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Goodwill and Intangible Assets | 9 Months Ended
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Oct. 29, 2023
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill The carrying amounts of goodwill by applicable operating segment were as follows:
(in thousands) | Signal Integrity |  | Advanced Protection and Sensing |  | IoT Systems |  |  |  |  |  | IoT Connected Services |  | Unallocated |  |  |  | Total
Balance at January 29, 2023 | $ | 274,085 |  |  | $ | 14,639 |  |  | $ | 61,582 |  |  |  |  |  |  | $ | — |  |  | $ | 931,397 |  |  |  |  | $ | 1,281,703 |
Measurement period adjustment | — |  |  | — |  |  | — |  |  |  |  |  |  | — |  |  | 23,925 |  |  |  |  | $ | 23,925 |
Reallocation | — |  |  | — |  |  | 655,527 |  |  |  |  |  |  | 299,795 |  |  | (955,322) |  |  |  |  | — |
Cumulative translation adjustment | — |  |  | — |  |  | (2,663) |  |  |  |  |  |  | (7,465) |  |  | — |  |  |  |  | (10,128) |
Impairment | — |  |  | — |  |  | (211,212) |  |  |  |  |  |  | (70,609) |  |  | — |  |  |  |  | (281,821) |
Balance at October 29, 2023 | $ | 274,085 |  |  | $ | 14,639 |  |  | $ | 503,234 |  |  |  |  |  |  | $ | 221,721 |  |  | $ | — |  |  |  |  | $ | 1,013,679 |
On January 12, 2023, in connection with the Sierra Wireless Acquisition, the Company acquired all of the outstanding equity interests in Sierra Wireless and a preliminary goodwill balance of $931.4 million was recorded for the excess of the consideration transferred over the net assets acquired and represented the expected revenue and cost synergies of the combined company and assembled workforce. In the nine months ended October 29, 2023, the Company recorded measurement period adjustments that increased goodwill by $23.9 million. See Note 2, Acquisition and Divestiture, for further discussion of the Sierra Wireless Acquisition and impact of the measurement period adjustments. In the fourth quarter of fiscal year 2023, in conjunction with the Sierra Wireless Acquisition, the Company formed two additional operating segments: the IoT Systems operating segment, which also absorbed portions of the Company's previous Wireless and Sensing operating segment, and the IoT Connected Services operating segment. In the nine months ended October 29, 2023, the Company finalized the determination of the reporting units related to the previously-identified operating segments. IoT Systems-Modules and IoT Systems-Routers were identified as reporting units, which together with IoT Systems-Wireless (f.k.a. Wireless and Sensing) reporting unit, aggregate into the IoT Systems operating segment. IoT Connected Services comprises one reporting unit and, accordingly, is both a reporting unit and an operating segment. During the nine months ended October 29, 2023, the Company also completed an allocation of the goodwill balance resulting from the Sierra Wireless Acquisition to each of these reporting units. Goodwill is not amortized, but is tested for impairment at the reporting unit level using either a qualitative or quantitative assessment on an annual basis during the fourth quarter of each fiscal year, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair market value of the reporting unit. During the second quarter of fiscal year 2024, as a result of reduced earnings forecasts associated with the business acquired from Sierra Wireless and current macroeconomic conditions, including a rising interest rate environment, the Company performed an interim impairment test using a quantitative assessment of the reporting units related to the Sierra Wireless Acquisition (specifically, the IoT Connected Services, IoT Systems–Modules and IoT Systems–Routers reporting units). The interim impairment test resulted in $279.6 million of total pre-tax non-cash goodwill impairment charges recorded during the second quarter of fiscal year 2024 in the Statements of Operations, consisting of $69.0 million of goodwill impairment for the IoT Connected Services reporting unit, $109.9 million of goodwill impairment for the IoT Systems–Modules reporting unit and $100.7 million goodwill impairment for the IoT Systems–Routers reporting unit. During the third quarter of fiscal year 2024, the Company recorded an additional $2.3 million of total pre-tax non-cash goodwill impairment charges resulting from the finalization of the measurement period adjustments, consisting of $1.6 million of goodwill impairment for the IoT Connected Services reporting unit, $0.2 million of goodwill impairment for the IoT Systems–Modules reporting unit and $0.5 million of goodwill impairment for the IoT Systems–Routers reporting unit. The fair values of these reporting units were determined based on a discounted cash flow model (an income approach) and earnings multiples (a market approach). Significant inputs to the reporting unit fair value measurements included forecasted cash flows, discount rates, terminal growth rates and earnings multiples, which were determined by management estimates and assumptions. The reporting unit fair value measurements are classified as Level 3 in the fair value hierarchy because they involve significant unobservable inputs. Purchased and Other Intangibles The following table sets forth the Company’s finite-lived intangible assets resulting from business acquisitions, which are amortized over their estimated useful lives:
|  |  | October 29, 2023 |  | January 29, 2023 |  |
(in thousands, except estimated useful life) | Estimated Useful Life |  | Gross Carrying Amount |  | Accumulated Amortization |  |  |  | Net Carrying Amount |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount |  |  |  |  |  |
Core technologies | 1-8 years |  | $ | 154,562 |  |  | $ | (32,549) |  |  |  |  | $ | 122,013 |  |  | $ | 175,080 |  |  | $ | (21,156) |  |  | $ | 153,924 |  |  |  |  |  |  |
Customer relationships | 1-10 years |  | 51,744 |  |  | (12,791) |  |  |  |  | 38,953 |  |  | 53,000 |  |  | (690) |  |  | 52,310 |  |  |  |  |  |  |
Trade name | 2-10 years |  | 9,000 |  |  | (2,507) |  |  |  |  | 6,493 |  |  | 9,000 |  |  | (132) |  |  | 8,868 |  |  |  |  |  |  |
Total finite-lived intangible assets |  |  | $ | 215,306 |  |  | $ | (47,847) |  |  |  |  | $ | 167,459 |  |  | $ | 237,080 |  |  | $ | (21,978) |  |  | $ | 215,102 |  |  |  |  |  |  |
Amortization expense of finite-lived intangible assets was as follows:
| Three Months Ended |  | Nine Months Ended
(in thousands) | October 29, 2023 |  | October 30, 2022 |  | October 29, 2023 |  | October 30, 2022
Core technologies | $ | 10,008 |  |  | $ | 1,000 |  |  | $ | 31,436 |  |  | $ | 3,096 |
Customer relationships | 4,061 |  |  | — |  |  | 12,231 |  |  | — |
Trade name | 792 |  |  | — |  |  | 2,375 |  |  | — |
Total amortization expense | $ | 14,861 |  |  | $ | 1,000 |  |  | $ | 46,042 |  |  | $ | 3,096 |
Amortization expense of finite-lived intangible assets related to core technologies was recorded in “Amortization of acquired technology” within “Total cost of sales” in the Statements of Operations and amortization expense of finite-lived intangible assets related to customer relationships and trade name was recorded in “Intangible amortization” within “Total operating costs and expenses, net” in the Statements of Operations. As of the Acquisition Date, the weighted-average amortization period for the finite-lived intangible assets acquired in the Sierra Wireless Acquisition was 5.3 years, which reflects weighted-average amortization periods of 4.4 years, 7.9 years and 6.2 years for core technologies, customer relationships and trade name, respectively. Future amortization expense of finite-lived intangible assets is expected as follows:
(in thousands) | Core Technologies |  | Customer Relationships |  | Trade name |  | Total
2024 (remaining three months) | $ | 9,990 |  |  | $ | 3,531 |  |  | $ | 792 |  |  | $ | 14,313 |
2025 | 39,449 |  |  | 3,954 |  |  | 1,722 |  |  | 45,125 |
2026 | 32,342 |  |  | 3,954 |  |  | 500 |  |  | 36,796 |
2027 | 17,481 |  |  | 3,954 |  |  | 500 |  |  | 21,935 |
2028 | 13,469 |  |  | 3,954 |  |  | 500 |  |  | 17,923 |
Thereafter | 9,282 |  |  | 19,606 |  |  | 2,479 |  |  | 31,367 |
Total expected amortization expense | $ | 122,013 |  |  | $ | 38,953 |  |  | $ | 6,493 |  |  | $ | 167,459 |
Also presented in “Other intangible assets, net” in the Balance Sheets, are finite-lived intangible assets under construction to be amortized upon placement in service. The following table sets forth the Company’s finite-lived intangible assets under construction:
(in thousands) |  | Net Carrying Amount
Value at January 29, 2023 |  | $ | — |
Capitalized development costs |  | 771 |
Value at October 29, 2023 |  | $ | 771 |

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