Teladoc Health, Inc. Goodwill & Intangibles Disclosure

Note 7. Goodwill

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Goodwill consisted of the following (in thousands):

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The Company experienced triggering events in 2022 due to sustained decreases in the Company’s share price, prompting impairment assessments of goodwill and long-lived assets including definite-lived intangibles as of March 31, 2022 and again as of June 30, 2022.

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Both impairment assessments in 2022 reflected a 75%/25% allocation between the income and market approaches. The Company believes the 75% weighting to the income approach continues to be appropriate as it more directly reflects the Company’s future growth and profitability expectations. The table below indicates changes in the most significant inputs to the Company’s impairment analysis on each testing date related to those triggering events and the annual impairment test.

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In March 2022, the Company updated the projected long-range cash flows used in the impairment assessment, including revenues, margin, and capital expenditures to reflect current conditions. Other changes in valuation assumptions included increases in interest rates and market volatility, resulting in a higher discount rate, and selection of lower revenue multiples based upon an assessment of a relevant peer group. As a result of this review, the Company did not identify an impairment to its definite-lived intangible assets or other long-lived assets, but the Company recorded a $6.6 billion non-deductible goodwill impairment charge (or $40.88 per basic and diluted share) in the quarter ended March 31, 2022. The non-cash charge had no impact on the provision for income taxes.

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As of June 30, 2022, the Company updated valuation assumptions. The discount rate was increased for a company risk premium to reflect the current perception of risks of achieving projected cash flows and, to a lesser extent, to reflect further increases in interest rates and market volatility. Additionally, revenue market multiples were lowered based upon an updated analysis of a consistent peer group. The assessment did not result in an impairment of definite-lived intangible assets or other long-lived assets but resulted in an additional $3.0 billion non-deductible goodwill impairment charge (or $18.77 per basic and diluted share). The non-cash charge had no impact on the provision for income taxes.

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On October 1, 2022, the Company reorganized its reporting structure to include two reportable segments, Integrated Care and BetterHelp, which also represent reporting units for purposes of assessing goodwill. The Company performed its annual impairment test consistent with the rules set forth under ASC 350, “Intangibles—Goodwill and Other,” performing an initial test on its then-existing reporting unit. The impairment test utilized the Company’s latest estimates of projected cash flows, including revenues, margin, and capital expenditures, as well as current market assumptions for the discount rate and revenue multiples, to reflect current market conditions and risk assessments. Based on the result of the impairment test, the Company recognized an additional $2.6 billion non-deductible goodwill impairment charge, driven significantly by a decline in projected cash flows. Following this impairment, the Company reassigned the remaining $2.2 billion to its new reporting units using a relative fair value allocation approach. The Company performed tests of the asset groups identified for the purposes of testing the recoverability of each reporting unit’s definite-lived intangibles and other long-lived assets, which was passed by a significant margin. Lastly, a post allocation goodwill impairment test on each of the reporting units was performed, the result of which was the recognition of an additional $1.1 billion of impairment on the goodwill assigned to the Company’s Teladoc Health Integrated Care reporting unit. The $3.8 billion (or $23.37 per basic and diluted share) non-cash charges had no impact on the provision for income taxes.

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For the twelve months ended December 31, 2022, a $13.4 billion non-deductible goodwill impairment charge (or $83.01 per basic and diluted share) was recognized. There were no impairment charges recorded for goodwill or definite-lived intangible assets for the years ended December 31, 2021 or 2020.