Quarterly report pursuant to Section 13 or 15(d)

IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS

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IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS
 9 Months Ended
Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]  
IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS

4. IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS

 

During the three months ended September 30, 2023, the Company considered the decline in its stock price to be an indicator of impairment and, accordingly, performed a quantitative impairment assessment of its goodwill and intangible assets. This assessment involved comparing the estimated fair value of each of its reporting units to the reporting unit’s carrying value, inclusive of the goodwill balance allocated to the reporting unit.

 

Estimation of the fair value of each reporting unit involved the projection of discounted future cash flows using certain assumptions that are subjective in nature, including assumptions related to historical and market growth rates and gross margin improvements, as well as future operating expense synergies and optimization, among other factors. Based on its analysis, the Company determined that the carrying value exceeded the estimated fair value as of September 30, 2023 in all reporting units. Consequently, the Company recognized a goodwill impairment charge of $89,087 in the condensed consolidated statements of operations during the three and nine months ended September 30, 2023.

 

The fair value measurements used in the evaluation described above are considered to be Level 3 valuations within the fair value hierarchy, as the measurements involve projections of discounted future cash flows, which are derived from unobservable assumptions, the most subjective of which are the discount rates for each respective reporting unit. The discount rate used in for all reporting units ranged from 20% to 22.5%.

 

Changes in goodwill during the nine months ended September 30, 2023 were as follows:

 

         
Beginning balance January 1, 2023   $ 203,710  
Impairment of goodwill     (89,087 )
Acquisition of Envoy     30,118  
Effect of translation adjustments     140  
Ending balance September 30, 2023   $ 144,881  

 

Similarly, the Company determined that the carrying value of certain intangible assets had exceeded its undiscounted cash flows and, as a result, recorded an intangible asset impairment charge of $5,143 in the condensed consolidated statements of operations during the three and nine months ended September 30, 2023.

 

Changes in intangible assets during the nine months ended September 30, 2023 were as follows:

 

    December 31, 2022     Additions     Impairment     September 30, 2023  
Internal use software   $ 1,123     $ -     $ -     $ 1,123  
Capitalized engineering costs     237       -       -       237  
Trade name and patents     2,759       166       (13 )     2,912  
Customer relationships     21,398       1,925       (4,405 )     18,918  
Favorable leases     257       -       -       257  
Internally developed technology     5,031       175       (218 )     4,988  
Non-compete agreements     2,253       11       (507 )     1,757  
      33,058       2,277       (5,143 )     30,192  
Less: accumulated amortization     (6,912 )     (7,194 )     -       (14,106 )
Plus: foreign currency translation     436       755       -       1,191  
Intangible assets, net   $ 26,582     $ (4,162 )   $ (5,143 )   $ 17,277