Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2024

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 its single reporting unit goodwill at least annually or whenever events or circumstances indicate a potential impairment. 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. Recoverability of goodwill is determined by comparing the estimated fair value of reporting units to the carrying value of the underlying net assets in the reporting units. If the estimated fair value of a reporting unit is determined to be less than the fair value of its net assets, goodwill is deemed impaired, and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the estimated fair value of the reporting unit and the fair value of its other assets and liabilities.

During the three months ended March 31, 2024, as a result of the sustained decrease in the Company's common stock share price and overall market capitalization subsequent to February 23, 2024, management concluded that a triggering event occurred, indicating goodwill may be impaired. The Company conducted a quantitative impairment test of its goodwill as of February 29, 2024 and as a result of this interim assessment, the Company recorded a goodwill impairment charge totaling $24.0 million during the three months ended March 31, 2024. Subsequent to this write-down, the fair value of the Company's single reporting unit approximated its carrying value. The fair value of the reporting unit was determined utilizing level 3 inputs (including estimates of revenue growth, earnings before interest taxes depreciation and amortization ("EBITDA") contribution and discount rates) and a combination of the income approach using the estimated discounted cash flows and a market-based valuation methodology. If current projections are not achieved or specific valuation factors outside the Company's control, such as discount rates and continued economic and industry challenges, significantly change, goodwill could be subject to future impairment.

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


	March 31, 2024
	(in thousands, except for useful life data)
	Weighted Average Remaining Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Purchased technology	5	$	13,330	$	(7,624)	$	5,706
Customer relationships	11	27,548		(9,235)		18,313
Customer contracts	1	7,000		(6,434)		566
Software license	5	5,419		(2,546)		2,873
Patents	3	600		(343)		257
Total		$	53,897	$	(26,182)	$	27,715


	December 31, 2023
	(in thousands, except for useful life data)
	Weighted Average Remaining Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Purchased technology	5	$	13,330	$	(7,243)	$	6,087
Customer relationships	11	27,548		(8,111)		19,437
Customer contracts	1	7,000		(6,337)		663
Software license	6	5,419		(2,353)		3,066

Patents	3	600		(321)		279
Total		$	53,897	$	(24,365)	$	29,532

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 both March 31, 2024 and December 31, 2023. During the three months ended March 31, 2024 and 2023, intangible asset amortization expense was $1.8 million and $1.5 million, respectively.

As of March 31, 2024, estimated amortization expense for the remainder of 2024 and thereafter was as follows (unaudited, in thousands):


Year Ending December 31,	Amortization Expense
2024	$	4,119
2025	5,106
2026	4,709
2027	3,834
2028	2,790
2029 and thereafter	7,157
Total	$	27,715