Alpha Teknova, Inc. Goodwill & Intangibles Disclosure
Note 8. Goodwill and Intangible Assets, Net
The following is a summary of the changes in the carrying amount of goodwill (in thousands):
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|
Balance at December 31, 2022 |
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Balance at December 31, 2021 |
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||||||||||||||||||
|
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Gross |
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Accumulated |
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Net |
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|
Gross |
|
|
Accumulated |
|
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Net |
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||||||
Goodwill |
|
$ |
16,613 |
|
|
$ |
16,613 |
|
|
$ |
— |
|
|
$ |
16,613 |
|
|
$ |
— |
|
|
$ |
16,613 |
|
During the three months ended September 30, 2022, the market price of Teknova’s common stock and market capitalization declined significantly. Given the significance of this decline, the Company performed interim goodwill impairment testing.
The fair value of the Company was determined using a combination of an income approach and market approach. The income approach was based on the present value of future cash flows, which were derived from financial forecasts, and requires significant assumptions and judgement including, among others, a discount rate and a terminal value. Fair values were based on expected future cash flows using Level 3 inputs under ASC 820, Fair Value Measurement. The cash flows are those expected to be generated by the Company, discounted at the weighted average cost of capital. The present value of future cash flows was determined by discounting estimated future cash flows at an 18.0% weighted average cost of capital, which considers the risk of achieving the projected cash flows, long-term growth rate, the risk applicable to the Company, industry, and to the market as a whole.
The guideline public company method, a market approach method, was also used to estimate the fair value of the Company. The guideline public company method utilizes the trading multiples of similarly traded public companies. The unobservable inputs used to measure the fair value primarily included projected revenue growth rates and the determination of appropriate market comparison companies. Selected multiples were considered and applied to the trailing-twelve-month and next-twelve-month enterprise value-to-revenue multiples.
The resulting estimated fair value was reconciled to the Company’s market capitalization. The reconciliation included an estimated implied control premium above the Company's market capitalization on September 30, 2022, of approximately 25%. Based on the results of the impairment test, the Company determined goodwill was fully impaired and recorded an impairment charge of $16.6 million during the three months ended September 30, 2022. There was no impairment of goodwill during the year ended December 31, 2021.
The following is a summary of intangible assets with definite and indefinite lives (in thousands):
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|
Balance at December 31, 2022 |
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|
Balance at December 31, 2021 |
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|
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Gross |
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Accumulated |
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|
Net |
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|
Gross |
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|
Accumulated |
|
|
Net |
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Definite Lived: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Customer relationships |
|
$ |
9,180 |
|
|
$ |
4,543 |
|
|
$ |
4,637 |
|
|
$ |
9,180 |
|
|
$ |
3,395 |
|
|
$ |
5,785 |
|
Indefinite Lived: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Tradename |
|
|
12,919 |
|
|
|
— |
|
|
|
12,919 |
|
|
|
12,919 |
|
|
|
— |
|
|
|
12,919 |
|
Total intangible assets |
|
$ |
22,099 |
|
|
$ |
4,543 |
|
|
$ |
17,556 |
|
|
$ |
22,099 |
|
|
$ |
3,395 |
|
|
$ |
18,704 |
|
For the years ended December 31, 2022 and 2021 amortization expense was approximately $1.1 million and $1.1 million, respectively.
The remaining weighted-average useful life of definite lived intangible assets is four years. The estimated future amortization expense of intangible assets with definite lives is as follows (in thousands):
|
|
Amount |
|
|
2023 |
|
$ |
1,148 |
|
2024 |
|
|
1,148 |
|
2025 |
|
|
1,148 |
|
2026 |
|
|
1,148 |
|
2027 |
|
|
45 |
|
Estimated future amortization expense of definite-lived intangible assets |
|
$ |
4,637 |
|
There was no impairment of intangible assets during the years ended December 31, 2022 and 2021.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2022 | Mar 30, 2023 | Showing above |
| 2021 | Mar 18, 2022 | |
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.