Goodwill and Intangible Assets, Net

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

During the nine months ended September 30, 2023, a decline in our financial performance, overall negative trend in the video service provider channel and an uncertain economic environment, contributed to a significant decline in our market capitalization. We considered this to be an impairment trigger. We, therefore, performed a quantitative valuation analysis under an income approach to estimate our reporting unit's fair value. The income approach used projections of estimated operating

results and cash flows that were discounted using a discount rate based on the weighted-average cost of capital. The main assumptions supporting the cash flow projections include, but are not limited to, revenue growth, margins, discount rate, and terminal growth rate. The financial projections reflect our best estimate of economic and market conditions over the projected period, including forecasted revenue growth, margins, capital expenditures, depreciation and amortization. In addition to our valuation analysis under an income approach, we also considered the implied control premium compared to our market capitalization.

We determined that the implied control premium over our market capitalization to be substantial; therefore, we recorded an impairment charge of $49.1 million during the nine months ended September 30, 2023.

Changes in the carrying amount of goodwill were as follows:


(In thousands)
Balance at December 31, 2022	$	49,085

Goodwill impairment	(49,075)
Foreign exchange effects	(10)
Balance at September 30, 2023	$	—

Intangible Assets, Net

The components of intangible assets, net were as follows:


	September 30, 2023						December 31, 2022
(In thousands)	Gross (1)		Accumulated Amortization (1)		Net		Gross (1)		Accumulated Amortization (1)		Net
Capitalized software development costs	$	2,078	$	(281)	$	1,797	$	1,647	$	(44)	$	1,603
Customer relationships	6,340		(3,622)		2,718		6,340		(3,080)		3,260
Developed and core technology	4,520		(3,966)		554		4,520		(3,693)		827
Distribution rights	304		(299)		5		308		(281)		27
Patents	32,509		(12,165)		20,344		29,388		(10,790)		18,598
Trademarks and trade names	450		(339)		111		450		(295)		155
Total intangible assets, net	$	46,201	$	(20,672)	$	25,529	$	42,653	$	(18,183)	$	24,470

(1)This table excludes the gross value of fully amortized intangible assets totaling $44.3 million and $43.7 million at September 30, 2023 and December 31, 2022, respectively.

Amortization expense is recorded in selling, general and administrative expenses, except amortization expense related to capitalized software development costs, which is recorded in cost of sales. Amortization expense by statement of operations caption was as follows:


(In thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Cost of sales	$	146	$	13	$	302	$	37
Selling, general and administrative expenses	1,119		1,018		3,282		2,928
Total amortization expense	$	1,265	$	1,031	$	3,584	$	2,965

Estimated future annual amortization expense related to our intangible assets at September 30, 2023, was as follows:


(In thousands)
2023 (remaining 3 months)	$	1,256
2024	5,103
2025	4,392
2026	3,583
2027	3,035
Thereafter	8,160
Total	$	25,529