Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Intangible Assets

v3.23.2
Goodwill and Intangible Assets
 6 Months Ended
Jun. 30, 2023
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:
Six Months Ended June 30,
2023 2022
(in thousands)
Beginning balance $ 306,739  $ 306,668 
Acquisitions (Note 3)
 11,717  — 
Adjustments —  71 
Ending balance $ 318,456  $ 306,739 
During the six months ended June 30, 2023, there was an increase in the carrying value of goodwill of $11.7 million related to the acquisition of Company Y.
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.
In addition to its annual review, the Company performs a test of impairment when indicators of impairment are present. During the six months ended June 30, 2023 and 2022, 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:
June 30, 2023 December 31, 2022
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 $ 19,300  $ (934) $ 18,366  $ 21,764  $ (580) $ 21,184 
Developed technology 6.9 311,261  (246,970) 64,291  311,261  (228,532) 82,729 
Trademarks and trade names 6.2 14,800  (14,205) 595  14,800  (13,461) 1,339 
Customer relationships 5.0 128,800  (125,577) 3,223  128,800  (124,807) 3,993 
Backlog 5.3 500  (439) 61  500  (429) 71 
Patents 7.0 4,781  (114) 4,667  —  —  — 
6.1 $ 479,442  $ (388,239) $ 91,203  $ 477,125  $ (367,809) $ 109,316 
The following table sets forth amortization expense associated with finite-lived intangible assets, which is included in the consolidated statements of operations as follows:
Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
(in thousands) (in thousands)
Cost of net revenue $ 9,333  $ 9,865  $ 18,791  $ 20,712 
Research and development 1  1  2  2 
Selling, general and administrative 709  2,926  1,637  9,102 
$ 10,043  $ 12,792  $ 20,430  $ 29,816 
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:
Six Months Ended June 30,
2023 2022
(in thousands)
Beginning balance $ 109,316  $ 149,940 
Additions 5,524  5,204 
Other disposals (769) — 
Transfers to developed technology from IPR&D —  2,600 
Amortization (20,430) (29,816)
Impairment losses (2,438) — 
Ending balance $ 91,203  $ 127,928 
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 three months ended June 30, 2023 and 2022, no impairment losses related to finite-lived intangible assets were recognized. During the six months ended June 30, 2023 and 2022, impairment losses related to finite-lived intangible assets of $2.4 million and $0, respectively, were recognized. The impairment loss was attributable to certain purchased licensed technology.
The following table presents future amortization of the Company’s finite-lived intangible assets at June 30, 2023:
Amount
(in thousands)
2023 (6 months) $ 18,526 
2024 24,427 
2025 14,743 
2026 13,634 
2027 9,786 
Thereafter 10,087 
Total $ 91,203