Palladyne AI Corp. Goodwill & Intangibles Disclosure
6. Goodwill and Intangible Assets
Goodwill
As a result of sustained decreases in the Company’s publicly quoted share price during the fourth quarter of 2022, the Company conducted an analysis of its goodwill as of December 31, 2022, and performed a quantitative goodwill impairment assessment. The Company estimated the reporting unit's fair value under an income approach using a discounted cash flow model. The income approach used the reporting unit's projections of estimated operating results and cash flows that were discounted using a market participant discount rate based on the weighted-average cost of capital. The main assumptions supporting the cash flow projections include, but are not limited to, revenue growth, margins, discount rate, and terminal growth rate. The financial projections reflect management's best estimate of economic and market conditions over the projected period, including forecasted revenue growth, margins, capital expenditures, depreciation and amortization. Based on the Company’s quantitative goodwill impairment assessment, it concluded that the carrying value of its reporting unit exceeded its fair value and that all of its goodwill was fully impaired as of December 31, 2022.
Acquired Intangible Assets
Acquired intangible assets, net consisted of the following:
|
|
December 31, 2023 |
|
|||||||||||||
(In thousands) |
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
|
Weighted Average Remaining Useful Life |
|
||||
Trade name and trademarks |
|
$ |
1,000 |
|
|
$ |
1,000 |
|
|
$ |
— |
|
|
|
— |
|
Developed technology |
|
|
9,600 |
|
|
|
9,600 |
|
|
|
— |
|
|
|
— |
|
Customer relationships |
|
|
10,700 |
|
|
|
10,700 |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
21,300 |
|
|
$ |
21,300 |
|
|
$ |
— |
|
|
|
|
|
|
|
December 31, 2022 |
|
|||||||||||||
(In thousands) |
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
|
Weighted Average Remaining Useful Life |
|
||||
Trade name and trademarks |
|
$ |
1,000 |
|
|
$ |
111 |
|
|
$ |
889 |
|
|
|
5 |
|
Developed technology |
|
|
9,600 |
|
|
|
1,280 |
|
|
|
8,320 |
|
|
|
4 |
|
Customer relationships |
|
|
10,700 |
|
|
|
793 |
|
|
|
9,907 |
|
|
|
8 |
|
Total |
|
$ |
21,300 |
|
|
$ |
2,184 |
|
|
$ |
19,116 |
|
|
|
|
|
The Company recorded $2.8 million and $2.2 million of amortization expense during the years ended December 31, 2023 and 2022, respectively, which was recorded as intangible amortization expense in the consolidated statement of operations. As a result of the Company’s product development reprioritization announced in November 2023, the Company reassessed the remaining useful-lives of its intangible assets. The Company recorded $16.3 million of accelerated amortization expense during the year ended December 31, 2023, which is included in asset write-down and restructuring in the consolidated statements of operations.
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.