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Note 4 - Intangible Assets

12 Months Ended

Dec. 31, 2022

Intangible Assets Disclosure [Text Block]

NOTE 4. INTANGIBLE ASSETS

Intangible assets consist of the following:

	*December 31, 2022*
	*Weighted*
	*Useful Life*		*Gross*					*Accumulated*			*Effect of Foreign*
	*Remaining (in*		*Carrying*		*Accumulated*			*Impairment*			*Currency*		*Intangible*
*(In thousands)*	*years)*		*Value*		*Amortization*			*Losses*			*Exchange*		*Assets, Net*
*Amortizing intangibles*
Customer relationships		0.6	$	63,050	$	(62,070	)	$	—		$	—	$	980
Host agreements		10.4		58,000		(17,722	)		—			—		40,278
Development agreement		6.6		21,373		(1,145	)		—			—		20,228
Developed technology		9.8		36,445		(600	)		—			53		35,898
B2B relationships		7.0		28,000		(652	)		—			12		27,360
B2C relationships		11.8		13,000		(181	)		—			—		12,819
				219,868		(82,370	)		—			65		137,563

*Indefinite lived intangible assets*
Trademarks	Indefinite			204,000		—			(36,375	)		—		167,625
Gaming license rights	Indefinite			1,378,081		(33,960	)		(222,174	)		—		1,121,947
				1,582,081		(33,960	)		(258,549	)		—		1,289,572
Balances, December 31, 2022			$	1,801,949	$	(116,330	)	$	(258,549	)	$	65	$	1,427,135

December 31, 2021

Weighted

Gross

Accumulated

Useful Life

Carrying

Accumulated

Impairment

Intangible

(In thousands)

Remaining (in years)

Value

Amortization

Losses

Assets, Net

Amortizing intangibles

Customer relationships
1.5 $ 68,100 $ (63,798 ) $ — $ 4,302

Host agreements
11.4 58,000 (13,856 ) — 44,144

Development agreement
— 21,373 — — 21,373

147,473 (77,654 ) — 69,819

Indefinite lived intangible assets

Trademarks

Indefinite
204,000 — (27,200 ) 176,800

Gaming license rights

Indefinite
1,377,935 (33,960 ) (222,174 ) 1,121,801

1,581,935 (33,960 ) (249,374 ) 1,298,601

Balances, December 31, 2021
$ 1,729,408 $ (111,614 ) $ (249,374 ) $ 1,368,420

Amortizing Intangible Assets

Customer Relationships

Customer relationships represent the value of repeat business associated with our customer loyalty programs. The value of customer relationships is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to these customers, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections of future cash flows, assumptions and estimates: revenue of our rated customers, based on expected level of play; promotional allowances provided to these existing customers; attrition rate related to these customers; operating expenses; general and administrative expenses; trademark expense; discount rate; and the present value of tax benefit.

Host Agreements

Host agreements represent the value associated with the host establishment relationships of our distributed gaming operator. The value of host agreements is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to these establishments, discounted to present value at a risk-adjusted rate of return.

Development Agreement

Development agreement is an acquired contract with Wilton Rancheria under which the Company developed the Sky River Casino on the Wilton Rancheria's land. Amortization of this asset began on August 15, 2022, upon the opening of Sky River Casino.

Developed Technology

Developed technology represents the value associated with our online gaming platform. The value is determined using the relief from royalty method, which presumes that without ownership of such technology, we would have to make a stream of payments to a technology owner in return for the right to use their technology. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the technology. We used the following significant projections of future cash flows, assumptions and estimates to determine value under the relief from royalty method: revenue from online gaming activities; royalty rate; tax expense; obsolescence rate; discount rate; and present value of tax benefit.

B2B Relationships and B2C Relationships

B2B relationships and B2C relationships represent the value of our customer relationships, including those under contractual arrangements, associated with our online gaming operations. The value of B2B and B2C relationships are determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to those customer relationships, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections of cash flows, assumptions and estimates: revenue of those customers, based on expected level of play and the specific contractual arrangement; promotional allowances and attrition rate related to these relationships; operating expenses; general and administrative expenses; contributory asset charge; discount rate; and the present value of tax benefit.

Indefinite Lived Intangible Assets

Trademarks

Trademarks are based on the value of our brands, which reflect the level of service and quality we provide and from which we generate repeat business. Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademark, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their name. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the trade name. We used the following significant projections of future cash flows, assumptions and estimates to determine value under the relief from royalty method: revenue from gaming and hotel activities; royalty rate; tax expense; terminal growth rate; discount rate; and the present value of tax benefit.

Gaming License Rights

Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance therein. In the majority of cases, the value of our gaming licenses is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to future gaming revenue, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections of future cash flows, assumptions and estimates: gaming revenues; gaming operating expenses; general and administrative expenses; tax expense; terminal value; and discount rate. In two instances, we determine the value of our gaming licenses by applying a cost approach. Our primary consideration in the application of this methodology is the initial statutory fee associated with acquiring a gaming license in the jurisdiction.

Activity for the Years Ended December 31, 2022, 2021 and 2020

The following table sets forth the changes in these intangible assets:

*(In thousands)*	*Customer Relationships*			*Host Agreements*			*Development Agreement*			*Developed Technology*			*B2B Relationships*			*B2C Relationships*			*Trademarks*			*Gaming License Rights*			*Intangible Assets, Net*
Balance, January 1, 2020	$	28,502		$	51,878		$	21,373		$	—		$	—		$	—		$	202,387		$	1,162,751		$	1,466,891
Impairments		—			—			—			—			—			—			(20,500	)		(42,200	)		(62,700	)
Amortization		(15,464	)		(3,867	)		—			—			—			—			—			—			(19,331	)
Other (1)		—			—			—			—			—			—			(2,687	)		—			(2,687	)
Balance, December 31, 2020		13,038			48,011			21,373			—			—			—			179,200			1,120,551			1,382,173
Additions		—			—			—			—			—			—			—			1,250			1,250
Impairments		—			—			—			—			—			—			(2,400	)		—			(2,400	)
Amortization		(8,736	)		(3,867	)		—			—			—			—			—			—			(12,603	)
Balance, December 31, 2021		4,302			44,144			21,373			—			—			—			176,800			1,121,801			1,368,420
Additions		—			—			—			36,445			28,000			13,000			—			146			77,591
Impairments		—			—			—			—			—			—			(9,175	)		—			(9,175	)
Amortization		(3,322	)		(3,866	)		(1,145	)		(600	)		(652	)		(181	)		—			—			(9,766	)
Effect of foreign currency exchange		—			—			—			53			12			—			—			—			65
Balance, December 31, 2022	$	980		$	40,278		$	20,228		$	35,898		$	27,360		$	12,819		$	167,625		$	1,121,947		$	1,427,135

⁽¹⁾ A domain rights asset was written off in second quarter 2020.

Future Amortization

Customer relationships are being amortized on an accelerated basis over a weighted average original useful life of five years. Host agreements are being amortized on a straight-line basis over an original life of 15 years. The development agreement is being amortized on a straight-line basis over an original life of seven years. Developed technology is being amortized on a straight-line basis over an original life of 10 years. B2B relationships are being amortized on a straight-line basis over an original life of 7 years and 10 years. B2C relationships are being amortized on a straight-line basis over an original life of 12 years. Future amortization is as follows:

*(In thousands)*	*Customer Relationships*		*Host Agreements*		*Development Agreement*		*Developed Technology*		*B2B Relationships*		*B2C Relationships*		*Total*
*For the year ending December 31,*
2023	$	940	$	3,867	$	3,053	$	3,689	$	3,914	$	1,083	$	16,546
2024		40		3,867		3,053		3,689		3,914		1,083		15,646
2025		—		3,867		3,053		3,689		3,914		1,083		15,606
2026		—		3,867		3,053		3,689		3,914		1,083		15,606
2027		—		3,867		3,053		3,689		3,914		1,083		15,606
Thereafter		—		20,943		4,963		17,453		7,790		7,404		58,553
Total future amortization	$	980	$	40,278	$	20,228	$	35,898	$	27,360	$	12,819	$	137,563

Trademarks and gaming license rights are not subject to amortization, as we have determined that they have an indefinite useful life; however, these assets are subject to an annual impairment test each year and between annual test dates in certain circumstances.

Impairment Considerations

As a result of our third quarter 2022 impairment review, the Company recorded an impairment charge of $5.6 million for a trademark related to a property in our Midwest & South segment. As a result of our annual 2022 impairment test and our fourth quarter 2022 impairment review, the Company recorded additional impairment charges of $3.6 million for trademarks related to our Midwest & South segment.

As a result of our annual 2021 impairment test, the Company recorded impairment charges of $2.4 million for trademarks related to our Las Vegas Locals segment.

As a result of the first quarter 2020 impairment review, the Company recorded impairment charges of $16.9 million for trademarks, of which $8.0 million related to our Las Vegas Locals segment and $8.9 million related to our Midwest & South segment, and $42.2 million for gaming license rights related to our Midwest & South segment. An additional trademark impairment charge of $3.6 million, of which $2.5 million related to the Las Vegas Locals segment and $1.1 million related to the Midwest & South segment, was recorded as part of the annual 2020 impairment test.