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Goodwill and other Identifiable Intangible Assets (Tables) | 12 Months Ended
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Sep. 30, 2022
Goodwill and Intangible Assets Disclosure [Abstract] |
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS, NET | GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS, NET Identifiable Intangible Assets, Net Amortizable identifiable intangible assets, net as of September 30, 2022 and 2021 were comprised of the following (in thousands):
| September 30, 2022 |  | September 30, 2021
| Gross carrying amount |  | Accum. amort. |  | Net |  | Gross carrying amount |  | Accum. amort. |  | Net
Purchased and core technology | $ | 85,016 |  |  | $ | (55,854) |  |  | $ | 29,162 |  |  | $ | 69,162 |  |  | $ | (50,701) |  |  | $ | 18,461 |
License agreements | 112 |  |  | (112) |  |  | — |  |  | 112 |  |  | (112) |  |  | — |
Patents and trademarks | 39,711 |  |  | (17,666) |  |  | 22,045 |  |  | 23,491 |  |  | (14,978) |  |  | 8,513 |
Customer relationships | 309,212 |  |  | (58,355) |  |  | 250,857 |  |  | 130,278 |  |  | (39,973) |  |  | 90,305 |
Non-compete agreements | 600 |  |  | (600) |  |  | — |  |  | 600 |  |  | (600) |  |  | — |
Order backlog | 1,000 |  |  | (1,000) |  |  | — |  |  | 1,000 |  |  | (250) |  |  | 750 |
Total | $ | 435,651 |  |  | $ | (133,587) |  |  | $ | 302,064 |  |  | $ | 224,643 |  |  | $ | (106,614) |  |  | $ | 118,029 |
Amortization expense is included in our consolidated statements of operations in cost of sales and general and administrative expense. Amortization expense in cost of sales includes amortization for purchased and core technology and certain patents and trademarks. Amortization expense for fiscal years 2022, 2021 and 2020 was as follows (in thousands):
Fiscal year | Total
2022 | $ | 27,195 |
2021 | $ | 16,534 |
2020 | $ | 14,754 |
3. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS, NET (CONTINUED) Estimated amortization expense for the next five fiscal years is as follows (in thousands):
Fiscal year | Total
2023 | $ | 25,692 |
2024 | $ | 24,977 |
2025 | $ | 21,520 |
2026 | $ | 20,593 |
2027 | $ | 18,582 |
The changes in the carrying amount of goodwill by reportable segments are (in thousands):
| IoT Products & Services |  | IoT Solutions |  | Total
Balance on September 30, 2020 | $ | 160,365 |  |  | $ | 49,770 |  |  | $ | 210,135 |
Acquisitions | 13,472 |  |  | — |  |  | 13,472 |
Adjustments | 847 |  |  | — |  |  | 847 |
Foreign currency translation adjustment | 496 |  |  | 572 |  |  | 1,068 |
Balance on September 30, 2021 | $ | 175,180 |  |  | $ | 50,342 |  |  | $ | 225,522 |
Acquisition | — |  |  | 118,635 |  |  | 118,635 |
Adjustments | 186 |  |  | (631) |  |  | (445) |
Foreign currency translation adjustment | (2,435) |  |  | (800) |  |  | (3,235) |
Balance on September 30, 2022 | $ | 172,931 |  |  | $ | 167,546 |  |  | $ | 340,477 |
No goodwill impairment has been recorded in any period presented. Goodwill represents the excess of cost over the fair value of net identifiable assets acquired. Goodwill is quantitatively tested for impairment on an annual basis as of June 30, or more frequently if events or circumstances occur which could indicate impairment. We continue to have two reportable segments, our IoT Products & Services segment and our IoT Solutions segment (see Note 4). Effective with the reorganization announcement on October 7, 2020 (see Note 10), our IoT Products & Services business is now structured to include four reporting units under the IoT Products & Services segment, each with a reporting manager: Cellular Routers, Console Servers, OEM Solutions and Infrastructure Management. Due to the reorganization, we performed our fiscal third quarter 2021 annual impairment test for those four reporting units along with our IoT Solutions segment. Following our acquisition of Ventus, IoT Solutions is comprised of two reporting units. All six reporting units were included in our fiscal third quarter 2022 annual impairment test. For our quantitative goodwill impairment tests, we determine the estimated fair value of each reporting unit and compare it to the carrying value of the reporting unit, including goodwill. If the carrying amount of a reporting unit is higher than its estimated fair value, then an impairment loss must be recognized for the excess. Fair values for the six reporting units were each estimated on a standalone basis using a weighted combination of the income approach and market approach. The income approach indicates the fair value of a business based on the value of the cash flows the business or asset can be expected to generate in the future. A commonly used variation of the income approach used to value a business is the discounted cash flow (“DCF”) method. The DCF method is a valuation technique in which the value of a business is estimated on the earnings capacity, or available cash flow, of that business. Earnings capacity represents the earnings available for distribution to stockholders after consideration of the reinvestment required for future growth. Significant judgment is required to estimate the amount and timing of future cash flows for each reporting unit and the relative risk of achieving those cash flows. 3. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS, NET (CONTINUED) The market approach indicates the fair value of a business or asset based on a comparison of the business or asset to comparable publicly traded companies or assets and transactions in its industry as well as our prior acquisitions. This approach can be estimated through the guideline company method. This method indicates fair value of a business by comparing it to publicly traded companies in similar lines of business. After identifying and selecting the guideline companies, we make judgments about the comparability of the companies based on size, growth rates, profitability, risk, and return on investment in order to estimate market multiples. These multiples are then applied to the reporting units to estimate a fair value. Assumptions and estimates to determine fair values under the income and market approaches are complex and often subjective. They can be affected by a variety of factors. These include external factors such as industry and economic trends. They also include internal factors such as changes in our business strategy and our internal forecasts. Changes in circumstances or a potential event could negatively affect the estimated fair values. We will continue to monitor potential COVID-19 industry and demand impacts as this could potentially affect our cash flows and market capitalization. If our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of one or more of our reporting units, we may be required to record future impairment charges for goodwill. Results of our Fiscal 2022 Annual Impairment Test As of June 30, 2022, we had a total of $32.7 million of goodwill for the Enterprise Routers reporting unit, $57.1 million of goodwill for the Console Servers reporting unit, $63.7 million of goodwill for the OEM Solutions reporting unit, $20.4 million of goodwill for the Infrastructure Management reporting unit, $49.5 million of goodwill for the SmartSense reporting unit and $118.3 million of goodwill for the Ventus reporting unit. At June 30, 2022, the fair value of goodwill exceeded the carrying value for all six reporting units. SmartSense and Ventus fair values exceeded carrying values by less than 10%. Implied fair value for each reporting unit was calculated on a standalone basis using a weighted combination of the income approach and market approach. The implied fair values of each reporting unit were added together along with our unallocated assets to get an indicated value of total equity to which a range of indicated value of total equity was derived. This range was compared to the total market capitalization of $852.0 million as of June 30, 2022. This implied a range of control (deficit)/ premiums of (5.6)% to 7.9%. This range of control premiums fell below the control premiums observed in the last five years in the communications equipment industry. As a result, the market capitalization reconciliation analysis proved support for the reasonableness of the fair values estimated for each individual reporting unit.
Schedule of Amortizable Identifiable Intangible Assets | Amortizable identifiable intangible assets, net as of September 30, 2022 and 2021 were comprised of the following (in thousands):
| September 30, 2022 |  | September 30, 2021
| Gross carrying amount |  | Accum. amort. |  | Net |  | Gross carrying amount |  | Accum. amort. |  | Net
Purchased and core technology | $ | 85,016 |  |  | $ | (55,854) |  |  | $ | 29,162 |  |  | $ | 69,162 |  |  | $ | (50,701) |  |  | $ | 18,461 |
License agreements | 112 |  |  | (112) |  |  | — |  |  | 112 |  |  | (112) |  |  | — |
Patents and trademarks | 39,711 |  |  | (17,666) |  |  | 22,045 |  |  | 23,491 |  |  | (14,978) |  |  | 8,513 |
Customer relationships | 309,212 |  |  | (58,355) |  |  | 250,857 |  |  | 130,278 |  |  | (39,973) |  |  | 90,305 |
Non-compete agreements | 600 |  |  | (600) |  |  | — |  |  | 600 |  |  | (600) |  |  | — |
Order backlog | 1,000 |  |  | (1,000) |  |  | — |  |  | 1,000 |  |  | (250) |  |  | 750 |
Total | $ | 435,651 |  |  | $ | (133,587) |  |  | $ | 302,064 |  |  | $ | 224,643 |  |  | $ | (106,614) |  |  | $ | 118,029 |
Schedule of Amortization Expense | Amortization expense for fiscal years 2022, 2021 and 2020 was as follows (in thousands):
Fiscal year | Total
2022 | $ | 27,195 |
2021 | $ | 16,534 |
2020 | $ | 14,754 |
Schedule of Estimated Future Amortization Expense Related to Identifiable Intangible Assets | Estimated amortization expense for the next five fiscal years is as follows (in thousands):
Fiscal year | Total
2023 | $ | 25,692 |
2024 | $ | 24,977 |
2025 | $ | 21,520 |
2026 | $ | 20,593 |
2027 | $ | 18,582 |
Schedule of Changes in Carrying Amount of Goodwill | The changes in the carrying amount of goodwill by reportable segments are (in thousands):
| IoT Products & Services |  | IoT Solutions |  | Total
Balance on September 30, 2020 | $ | 160,365 |  |  | $ | 49,770 |  |  | $ | 210,135 |
Acquisitions | 13,472 |  |  | — |  |  | 13,472 |
Adjustments | 847 |  |  | — |  |  | 847 |
Foreign currency translation adjustment | 496 |  |  | 572 |  |  | 1,068 |
Balance on September 30, 2021 | $ | 175,180 |  |  | $ | 50,342 |  |  | $ | 225,522 |
Acquisition | — |  |  | 118,635 |  |  | 118,635 |
Adjustments | 186 |  |  | (631) |  |  | (445) |
Foreign currency translation adjustment | (2,435) |  |  | (800) |  |  | (3,235) |
Balance on September 30, 2022 | $ | 172,931 |  |  | $ | 167,546 |  |  | $ | 340,477 |

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