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Goodwill and Intangible Assets | 6 Months Ended
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Nov. 23, 2024
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Intangible Assets | Goodwill and Intangible Assets As described in Note 2 – Summary of Significant Accounting Policies, the Company performed interim quantitative goodwill impairment assessments for its reporting units, each of which is also a reporting segment, during the three months ended November 23, 2024 and August 24, 2024, which resulted in pre-tax goodwill impairment charges of $79.5 million and $3.9 million, respectively. In the second quarter of fiscal 2025, the Company experienced a decrease in its market capitalization, along with slower than expected recovery in business performance within the On-Demand Talent segment and Europe and Asia Pacific segment. As a result, the Company performed a goodwill impairment assessment for each of its reporting units with associated goodwill, in which the estimated fair values of each reporting unit were compared to its respective carrying amounts. The Company’s determination of the estimated fair value was based on a combination of the income-based approach and the market-based approach. The income-based approach was based on the present value of discounted cash flows of each reporting unit, using the Company’s assumptions regarding revenue growth rates, forecasted gross profit margins, forecasted adjusted EBITDA margins, operating costs, tax rates, terminal period growth rates, and other economic and market trends. Additionally, the present value was based on applying a weighted average cost of capital, which considered long-term interest rates and cost of equity based on the reporting segment’s risk profile. The market-based approach was based on the guideline public company method, which uses market multiples of revenue and earnings before interest, taxes, depreciation and amortization for a group of comparable public companies. As part of the goodwill impairment test, we reconciled the aggregated estimated fair value of the Company's operating segments to the Company’s market capitalization, including consideration of any asymmetry in information, and control premium representing the estimated amount a market participant would pay to obtain a controlling interest in the Company. Based on the assessment as of an interim date in the three months ended November 23, 2024, the Company concluded as follows: On-Demand Talent – The carrying value, including $70.2 million of goodwill, was in excess of its fair value by $48.4 million. In addition to recording this excess as a goodwill impairment charge, the Company also recorded a $9.3 million charge related to the deferred tax impacts from the excess carrying value. The Company therefore recorded an aggregate of $57.8 million in goodwill impairment charges for the On-Demand Talent segment. Consulting – The fair value exceeded its carrying value, including $98.4 million of goodwill, by 13.3%. Europe and Asia Pacific – The carrying value, including $22.0 million of goodwill, was in excess of its fair value by $26.8 million. Because the excess of carrying value over fair value exceeded the goodwill balance for the segment, the Company fully impaired the goodwill balance, resulting in goodwill impairment charges of $21.7 million for the Europe and Asia Pacific segment. Outsourced Services – The fair value exceeded its carrying value, including $28.8 million of goodwill, by 49.5%. The goodwill impairment assessment in the first quarter of fiscal 2025 was performed concurrently with the change in the Company’s operating segments, which were aligned to the Company’s reporting units and reportable segments. As a result of this segment realignment, the Company allocated goodwill to each of its reporting units under the new organizational structure on a relative fair value basis. The Company estimated the fair values of the reporting units based on the income-based approach using the discounted cash flow method, which included assumptions regarding revenue growth rates, forecasted gross profit margins, operating costs, tax rates, terminal period growth rates, and economic and market trends. Additionally, the present value of discounted cash flows was based on applying a weighted average cost of capital, which considered long-term interest rates and cost of equity based on the reporting segment’s risk profile. As a result of this assessment, in the three months ended August 24, 2024, the Company concluded that the carrying value of the Europe and Asia Pacific segment was in excess of its fair value and recorded a non-cash goodwill impairment charge of $3.9 million for its Europe and Asia Pacific Segment. In performing the goodwill impairment assessments, the Company considers the assumptions used in determining the estimated fair values of its reporting units to be reasonable and appropriate. However, the assumptions are complex and subjective, and additional adverse changes in a key assumption or a combination of key assumptions may significantly affect the Company’s assessment of the fair value and goodwill impairment. These assumptions include, among other things, a failure to meet expected earnings or other financial plans; changes in the discount rate, the terminal growth rate or tax rates; or significant changes in industry or economic trends. If the assumptions noted above adversely change, negative macroeconomic conditions worsen or the Company’s market capitalization decreases for a sustained period of time, the Company may be required to perform additional impairment analysis that could result in additional impairment charges and materially adversely affect the Company’s financial condition and results of operations. The following table summarizes the activity in the Company’s goodwill balance. The balance as of May 25, 2024 was recast to reflect the impact of the Company's change in segment reporting and the final fair value allocation of the reporting units that became effective during the first quarter of fiscal 2025 (in thousands):
| On-Demand Talent |  | Consulting |  | Europe & Asia Pacific |  | Outsourced Services |  | All Other |  | Total
Balance as of May 25, 2024 | $ | 70,202 |  |  | $ | 91,770 |  |  | $ | 25,850 |  |  | $ | 28,757 |  |  | $ | — |  | $ | 216,579 |
Acquisition (see Note 4) | — |  | 6,653 |  |  | — |  | — |  | — |  | 6,653 |
Goodwill Impairment | (57,755) |  | — |  | (25,582) |  | — |  | $ | — |  | (83,337)
Impact of foreign currency exchange rate changes |  |  | — |  | (268) |  | — |  | — |  | (268) |
Balance as of November 23, 2024 | $ | 12,447 |  |  | $ | 98,423 |  |  | $ | — |  |  | $ | 28,757 |  |  | $ | — |  | $ | 139,627 |
The following table presents details of the Company’s intangible assets, estimated lives and related accumulated amortization (in thousands):
|  |  | As of November 23, 2024 |  | As of May 25, 2024
| Estimated Useful Life |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Customer contracts and relationships | 7 - 12 years |  | $ | 39,500 |  | $ | (18,957) |  |  | $ | 20,543 |  | $ | 25,100 |  | $ | (16,858) |  |  | $ | 8,242
Computer software | 1 - 3.5 years |  | 7,870 |  | (7,184) |  |  | 686 |  | 7,870 |  | (6,539) |  |  | 1,331
Trade names | 1 year |  | 600 |  | (250) |  | 350 |  | - |  | - |  | -
Non-Compete Agreements | 5 years |  | 720 |  | (60) |  | 660 |  | - |  | - |  | -
Total |  |  | $ | 48,690 |  | $ | (26,451) |  |  | $ | 22,239 |  | $ | 32,970 |  | $ | (23,397) |  |  | $ | 9,573
The Company recorded amortization expense of $1.6 million and $1.3 million for the three months ended November 23, 2024 and November 25, 2023, respectively, and $3.1 million and $2.6 million for the six months ended November 23, 2024 and November 25, 2023, respectively. The following table presents future estimated amortization expense based on existing intangible assets (in thousands): Fiscal Years:
2025 (remaining six months) | $ | 2,830
2026 | 4,186
2027 | 1,936
2028 | 1,632
2029 | 1,632
2030 and thereafter | 10,023
Total | $ | 22,239
Actual future estimated amortization expense could differ from these estimated amounts as a result of future acquisitions, dispositions, impairments, and other factors or changes.

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