Goodwill

9 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The carrying amount of goodwill by reportable segment as of March 31, 2020 and June 30, 2019 was as follows:



	Vistaprint			PrintBrothers			The Print Group			National Pen			All Other Businesses			Total
Balance as of June 30, 2019	$	145,961		$	124,089		$	198,363		$	34,434		$	216,033		$	718,880
Acquisitions (1)	—			6,879			—			—			—			6,879
Impairment (2)	—			—			(40,391		)	(34,434		)	(26,017		)	(100,842		)
Adjustments (3)	3,919			—			—			—			(3,919		)	—
Effect of currency translation adjustments (4)	(171		)	(3,644		)	(5,769		)	—			—			(9,584		)
Balance as of March 31, 2020	$	149,709		$	127,324		$	152,203		$	—		$	186,097		$	615,333

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(1) During the first quarter of fiscal 2020, we recognized goodwill related to an immaterial acquisition within our PrintBrothers reportable segment.

(2) During the third quarter of fiscal 2020, we recognized impairment in our Exaprint, National Pen, and VIDA reporting units. Refer below for additional details.

(3) Due to changes in the composition of our reportable segments during the first quarter of fiscal 2020, we reclassified the goodwill associated with our Vistaprint Corporate Solutions reporting unit from All Other Businesses to our Vistaprint reportable segment. Refer to Note 12 for additional details on the changes in our reportable segments.

(4) Related to goodwill held by subsidiaries whose functional currency is not the U.S. dollar.

Impairment Review

Fiscal 2020

Our annual goodwill impairment test is performed as of May 31; however, during the third quarter of fiscal 2020, nearly all of our businesses have experienced significant declines in revenue during the month of March, due to the disruptions associated with the COVID-19 pandemic. As a result, we concluded that a triggering event existed for all ten reporting units with goodwill, which required us to perform an impairment test in the current quarter. We have estimated the near-term financial impacts of this economic disruption and utilized different scenarios that evaluate outcomes that would indicate more or less severe demand declines, as well as different time horizons for the post-pandemic recovery period. Although we currently expect the impacts to be temporary, the negative effects of the pandemic on revenue and profitability triggers an assessment of goodwill, as we expect some of our businesses to achieve materially lower financial results than previously expected.

For seven of our reporting units, a significant level of headroom existed between the estimated fair value and carrying value of the reporting units at our May 31, 2019 test date, and significant headroom remained after considering the deterioration in cash flow due to COVID-19, resulting in no indication of impairment. For three of our reporting units, we identified triggering events that extend beyond the near-term impacts of the pandemic, which include reductions to the long-term profitability outlooks for our Exaprint, National Pen and VIDA reporting units. The triggering events in these specific reporting units were due to a combination of the near-term disruptions outlined above, along with reductions to the long-term profitability expected from each business, as compared to prior expectations, which was informed by recent underperformance relative to expectations. For our VIDA reporting unit, in light of our decision to exit the business, which was completed on April 10, 2020, the negotiated sale price was the primary input in our goodwill analysis. Refer to Note 2 for additional details. As a result of the considerations noted, we concluded it was more likely than not that the fair value of each of these three reporting units are below each of their respective carrying amount.

As required, prior to performing the quantitative goodwill impairment test, we first evaluated the recoverability of long-lived assets as the change in expected long-term cash flows is indicative of a potential impairment. We performed the recoverability test using undiscounted cash flows for the asset groups of all of our reporting units and concluded that no impairment of long-lived assets existed. Subsequent to performing the recoverability of long lived assets test, we performed a quantitative assessment of goodwill of all reporting units and compared the carrying value to the fair value. For those with significant headroom, we did not believe any indication of impairment exists, and for those where the carrying value exceeded the fair value, we recognized an impairment as outlined below.

Our goodwill impairment test resulted in impairment charges to our Exaprint reporting unit, included within The Print Group reportable segment, the National Pen reporting unit, and our VIDA reporting unit, included within our All Other Business reportable segment. In order to execute the quantitative goodwill impairment test, we compared the fair value of each reporting unit to its carrying value. We used the income approach, specifically the discounted cash flow method, to derive the fair value. This approach calculates fair value by estimating the after-tax cash flows attributable to a reporting unit and then discounting the after-tax cash flows to a present value using a risk-adjusted discount rate. We selected this method as being the most meaningful in preparing our goodwill assessment as we believe the income approach most appropriately measures our income producing assets. We considered using the market approach but concluded it was not appropriate in valuing these particular reporting units given the lack of relevant market comparisons available for application of the market approach. The cash flow projections in the fair value analysis are considered Level 3 inputs, and consist of management's estimates of revenue growth rates and operating margins, taking into consideration historical results, as well as industry and market conditions. The discount rate used in the fair value analysis is based on a weighted average cost of capital (“WACC”), which represents the average rate a business must pay its providers of debt and equity, plus a risk premium. The respective WACC percentages used for each reporting unit within our goodwill impairment test and noted below were derived from a group of comparable companies for each respective reporting unit, adjusted for the risk premium associated with each reporting unit.

Based on the goodwill impairment test performed, we recognized the following impairment charges:


•	A partial impairment of the goodwill of our Exaprint reporting unit of $40,391, using a WACC of 14.5%, resulting in $23,767 of goodwill that remains after the impairment as of March 31, 2020


•	A full impairment of the goodwill of our National Pen reporting unit of $34,434, using a WACC of 13.0%


•	A full impairment of the goodwill of our VIDA reporting unit of $26,017, based upon our negotiated sale price

Our goodwill analysis requires significant judgment, including the identification of reporting units and the amount and timing of expected future cash flows. While we believe our assumptions are reasonable, actual results could differ from our projections. There have been no indications of impairment that would require analysis for any of our other reporting units as of March 31, 2020.