Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The changes in carrying amounts of goodwill for the nine months ended September 30, 2023 are as follows (in thousands):


	Digital Media		Cybersecurity and Martech		Consolidated
Balance as of January 1, 2023	$	1,065,989	$	525,485	$	1,591,474
Goodwill acquired (Note 3)	6,258		—		6,258

Goodwill impairment	(56,850)		—		(56,850)
Purchase accounting adjustments (1)	(72)		—		(72)

Foreign exchange translation	(644)		(503)		(1,147)
Balance as of September 30, 2023	$	1,014,681	$	524,982	$	1,539,663

(1)Purchase accounting adjustments relate to measurement period adjustments to goodwill in connection with prior business acquisitions.

During the three and nine months ended September 30, 2023 and 2022, the Company reassessed the fair value of certain reporting units within the Digital Media reportable segment as a result of a forecasted reduction in revenue and EBITDA in the reporting unit, as well as an increase in interest rates and market volatility that would affect the Company’s assumptions on its discount rate. Based on the quantitative fair value test in each period, the carrying value of the reporting unit exceeded its fair value, and the Company recorded an impairment of approximately $56.9 million during the three and nine months ended September 30, 2023, and approximately $27.4 million during the three and nine months ended September 30, 2022. Following the impairment during the three and nine months ended September 30, 2022, the reporting unit had goodwill of approximately $86.9 million and the carrying value approximated its fair value. Following the impairment during the three and nine months ended September 30, 2023, the reporting unit had goodwill of approximately $79.2 million and there is no excess of reporting unit fair value over the carrying amount, so any further decrease in estimated fair value would result in an additional impairment charge to goodwill. Changes in market conditions, and key assumptions made in future quantitative assessments, including expected cash flows, competitive factors and discount rates, could negatively impact the results of future impairment testing and could result in the recognition of an impairment charge.

In each period, the fair value of the reporting unit was determined using an equal weighting of an income approach that was based on the discounted estimated future cash flows of the reporting unit and a market approach that uses the guideline public company approach. We believe the combination of these approaches provides an appropriate valuation because it incorporates the expected cash generation of the reporting unit in addition to how a third-party market participant would value the reporting unit. As the business is assumed to continue in perpetuity, the discounted future cash flows include a terminal value. Determining fair value using a discounted estimated future cash flow analysis requires the exercise of significant judgment with respect to several items, including the amount and timing of expected future cash flows and appropriate discount rates. The expected cash flows used in the discounted cash flow analyses were based on the most recent forecast for the reporting unit. For years beyond the forecast period, the estimates were based, in part, on forecasted growth rates. The discount rate the Company used represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in its reporting unit operations and the rate of return a market participant would expect to earn. Determining fair value using a market approach considers multiples of financial metrics based on trading multiples of a selected peer group of companies. From the comparable companies, a representative market multiple is determined, which is applied to financial metrics to estimate the fair value of the reporting unit.

During the three months ended September 30, 2022, the Company realigned two reporting units within the Digital Media reportable segment. The Company re-allocated goodwill between the two identified reporting units based upon the relative fair value of the respective reporting units. Immediately before and immediately following this change in reporting units, the Company performed a quantitative fair value assessment using the income approach and market approach noted above, and each of these reporting units exceeded their respective carrying values and, therefore, there was no impairment to goodwill.

Goodwill as of September 30, 2023 and December 31, 2022 reflects accumulated impairment losses of $84.2 million and $27.4 million, respectively, in the Digital Media reportable segment.

Intangible Assets Subject to Amortization

As of September 30, 2023, intangible assets subject to amortization relate primarily to the following (in thousands):


	Weighted-Average Amortization Period	Historical Cost		Accumulated Amortization		Net
Trade names	10 years	$	265,406	$	142,201	$	123,205
Customer relationships (1)	8 years	690,942		533,565		157,377
Other purchased intangibles	9 years	476,529		389,168		87,361
Total		$	1,432,877	$	1,064,934	$	367,943

(1)The Company amortizes customer relationship assets in a pattern that best reflects the pace at which the asset’s benefits are consumed. This pattern results in a substantial majority of the amortization expense being recognized in the first 4 to 5 years, despite the overall life of the asset.

As of December 31, 2022, intangible assets subject to amortization relate primarily to the following (in thousands):


	Weighted-Average Amortization Period	Historical Cost		Accumulated Amortization		Net
Trade names	10 years	$	261,614	$	125,422	$	136,192
Customer relationships (1)	8 years	687,798		479,741		208,057
Other purchased intangibles	8 years	481,973		363,407		118,566
Total		$	1,431,385	$	968,570	$	462,815

Amortization expense, included in General and administrative expense on the Condensed Consolidated Statements of Operations, was approximately $33.0 million and $36.3 million for the three months ended September 30, 2023 and 2022, respectively, and $100.0 million and $119.3 million for the nine months ended September 30, 2023 and 2022, respectively.