Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Long-Lived Assets

The Company performs a goodwill impairment test at least annually, or more frequently if certain events occur, or circumstances change, that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. The Company’s two reporting units are: Mobile Broadband (MBB) and KVH Media Group (Media).

Other long-lived assets, which include intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of other long-lived assets is measured by a comparison of the carrying amount of an asset group to its future undiscounted cash flows. If these comparisons indicate that an asset group is not recoverable, the Company will recognize an impairment loss for the amount by which the carrying value of the asset group exceeds its related estimated fair value. The Company has determined that the assets within each of the Company's reporting units (MBB and Media) are highly interrelated and interdependent on each other to generate revenues, and thus independent cash flows are not identifiable at a level lower than that of these reporting units. Accordingly, the Company's asset groups were determined to be its reporting units (MBB and Media).

In the third quarter of 2023, the Company experienced a sustained decrease in its stock price, which was identified by the Company as an indicator of impairment. Consequently, the Company performed a quantitative assessment of impairment of goodwill and other long-lived assets for the MBB and Media reporting units and asset groups. These assessments require considerable judgment and are largely based on assumptions and estimates developed by management including estimation of future cash flows, estimation of long-term growth rates, determination of the period over which future cash flows will occur, determination of a weighted average cost of capital, and consideration of market, industry, and other factors.

In performing the quantitative impairment assessment for goodwill, the Company determined the fair value of its reporting units by discounting its estimated future cash flows using an appropriate weighted average cost of capital. As of September 30, 2023, the estimated fair values of the MBB and Media reporting units were lower than their carrying values. After recognition of a long-lived asset impairment charge (as discussed below), the Company recognized a goodwill impairment charge of $5,333, which represented the total goodwill for both reporting units, in the consolidated statements of operations for the three and nine months ended September 30, 2023.

In performing the quantitative impairment assessment for other long-lived assets, the Company used undiscounted cash flows expected to be generated over the estimated remaining useful life of the primary asset of each asset group, to determine whether the carrying amounts of each asset group are recoverable. As of September 30, 2023, the Company’s analysis indicated that the carrying amount of the MBB asset group is recoverable, and therefore no impairment charge was recognized. As of September 30, 2023, the Company’s analysis indicated that the carrying amount of the Media asset group is not recoverable and that such carrying amount exceeded its fair value. Accordingly, the Company recognized a long-lived assets impairment charge of $657 in the consolidated statements of operations for the three and nine months ended September 30, 2023.

Goodwill

The following table sets forth the changes in the carrying amount of goodwill for the nine months ended September 30, 2023:


	Amounts
Balance at December 31, 2022	$	5,308
Impairment	(5,333)
Foreign currency translation adjustment	25
Balance at September 30, 2023	$	—

Intangible Assets

The changes in the carrying amount of intangible assets during the nine months ended September 30, 2023 are as follows:


	Amounts
Balance at December 31, 2022	$	404
Amortization expense	(167)
Intangible assets acquired in asset acquisition	35
Impairment	(274)
Foreign currency translation adjustment	2
Balance at September 30, 2023	$	—

Intangible assets arose from the acquisition of KVH Media Group (acquired as Headland Media Limited) in May 2013. These intangible assets were being amortized on a straight-line basis over the estimated useful life of 10 years for acquired subscriber relationships. The intangible assets were recorded in pounds sterling and fluctuations in exchange rates cause these amounts to increase or decrease from time to time.

Acquired intangible assets are subject to amortization. The following table summarizes acquired intangible assets at September 30, 2023 and December 31, 2022, respectively:


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
September 30, 2023
Subscriber relationships	$	—	$	—	$	—
Distribution rights	—		—		—
Internally developed software	—		—		—
Proprietary content	—		—		—
Intellectual property	2,284		2,284		—

	$	2,284	$	2,284	$	—
December 31, 2022
Subscriber relationships	$	7,649	$	7,245	$	404
Distribution rights	315		315		—
Internally developed software	446		446		—
Proprietary content	153		153		—
Intellectual property	2,284		2,284		—

	$	10,847	$	10,443	$	404

Amortization expense related to intangible assets was $19 and $90 for the three months ended September 30, 2023 and 2022, respectively, and $167 and $409 for the nine months ended September 30, 2023 and 2022, respectively. Amortization expense was categorized as general and administrative expense.