Goodwill and Other Identifiable Intangible Assets, Net

6 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS, NET

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Amortizable intangible assets were (in thousands):


	March 31, 2023						September 30, 2022
	Gross carrying amount		Accum. amort.		Net		Gross carrying amount		Accum. amort.		Net
Purchased and core technology	$	85,037	$	(57,931)	$	27,106	$	85,016	$	(55,854)	$	29,162
License agreements	112		(112)		—		112		(112)		—
Patents and trademarks	39,802		(18,804)		20,998		39,711		(17,666)		22,045

Customer relationships	309,222		(67,885)		241,337		309,212		(58,355)		250,857
Non-compete agreements	600		(600)		—		600		(600)		—
Order backlog	1,000		(1,000)		—		1,000		(1,000)		—
Total	$	435,773	$	(146,332)	$	289,441	$	435,651	$	(133,587)	$	302,064

Amortization expense was $6.2 million and $7.0 million for the three months ended March 31, 2023 and 2022. Amortization expense was $12.7 million and $13.4 million for the six months ended March 31, 2023 and 2022, respectively. Amortization expense is recorded on our condensed consolidated statements of operations within cost of sales and in general and administrative expense.

Estimated amortization expense related to intangible assets for the remainder of fiscal 2023 and the five succeeding fiscal years is (in thousands):


2023 (six months)	$	13,317
2024	25,227
2025	21,771
2026	20,593
2027	20,593
2028	20,411

6. GOODWILL AND OTHER INTANGIBLE ASSETS, NET (CONTINUED)

The changes in the carrying amount of goodwill by reportable segments are (in thousands):


	Three months ended March 31, 2023
	IoT Products & Services		IoT Solutions		Total
Balance on September 30, 2022	$	172,931	$	167,546	$	340,477


Foreign currency translation adjustment	1,269		116		1,385
Balance on March 31, 2023	$	174,200	$	167,662	$	341,862

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 8). Our IoT Products & Services business is 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. Following our acquisition of Ventus in November 2021, we have two reporting units within our IoT Solutions segment: SmartSense and Ventus. Each of these segments was tested individually for impairment during our annual impairment test completed in the third fiscal quarter of fiscal 2022.

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. 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.