Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Changes in the carrying value of goodwill by reporting unit were as follows:


	Total		DWS		CA&I		ECS		Other
Balance at December 31, 2023	$	287.4	$	140.8	$	38.0	$	98.3	$	10.3
Goodwill impairment	(39.1)		(39.1)		—		—		—
Translation adjustments	0.2		0.2		—		—		—
Balance at September 30, 2024	$	248.5	$	101.9	$	38.0	$	98.3	$	10.3

At September 30, 2024, the amount of goodwill allocated to reporting units with negative net assets within Other was $10.3 million.

Goodwill Impairment

The company reviews goodwill for impairment annually, as well as whenever there are events or changes in circumstances (triggering events), which indicate that the carrying amount may not be recoverable. The company continuously monitors its revenue, gross profit and operating profit growth and evaluates other relevant events and circumstances including changes to U.S. treasury rates and equity risk premiums, tax rates, recent market valuations from transactions by comparable companies, volatility in the company’s market capitalization, and general industry, market and macro-economic conditions, that could unfavorably impact the recoverability of the goodwill carrying value.

During the third quarter of 2024, the company reviewed its estimated long term expected future cash flows for its Digital Workplace Solutions (DWS) reporting unit as operating results were below estimated forecast due to the impact of the slower pace of client signings driven by the current economic environment and industry dynamics. Based on this, the company concluded that a triggering event existed and conducted a quantitative goodwill assessment for its reporting unit as of September 30, 2024.

The fair value of the DWS reporting unit was estimated using both the income approach and the market approach using a weighted methodology to determine its fair value.

The income approach is a forward-looking approach to estimating fair value and relies primarily on internal forecasts. Within the income approach, the method used is the discounted cash flow method, which is considered a Level 3 nonrecurring fair value measurement. The company starts with a forecast of all expected net cash flows associated with the reporting unit, which

includes the application of a terminal value, and then applies a reporting unit-specific discount rate to arrive at a net present value amount. Significant estimates and assumptions inherent in this approach include the amount and timing of projected net cash flows, long-term growth rate and the discount rate. Cash flow projections are based on management’s estimates of economic and market conditions, which drive key assumptions of revenue growth rates and operating margins. The discount rate, in turn, is based on various market factors and specific risk characteristics of each reporting unit.

The market approach relies primarily on external information for estimating the fair value. Significant estimates and assumptions inherent in this approach include the selection of appropriate guideline companies and the selected performance metric used in this approach.

Based on the goodwill impairment analysis performed during the third quarter of 2024, the carrying value of the DWS reporting unit exceeded its respective fair value, resulting in the recognition of a goodwill impairment charge of $39.1 million for the three and nine months ended September 30, 2024.

Based on the annual impairment analysis performed during the fourth quarter of 2023, the Cloud, Applications & Infrastructure Solutions (CA&I) reporting unit had a 10% excess of fair value over book value, including goodwill.

It is possible that future changes in such circumstances or in the inputs and assumptions used in estimating the fair value of the reporting units could require the company to record an additional non-cash impairment charge.

Intangible Assets, Net

Intangible assets, net at September 30, 2024, consists of the following:


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Technology (i)	$	10.0	$	10.0	$	—
Customer relationships (ii)	54.2		18.0		36.2
Marketing (ii)	1.3		0.9		0.4
Total	$	65.5	$	28.9	$	36.6

(i) Amortization expense is included within cost of revenue - technology in the consolidated statements of income (loss).

(ii) Amortization expense is included within selling, general and administrative expense in the consolidated statements of income (loss).

For the three months ended September 30, 2024 and 2023, amortization expense was $1.5 million and $2.4 million, respectively. For the nine months ended September 30, 2024 and 2023, amortization expense was $6.1 million and $7.3 million, respectively.

The future amortization relating to acquired intangible assets at September 30, 2024, was estimated as follows:


	Future Amortization Expense
Remainder of 2024	$	1.1
2025	4.3
2026	4.0
2027	4.0
2028	4.0
Thereafter	19.2
Total	$	36.6