GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill
Goodwill consists of the following (in thousands):
| | | | | | | | | | | |
| December 31, |
| 2024 | | 2023 |
| Goodwill | $ | 547,158 | | | $ | 547,158 | |
| | | |
| Effect of foreign currency translation | (6) | | | 47 | |
| Impairment charges | (547,152) | | | — | |
| Total goodwill | $ | — | | | $ | 547,205 | |
Goodwill is tested for impairment annually, or more often if an event or circumstance indicates that the carrying amount may not be recoverable. In connection with the preparation of the unaudited condensed consolidated financial statements for the three months ended June 30, 2024, the Company considered the decline in the Company’s stock price, market capitalization, and recent financial performance to be a triggering event for its single reporting unit and therefore completed a test for impairment of goodwill for the reporting unit as of June 30, 2024. The Company tested goodwill for impairment using a Step 1 quantitative test and compared the reporting unit’s fair value to its carrying value. An impairment is recorded for any excess carrying value above the reporting unit’s fair value, not to exceed the amount of goodwill. The Company estimates fair value of its reporting unit using a discounted cash flow model, commonly referred to as the income approach. The income approach uses a reporting unit’s projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions appropriate to the Company’s reporting unit. The discounted cash flow model uses management’s best estimates of economic and market conditions over the projected period using the best information available, including growth rates in revenues, costs and estimates of future expected changes in operating margins and cash expenditures. Other estimates and assumptions include terminal value growth rates, weighted average cost of capital and changes in future working capital requirements. The impairment test resulted in an impairment of $547.2 million.
Intangible Assets, Net
Intangible assets, net, consists of the following (in thousands):
| | | | | | | | | | | |
| December 31, |
| 2024 | | 2023 |
| Developed technology | $ | 32,618 | | | $ | 32,618 | |
| Trade name | 11,300 | | | 11,300 | |
| Customer relationships | 106,800 | | | 106,800 | |
| | | |
| Internally developed software | 81,314 | | | 67,282 | |
| Intangible assets | 232,032 | | | 218,000 | |
| Less: Accumulated amortization | (88,094) | | | (60,868) | |
| Add: Currency translation adjustment | (26) | | | 14 | |
| Total intangible assets, net | $ | 143,912 | | | $ | 157,146 | |
Amortization expense for intangible assets was $27.3 million, $24.9 million and $23.6 million for the years ended December 31, 2024, 2023, and 2022, respectively, of which amortization of internally developed software and developed technology is recognized in cost of goods sold and amortization of customer relationships and trade name is recognized in sales and marketing 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.