Vroom, Inc. Goodwill & Intangibles Disclosure
8. Goodwill and Intangible Assets
Goodwill
The following table summarizes the activity in the carrying value of goodwill by reporting unit for the year ended December 31, 2022 (in thousands):
|
|
Ecommerce |
|
|
Wholesale |
|
|
TDA |
|
|
Total |
|
||||
Balance as of December 31, 2021 |
|
$ |
152,876 |
|
|
$ |
1,720 |
|
|
$ |
4,221 |
|
|
$ |
158,817 |
|
Acquisition |
|
|
42,886 |
|
|
|
— |
|
|
|
— |
|
|
|
42,886 |
|
Goodwill impairment charge |
|
|
(195,762 |
) |
|
|
(1,720 |
) |
|
|
(4,221 |
) |
|
|
(201,703 |
) |
Balance as of December 31, 2022 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
There was no goodwill as of December 31, 2023 and 2022.
As of March 31, 2022, a quantitative interim goodwill impairment assessment was performed over the Company's reporting units due to further sustained declines in the Company's and comparable companies' stock prices during the three months ended March 31, 2022.
The Company estimated the fair value of the Ecommerce, Wholesale, and TDA reporting units using the discounted cash flow method under the income approach. The significant assumptions used in the valuation include revenue growth rates, future gross profit margins and operating expenses used to calculate projected future cash flows, determination of the weighted average cost of capital, and future economic and market conditions. The terminal value is based on an exit revenue multiple which requires significant assumptions regarding the selection of appropriate multiples that consider relevant market trading data. The Company bases its estimates and assumptions on its knowledge of the automotive and ecommerce industries, recent performance, expectations of future performance and other assumptions the Company believe to be reasonable.
The Company determined that the estimated fair value of the Ecommerce, Wholesale, and TDA reporting units was less than their carrying amounts. The Company recorded a goodwill impairment charge of $201.7 million in the consolidated statements of operations for the year ended December 31, 2022.
Refer to Note 5 – Acquisition for more information related to the acquisition that occurred in the year ended December 31, 2022.
Intangible Assets
Intangible assets, net consisted of the following (in thousands):
|
|
December 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||||||||||
|
|
Gross Carrying Value |
|
|
Accumulated Amortization |
|
|
Carrying Value |
|
|
Gross Carrying Value |
|
|
Accumulated Amortization |
|
|
Carrying Value |
|
||||||
Developed and purchased technology |
|
$ |
108,700 |
|
|
$ |
(38,050 |
) |
|
$ |
70,650 |
|
|
$ |
108,700 |
|
|
$ |
(21,053 |
) |
|
$ |
87,647 |
|
Customer relationships |
|
|
69,400 |
|
|
|
(17,336 |
) |
|
|
52,064 |
|
|
|
69,400 |
|
|
|
(8,661 |
) |
|
|
60,739 |
|
Trademarks and trade names |
|
|
12,200 |
|
|
|
(3,022 |
) |
|
|
9,178 |
|
|
|
12,200 |
|
|
|
(1,676 |
) |
|
|
10,524 |
|
Total intangible assets |
|
$ |
190,300 |
|
|
$ |
(58,408 |
) |
|
$ |
131,892 |
|
|
$ |
190,300 |
|
|
$ |
(31,390 |
) |
|
$ |
158,910 |
|
Refer to Note 5 – Acquisition for more information related to the acquisition that occurred in the year ended December 31, 2022.
Amortization expense for intangible assets was $27.0 million and $25.3 million for the years ended December 31, 2023 and 2022, respectively.
The estimated amortization expense for intangible assets subsequent to December 31, 2023, consists of the following (in thousands):
Year Ending December 31: |
|
|
|
|
2024 |
|
$ |
27,022 |
|
2025 |
|
|
27,022 |
|
2026 |
|
|
21,979 |
|
2027 |
|
|
21,882 |
|
2028 |
|
|
21,882 |
|
Thereafter |
|
|
12,105 |
|
|
|
$ |
131,892 |
|
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.