Annual report pursuant to Section 13 and 15(d)

Goodwill and Intangible Assets

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Goodwill and Intangible Assets
 12 Months Ended
Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets Goodwill and Intangible Assets
Goodwill
Goodwill arises from the acquisition method of accounting for business combinations and represents the excess of the purchase price over the fair value of the net assets and other identifiable intangible assets acquired. The fair values of net tangible assets and intangible assets acquired are based upon preliminary valuations and the Company’s estimates and assumptions are subject to change within the measurement period (potentially up to one year from the acquisition date).
The following table presents the changes in the carrying amount of goodwill for the periods indicated:
Year Ended December 31,
2022 2021
(in thousands)
Beginning balance $ 306,668  $ 302,828 
Acquisitions (Note 3)
 71  3,840 
Ending balance $ 306,739  $ 306,668 

During the year ended December 31, 2022, the increase in the carrying value of goodwill related to minor adjustments to the assets and liabilities in the purchase price allocation for Company X (Note 3).

The Company performs an annual goodwill impairment assessment on October 31st each year, using a quantitative assessment comparing the fair value of each reporting unit, which the Company has determined to be the entity itself, with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recorded. As a result of the Company’s impairment assessment, no goodwill impairment was recognized as of October 31, 2022.

In addition to its annual review, the Company performs a test of impairment when indicators of impairment are present. During the years ended December 31, 2022, 2021, and 2020, there were no indications of impairment of the Company’s goodwill balances.
Acquired Intangibles
Finite-lived Intangible Assets
The following table sets forth the Company’s finite-lived intangible assets resulting from business acquisitions and other purchases, which are amortized over their estimated useful lives:
December 31, 2022 December 31, 2021
Weighted
Average
Useful Life
(in Years)		 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Value Accumulated Amortization Net Carrying Amount
(in thousands)
Licensed technology 6.9 $ 21,764  $ (580) $ 21,184  $ 16,850  $ (2,218) $ 14,632 
Developed technology 6.9 311,261  (228,532) 82,729  308,661  (189,244) 119,417 
Trademarks and trade names 6.2 14,800  (13,461) 1,339  14,800  (11,221) 3,579 
Customer relationships 5.0 128,800  (124,807) 3,993  128,800  (116,847) 11,953 
Backlog 5.3 500  (429) 71  1,300  (941) 359 
6.1 $ 477,125  $ (367,809) $ 109,316  $ 470,411  $ (320,471) $ 149,940 

The following table sets forth amortization expense associated with finite-lived intangible assets, which is included in the consolidated statements of operations as follows:
Year Ended December 31,
2022 2021 2020
(in thousands)
Cost of net revenue $ 39,638  $ 43,078  $ 37,784 
Research and development 4  4  5 
Selling, general and administrative 11,955  23,625  23,529 
$ 51,597  $ 66,707  $ 61,318 
Amortization of finite-lived intangible assets in cost of net revenue in the consolidated statements of operations results primarily from acquired developed technology.
The following table sets forth the activity related to finite-lived intangible assets:
Year Ended December 31,
2022 2021
(in thousands)
Beginning balance $ 149,940  $ 200,066 
Acquisitions (Note 3)
 —  4,400 
Additions 11,184  7,581 
Transfers to developed technology from IPR&D 2,600  4,600 
Amortization (51,597) (66,707)
Impairment losses (2,811) — 
Ending balance $ 109,316  $ 149,940 
The Company regularly reviews the carrying amount of its long-lived assets subject to depreciation and amortization, as well as the related useful lives, to determine whether indicators of impairment may exist that warrant adjustments to carrying values or estimated useful lives. An impairment loss is recognized when the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset. Should impairment exist, the impairment loss is measured based on the excess of the carrying amount of the asset over the asset’s fair value.
During the year ended December 31, 2022, the Company recognized impairment losses related to finite-lived intangible assets of $2.8 million, which was attributable to certain acquired licensed technology. During the year ended December 31, 2021, no impairment losses related to finite-lived intangible assets were recognized. During the year ended December 31, 2020, the Company recognized impairment losses related to finite-lived intangible assets of $0.1 million, which was attributable to certain purchased licensed technology.
The following table presents future amortization of the Company’s finite-lived intangible assets at December 31, 2022:
Amount
(in thousands)
2023 $ 38,941 
2024 24,343 
2025 14,427 
2026 13,318 
2027 9,725 
Thereafter 8,562 
Total $ 109,316 
Indefinite-lived Intangible Assets
Indefinite-lived intangible assets consist entirely of acquired in-process research and development technology, or IPR&D. The following table sets forth the Company’s activities related to indefinite-lived intangible assets:
Year Ended December 31,
2022 2021
(in thousands)
Beginning balance $ 2,600  $ 7,200 
Transfers to developed technology from IPR&D (2,600) (4,600)
Ending balance $ —  $ 2,600 
The Company performs its annual assessment of indefinite-lived intangible assets on October 31st each year or more frequently if events or changes in circumstances indicate that the asset might be impaired utilizing a qualitative test as a precursor to the quantitative test comparing the fair value of the assets with their carrying amount. Based on the qualitative test, if it is more likely than not that indicators of impairment exists, the Company proceeds to perform a quantitative analysis. Based on the Company’s assessment as of October 31, 2022, no indicators of impairment were identified.
In addition to its annual review, the Company performs a test of impairment when indicators of impairment are present. During the years ended December 31, 2022, 2021, and 2020, no indicators of impairment were identified and, as a result, no IPR&D impairment losses were recorded.