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Intangible Assets and Goodwill | 9 Months Ended
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Sep. 30, 2023
Intangible Assets, Net (Excluding Goodwill) [Abstract] |
Intangible Assets | Note 7. Intangible Assets and Goodwill Other Intangible Assets The following is a summary of the Company’s acquired other intangible assets (dollars in thousands):
|  | September 30, 2023 |
|  | Weighted average amortization period (in years) |  | Gross carrying amount |  |  | Accumulated amortization |  |  | Net carrying amount |
Market related intangibles |  | 5 |  | $ | 1,820 |  |  | $ | 1,049 |  |  | $ | 771 |
Customer relationships |  | 7 |  |  | 13,780 |  |  |  | 8,425 |  |  | $ | 5,355 |
Developed technologies |  | 11 |  |  | 4,380 |  |  |  | 1,529 |  |  | $ | 2,851 |
Covenants to non-compete |  | 2 |  |  | 115 |  |  |  | 115 |  |  | $ | — |
Total intangible assets, net |  |  |  | $ | 20,095 |  |  | $ | 11,118 |  |  | $ | 8,977 |
|  | December 31, 2022 |
|  | Weighted average amortization period (in years) |  | Gross carrying amount |  |  | Accumulated amortization |  |  | Net carrying amount |
Market related intangibles |  | 5 |  | $ | 1,820 |  |  | $ | 795 |  |  | $ | 1,025 |
Customer relationships |  | 7 |  |  | 13,780 |  |  |  | 6,720 |  |  |  | 7,060 |
Developed technologies |  | 11 |  |  | 4,380 |  |  |  | 1,263 |  |  |  | 3,117 |
Covenants to non-compete |  | 2 |  |  | 115 |  |  |  | 114 |  |  |  | 1 |
Total intangible assets, net |  |  |  | $ | 20,095 |  |  | $ | 8,892 |  |  | $ | 11,203 |
Estimated annual amortization of intangible assets for the next five years and thereafter is shown in the foll owing table (in thousands):
|  | Estimated future amortization |
2023 (remaining three months) |  | $ | 742 |
2024 |  |  | 2,968 |
2025 |  |  | 2,958 |
2026 |  |  | 557 |
2027 |  |  | 356 |
Thereafter |  |  | 1,396 |
Total |  | $ | 8,977 |
Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures, and asset impairments, among other factors. Amortization expense was $0.7 million and $0.8 million for the three months ended September 30, 2023 and 2022, respectively. Amortization expense was $2.2 million and $2.3 million for the nine months ended September 30, 2023 and 2022, respectively. No impairment losses were recorded against the other intangibles during the three months ended September 30, 2023 and 2022. During the three months ended September 30, 2023, the Company had a decline in its market capitalization, as reflected in a material decline in share price. The decline in market capitalization indicated that the carrying value of the Company's intangible assets composed of acquired intangibles, developed technologies, customer relationships and non-compete agreements may not be recoverable. Accordingly under ASC 360, the Company performed an interim impairment test to determine the recoverability of the assets group by comparing the future undiscounted cash flows expected from the use of the asset group to the carrying value at September 30, 2023. The Company determined under ASC 360-10-55-24 that the reporting unit is the asset group for the purposes of assessing impairment of the intangible assets. The cash flows of the intangible assets are dependent on the reporting entity as a whole. The cash flows of other assets and liabilities in various departments of the Company such as research, administrative and sales and marketing contribute to the generation of cash flows from the intangible assets. The recoverability test indicated that the future expected cash flows materially exceed the asset group carrying value. Therefore, the Company did not proceed with the third step to determine the fair value of the intangible assets and compare fair value against the carrying value. Based on the assessment performed, we determined that the intangible asset carrying values are not impaired as of September 30, 2023 and the useful lives remain appropriate. Goodwill No impairment losses were recorded against the goodwill during the three months ended September 30, 2023 and 2022. The decline in the Company's market share price during the three months ended September 30, 2023 was a triggering event that indicated that the fair value of the entity may be below its carrying amount. As a result of the triggering event, the Company performed a qualitative assessment by comparing the margin between the market capitalization and the carrying value at September 30, 2023 and at December 31, 2022. The qualitative assessment showed a significant decline in the margin between the market capitalization and the carrying value. Therefore, the Company proceeded to perform a quantitative assessment. The quantitative impairment test compares the fair value of the reporting unit to its carrying amount, including goodwill. To determine the fair value of the reporting unit, the Company engaged a valuation consulting firm to assist management for purposes of impairment testing under ASC 350. The Company estimated the fair value of our reporting unit using a weighting of the market and income approaches. For the market approach, we used the guideline public company method. Under this method we utilize information from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit to derive an indication of value. For the income approach, we used a discounted cash flow methodology to derive an indication of value, which required management to make estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, income tax rates, EBITDA, perpetual growth rates, and long-term discount rates, among others. We then applied a weighting to the indicated values computed from the market and income approaches to derive the fair values of the reporting unit. Forecasts of future cash flows were based on our best estimate of future net sales and operating expenses, based primarily on customer forecasts, industry trade organization data and general economic conditions. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. Based on the analysis performed, the Company determined the fair value of the reporting unit is greater than the carrying value. Therefore, there is no goodwill impairment charge as of September 30, 2023. Certain future events and circumstances, including adverse changes in the business and economic conditions and changes in customer behavior could result in changes to our assumptions and judgments used in the impairment tests. A downward revision of these assumptions could cause the total fair value of our goodwill and intangible assets to fall below carrying values and a non-cash impairment charge would be required. Such a charge may have a material effect on the consolidated financial statements.

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