Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

In accordance with FASB ASC Topic No. 350, Intangibles-Goodwill and Other, Smith Micro reviews the recoverability of the carrying value of goodwill at least annually or whenever events or circumstances indicate a potential impairment. For purposes of the goodwill impairment test, the Company operates as a single reporting unit. Different judgments relating to the determination of reporting units could significantly affect the testing of goodwill for impairment and the amount of any impairment recognized.

In the first quarter of 2023, management concluded that the written notice of termination of a U.S. Tier 1 customer agreement for the Company's family safety solution, as disclosed in Note 16 of the 2022 Form 10-K, represented a triggering event indicating possible impairment of goodwill and long-lived assets, including Customer relationships intangible assets. The estimated fair value of the Company's reporting unit exceeded the fair value of the other assets and liabilities as of February 2023, and as such there was not any impairment. The Company determined that there were no further goodwill impairment indicators through September 30, 2023 and there were no goodwill impairment indicators at December 31, 2022. If current projections, including revenue growth and operating results, are not achieved or specific valuation factors outside the Company's control, such as discount rates, economic or industry challenges, significantly change, goodwill could be subject to future impairment.

For intangibles, an impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. As of February 28, 2023, the Company assessed the assets impacted as a result of the triggering event indicated above and performed a recoverability test on the Customer relationships intangible asset from the acquisition of the Family Safety Mobile Business from Avast in April 2021, using Level 3 unobservable inputs including estimates of revenue growth, and EBITDA. The Company's estimated undiscounted future cash flows exceeded the carrying amount of the Customer relationships intangible asset, and therefore there was no impairment to the definite-lived intangible assets as a result of the triggering event. There were no further intangible asset impairment indicators through September 30, 2023.

The components of the Company’s intangible assets were as follows for the periods presented:


	September 30, 2023 (unaudited)
	(in thousands, except for useful life data)
	Weighted Average Remaining Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Purchased technology	6	$	13,330	$	(6,853)	$	6,477
Customer relationships	11	27,548		(6,519)		21,029
Customer contracts	1	7,000		(6,171)		829
Software license	6	5,419		(2,153)		3,266
Patents	4	600		(300)		300
Total		$	53,897	$	(21,996)	$	31,901


	December 31, 2022 (audited)
	(in thousands, except for useful life data)
	Weighted Average Remaining Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Purchased technology	7	$	13,529	$	(5,835)	$	7,694
Customer relationships	12	27,548		(4,490)		23,058
Customer contracts	1	7,000		(5,673)		1,327
Software license	7	5,419		(1,552)		3,867
Non-compete	1	283		(273)		10
Patents	5	600		(236)		364
Total		$	54,379	$	(18,059)	$	36,320

The Company amortizes intangible assets over the pattern of economic benefit expected to be generated from the use of the assets, with a total weighted average amortization period of approximately nine years as of September 30, 2023 and ten years as of December 31, 2022. During the three months ended September 30, 2023 and 2022, intangible asset amortization expense was $1.5 million and $1.5 million, respectively. During the nine months ended September 30, 2023 and 2022, intangible asset amortization expense was $4.4 million and $4.8 million, respectively.

As of September 30, 2023, estimated amortization expense for the remainder of 2023 and thereafter was as follows (unaudited, in thousands):


Year Ending December 31,	Amortization Expense
2023	$	1,454
2024	5,635
2025	5,402
2026	5,007
2027	4,131
2028 and thereafter	10,272
Total	$	31,901