SMITH MICRO SOFTWARE, INC. Goodwill & Intangibles Disclosure
4. Goodwill and Intangible Assets
Goodwill
The carrying amount of goodwill and the impairment losses are as follows (in thousands):
| | Goodwill | | |
December 31, 2023 | | $ | 35,041 | |
Impairment losses | | | (23,989 | ) |
December 31, 2024 | | | 11,052 | |
Impairment losses | | | (11,052 | ) |
December 31, 2025 | | $ | — | |
In accordance with FASB ASC Topic No. 350, Intangibles-Goodwill and Other, Smith Micro reviews the recoverability of the carrying value of the Company's single reporting unit goodwill at least annually or whenever events or circumstances indicate a potential impairment. The annual impairment testing date is December 31 of each year. Recoverability of goodwill is determined by comparing the estimated fair value of the reporting unit to the carrying value of the underlying net assets in the reporting unit. If the estimated fair value of a reporting unit is determined to be less than the carrying value, goodwill is deemed impaired, and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the fair value.
During the three months ended March 31, 2024, the Company performed an interim quantitative impairment test on its goodwill as of February 29, 2024 and as a result of this interim assessment, the Company recorded a goodwill impairment charge totaling $24 million. The fair value of the reporting unit was determined based on a combination of the income approach using estimated discounted cash flows and a market-based valuation methodology utilizing market multiples. The assessment utilized Level 3 inputs including estimates of revenue growth, EBITDA contribution and discount rates.
In connection with the preparation of its quarterly financial statements for the second quarter of 2025, the Company assessed changes in circumstances to determine whether it was more likely than not that the fair value of its single reporting unit was below its carrying amount. While there was no single determinative event or factor, considerations including recent financial performance compared to expected forecasts, trends in stock valuation, pricing of the most recent equity raise, and the receipt of the Nasdaq minimum bid price requirement notice on June 24, 2025 led the Company to conclude that when considering the events and factors in totality it was necessary to perform an interim quantitative valuation assessment. The fair value of the reporting unit was determined based on a combination of the income approach using estimated discounted cash flows and a market-based valuation methodology utilizing market multiples. The assessment utilized Level 3 inputs including estimates of revenue growth, EBITDA contribution and discount rates. Based on the results of the assessment, a full goodwill impairment charge of $11.1 million was recorded.
Intangible Assets
The following table sets forth the Company’s acquired intangible assets by major asset class as of December 31, 2025 and 2024, respectively (in thousands, except for useful life data):
| | December 31, 2025 | | |||||||||||||
| | Weighted Average Remaining Useful Life (in Years) | | | Gross Carrying Amount | | | Accumulated Amortization | | | Net Book Value | | ||||
Purchased technology | | | 3 | | | $ | 11,076 | | | $ | (7,945 | ) | | $ | 3,131 | |
Customer relationships | | | 9 | | | | 24,573 | | | | (11,000 | ) | | | 13,573 | |
Customer contracts | | | — | | | | 7,000 | | | | (6,895 | ) | | | 105 | |
Software license | | | 4 | | | | 5,419 | | | | (3,843 | ) | | | 1,576 | |
Patents | | | 2 | | | | 600 | | | | (493 | ) | | | 107 | |
Total | | | | | | $ | 48,668 | | | $ | (30,176 | ) | | $ | 18,492 | |
|
| December 31, 2024 |
| ||||||||||||
|
| Weighted Average Remaining Useful Life (in Years) |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net Book Value |
| |||
Purchased technology |
| 4 |
|
| $ | 13,330 |
|
| $ | (8,762 | ) |
| $ | 4,568 |
|
Customer relationships |
| 9 |
|
|
| 27,548 |
|
|
| (11,280 | ) |
|
| 16,268 |
|
Customer contracts |
| — |
|
|
| 7,000 |
|
|
| (6,725 | ) |
|
| 275 |
|
Software license |
| 4 |
|
|
| 5,419 |
|
|
| (3,126 | ) |
|
| 2,293 |
|
Patents |
| 2 |
|
|
| 600 |
|
|
| (407 | ) |
|
| 193 |
|
Total |
|
| |
| $ | 53,897 |
|
| $ | (30,300 | ) |
| $ | 23,597 |
|
The Company recorded amortization expense of $5.1 million and $5.9 million on intangible assets for the years ended December 31, 2025 and 2024, respectively.
Future amortization expense related to intangible assets as of December 31, 2025 is as follows (in thousands):
Year Ended December 31, |
|
|
| |
2026 |
| $ | 4,709 |
|
2027 |
|
| 3,834 |
|
2028 |
|
| 2,790 |
|
2029 |
|
| 2,095 |
|
2030 and thereafter |
|
| 5,064 |
|
Total |
| $ | 18,492 |
|
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 5, 2026 | Showing above |
| 2024 | Mar 12, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Mar 23, 2023 | |
| 2021 | Mar 11, 2022 | |
| 2020 | Mar 8, 2021 | |
| 2019 | Mar 13, 2020 | |
| 2018 | Mar 27, 2019 | |
| 2017 | Mar 30, 2018 | |
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.