Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The changes in carrying amounts of goodwill for the nine months ended September 30, 2024 are as follows (in thousands):


	Digital Media		Cybersecurity and Martech		Consolidated
Balance as of January 1, 2024	$	1,016,880	$	529,185	$	1,546,065
Goodwill acquired (1)	112,534		—		112,534
Goodwill removed due to sale of businesses (2)	(3,983)		—		(3,983)
Goodwill impairment	(85,273)		—		(85,273)


Foreign exchange translation	1,180		2,331		3,511
Balance as of September 30, 2024	$	1,041,338	$	531,516	$	1,572,854

(1)Goodwill recognized in connection with the acquisitions during the nine months ended September 30, 2024 (see Note 3 — Business Acquisitions), which is not expected to be deductible for income tax purposes.

(2)During the nine months ended September 30, 2024, in a cash transaction, the Company sold an international business at Digital Media within its shopping vertical, which resulted in $4.0 million of goodwill being removed in connection with this sale.

Goodwill as of September 30, 2024 and December 31, 2023 reflects accumulated impairment losses of $169.5 million and $84.2 million, respectively, in the Digital Media reportable segment.

During the three and nine months ended September 30, 2024, the Company reassessed the fair value of certain reporting units within the Digital Media and Cybersecurity and Martech reportable segments as a result of a sustained decline in the Company’s stock price, and forecasted reductions in revenue or earnings before interest, taxes, depreciation, and amortization (“EBITDA”) in certain of its reporting units. Based on the quantitative fair value test of two reporting units within the Digital Media reportable segment, the carrying value of the reporting units exceeded their fair value, and the Company recorded an impairment of approximately $85.3 million during the three and nine months ended September 30, 2024.

During the three and nine months ended September 30, 2023, the Company reassessed the fair value of certain reporting units within the Digital Media reportable segment as a result of forecasted reduction in revenue and EBITDA in the reporting unit, as well as an increase in interest rates and market volatility that could affect the Company’s assumptions on its discount rates. Based on the quantitative fair value test, the carrying value of one 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.

During each period, the fair value of the relevant 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 based on public and private market information. As each 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.

Following the impairments at two reporting units during the three and nine months ended September 30, 2024, there was no excess of fair value over the carrying value at those reporting units. So any further decrease in estimated fair value of these two reporting units will result in an additional impairment charge to goodwill. Further, as of September 30, 2024, there was one additional reporting unit within the Digital Media reportable segment that may be at risk of impairment. In total, goodwill for these three reporting units was $498.4 million as of September 30, 2024. 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.

Intangible Assets Subject to Amortization

As of September 30, 2024, intangible assets subject to amortization relate primarily to the following (in thousands):


	Historical Cost		Accumulated Amortization		Net
Trade names and trademarks	$	375,332	$	214,695	$	160,637
Customer relationships	847,121		603,979		243,142
Other purchased intangibles	427,589		360,594		66,995
Total	$	1,650,042	$	1,179,268	$	470,774

As of December 31, 2023, intangible assets subject to amortization relate primarily to the following (in thousands):


	Historical Cost		Accumulated Amortization		Net
Trade names and trademarks	$	347,895	$	192,111	$	155,784
Customer relationships	692,634		555,384		137,250
Other purchased intangibles	379,703		347,331		32,372
Total	$	1,420,232	$	1,094,826	$	325,406

Amortization expense, included in ‘General, administrative, and other related costs’ in our Condensed Consolidated Statements of Operations, was approximately $28.5 million and $33.0 million for the three months ended September 30, 2024 and 2023, respectively, and $82.5 million and $100.0 million for the nine months ended September 30, 2024 and 2023, respectively.