, acquired cost	92		10
Less: accumulated amortization	(22)		(6)
Intangible assets, net	$	70	$	4
Goodwill, beginning of year	$	9	$	9
ADESA Acquisition	838		—
Impairment	(847)		—
Goodwill, end of year	$	—	$	9

During the fourth quarter of 2022, the Company's market capitalization declined significantly, with a closing stock price on December 27, 2022 at a historic low of $3.72 per share of Class A common stock. Management determined that a triggering event had occurred, indicating it was more likely than not that the fair value of the Company's single reporting unit was less than its carrying value as of December 31, 2022. Therefore, management performed a quantitative goodwill impairment test for the Company's reporting unit as of December 31, 2022 and as a result recorded a non-cash goodwill impairment charge of $847 million, which is reflected as Goodwill impairment in the accompanying consolidated statements of operations.

The quantitative goodwill impairment test requires a determination of whether the fair value of a reporting unit is less than the carrying value. As of December 31, 2022, and because the Company's single reporting unit had a negative carrying value, management utilized an enterprise value-based income approach to determine the fair value of the reporting unit. The income approach discounts projected free cash flows of the reporting unit at a computed weighted average cost of capital as the discount rate. The income approach requires the use of significant estimates and assumptions, which include revenue growth rates and future operating margins used to calculate projected future cash flows, weighted average cost of capital, and future economic and market conditions. In connection with this process, management also reconciled the estimated fair value of the Company's single reporting unit to its market capitalization, including consideration of a reasonable control premium, based upon the average price of the Company's Class A common stock over a reasonable period as of the measurement date. Management bases the cash flow forecasts on its knowledge of the automotive industry, recent performance of the Company, its

expectations of future performance, and other assumptions management believes to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates.

Amortization expense was approximately $16 million, $2 million and $2 million during the years ended December 31, 2022, 2021, and 2020, respectively. As of December 31, 2022, the remaining weighted-average amortization period for definite-lived intangible assets was approximately 6.0 years. The anticipated annual amortization expense to be recognized in future years as of December 31, 2022 is as follows:

	Expected Future Amortization
	(in millions)
2023	$	18
2024	18
2025	14
2026	7
2027	5
Thereafter	8
Total	$	70