Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill is tested for impairment at least annually or when certain events or indicators of impairment occur between annual impairment tests. In September 2024 and June 2024, in consideration of the sustained decline in our stock price, industry developments, and our financial performance, we evaluated our current operating performance. Accordingly, we determined that there were indicators of impairment and a quantitative assessment was necessary. In the quantitative assessment, we estimated the fair value of our reporting unit utilizing an income approach, based on the present value of future discounted cash flows, which is classified as Level 3 in the fair value hierarchy. Significant estimates used to determine fair value include the weighted average cost of capital, growth rates, and amount and timing of expected future cash flows. As a result of the quantitative assessment, we determined that goodwill was impaired as the fair value of our reporting unit was less than the carrying value. As such, during the three and nine months ended September 30, 2024, we recorded impairment expense of $195.7 million and $635.4 million, respectively, equal to the excess of the carrying value of our reporting unit over the estimated fair value, limited to the remaining balance of goodwill, which was classified as impairment expense on our condensed consolidated statements of operations.

The following table presents our goodwill balances (in thousands):


	Nine Months Ended September 30, 2024		Year Ended December 31, 2023
Beginning balance	$	631,995	$	615,093
Impairment expense	(635,391)		—
Foreign currency translation adjustment	3,396		16,902
Ending balance	$	—	$	631,995

Intangible Assets

Intangible assets are tested for impairment at the asset group level at least annually or when events or changes in circumstances indicate that the carrying amount of such asset groups may not be recoverable. In conjunction with our goodwill impairment analysis in June 2024, we determined that there were indicators of impairment for our Busuu assets and a recoverability test was necessary. In the recoverability test, we determined that the expected future undiscounted cash flows for the asset group were not sufficient to recover the carrying value. We then proceeded in estimating the fair value of the asset group utilizing the income approach, based on a present value of future discounted cash flows, which is classified as Level 3 in the fair value hierarchy. Significant estimates used to determine fair value include the growth rates and amount and timing of expected future cash flows. As a result of the impairment test, we determined the asset group was impaired and recorded a $31.9 million impairment expense related to the intangible assets during the nine months ended September 30, 2024, which was classified as impairment expense on our condensed consolidated statements of operations. We also recorded an impairment expense for property and equipment, net. For further information, see “Note 5, Property and Equipment, Net.”

The following tables present our intangible assets balances as of September 30, 2024 and December 31, 2023 (in thousands, except weighted-average amortization period):


	September 30, 2024
	Weighted-Average Amortization Period (in months)	Gross Carrying Amount		Accumulated Amortization		Accumulated Impairment		Foreign Currency Translation Adjustment		Net Carrying Amount
Developed technologies	80	$	106,703	$	(61,952)	$	(29,369)	$	(3,958)	$	11,424
Content libraries	60	12,230		(12,230)		—		—		—
Customer lists	35	34,190		(32,892)		—		(1,298)		—
Trade and domain names	52	16,213		(13,343)		(2,493)		(377)		—
Total intangible assets	67	$	169,336	$	(120,417)	$	(31,862)	$	(5,633)	$	11,424


	December 31, 2023
	Weighted-Average Amortization Period (in months)	Gross Carrying Amount		Accumulated Amortization		Accumulated Impairment		Foreign Currency Translation Adjustment		Net Carrying Amount
Developed technologies	80	$	106,703	$	(55,651)	$	—	$	(3,757)	$	47,295
Content libraries	60	12,230		(11,189)		—		—		1,041
Customer lists	35	34,190		(31,836)		—		(1,298)		1,056
Trade and domain names	52	16,213		(12,817)		—		(358)		3,038


Total intangible assets	67	$	169,336	$	(111,493)	$	—	$	(5,413)	$	52,430

During the three and nine months ended September 30, 2024, amortization expense related to our intangible assets totaled $1.4 million and $8.9 million, respectively. During the three and nine months ended September 30, 2023, amortization expense related to our intangible assets totaled $6.1 million and $18.7 million, respectively.

During the three months ended September 30, 2024, we did not recognize any impairment charges on our intangible assets and during the nine months ended September 30, 2024, we recognized a $31.9 million impairment charge on our intangible assets. During the three and nine months ended September 30, 2023, we recognized a $3.6 million impairment charge on our indefinite-lived intangible asset.

The following table presents the estimated future amortization expense related to our intangible assets as of September 30, 2024 (in thousands):


	September 30, 2024
Remaining three months of 2024	$	1,036
2025	4,240
2026	3,897
2027	1,776
2028	407
Thereafter	68
Total	$	11,424