Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

During the first quarter of 2021, the Company reallocated a portion of its goodwill to the Education Technology Services segment based on a relative fair value analysis performed using several probability weighted scenarios. The following table presents changes in the carrying value of goodwill by segment for the years ended December 31, 2021 and 2022 (in thousands):


	U.S. Higher Education		Australia / New Zealand		Education Technology Services		Total
Balance as of December 31, 2020	$	732,075	$	586,451	$	—	$	1,318,526
Reporting unit reallocation(1)	(100,000)		—		100,000		—
Additions	—		—		—		—
Impairments	—		—		—		—
Currency translation adjustments	—		(32,924)		—		(32,924)
Adjustments to prior acquisitions(2)	—		262		—		262
Balance as of December 31, 2021	632,075		553,789		100,000		1,285,864
Additions	—		947		—		947
Impairments	—		—		—		—
Currency translation adjustments	—		(35,621)		—		(35,621)
Adjustments to prior acquisitions	—		87		—		87
Balance as of December 31, 2022	$	632,075	$	519,202	$	100,000	$	1,251,277

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(1)Represents the reallocation of goodwill as a result of the Company reorganizing its segments in 2021.

(2)Represents a measurement period adjustment recorded in 2021 related to the Company’s acquisition of ANZ, as discussed in Note 3.

The Company assesses goodwill at least annually for impairment during the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective reporting unit below its carrying amount.

In 2022, the Company performed a qualitative impairment assessment of goodwill assigned to all reporting units, except for the goodwill assigned to the ANZ reporting unit, using the first day of the fourth quarter of 2022 as the assessment date. The Company evaluated the likelihood of impairment by considering qualitative factors relevant to the reporting units, such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and any other factors that have a significant bearing on fair value. Based on the results of its qualitative impairment analysis, the Company determined that no impairment indicators existed for these reporting units as of the assessment date.

In 2022, the Company performed a quantitative impairment assessment for goodwill assigned to the ANZ reporting unit using the first day of the fourth quarter of 2022 as the assessment date. The Company used an income-based approach to determine the fair value of the ANZ reporting unit. The income approach consisted of a discounted cash flow model that included projections of future cash flows for the ANZ reporting unit, calculating a terminal value, and discounting such cash flows by a risk adjusted rate of return. The determination of fair value consists of using unobservable inputs under the fair value measurement standards.

The Company believes that the most critical assumptions and estimates used in determining the estimated fair value of the ANZ reporting unit include, but are not limited to, the amounts and timing of expected future cash flows, new international student enrollment growth, the discount rate, and the terminal growth rate. The assumptions used in determining the expected future cash flows consider various factors such as historical operating trends, particularly in student enrollment and pricing, anticipated economic and regulatory conditions, reasonable expectations for planned business expansion opportunities, and long-term operating strategies and initiatives. The discount rate is based on the Company’s assumption of a prudent investor’s required rate of return for assuming the risk of investing in a particular company. The terminal growth rate reflects the sustainable operating income a reporting unit could generate in a perpetual state as a function of revenue growth, inflation, and future margin expectations. The Company believes that these assumptions are consistent with a reasonable market participant view while employing the concept of highest and best use of the asset.

Based on the results of its quantitative impairment assessment, the Company concluded that the fair value of its ANZ reporting unit exceeded its carrying value. Accordingly, no goodwill impairment charges were recorded during the years ended December 31, 2020, 2021, and 2022.

Intangible Assets

The following table represents the balance of the Company’s intangible assets as of December 31, 2021 and 2022 (in thousands):


	December 31, 2021						December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Subject to amortization
Student relationships	$	201,309	$	(180,007)	$	21,302	$	200,185	$	(191,125)	$	9,060
Not subject to amortization
Trade names	255,078		—		255,078		251,481		—		251,481
Total	$	456,387	$	(180,007)	$	276,380	$	451,666	$	(191,125)	$	260,541

The Company’s finite-lived intangible assets are comprised of student relationships, which are being amortized on a straight-line basis over a three-year useful life. Straight-line amortization expense for finite-lived intangible assets reflects the pattern in which the economic benefits of the assets are consumed over their estimated useful lives. Amortization expense related to finite-lived intangible assets was $57.3 million, $44.3 million, and $11.1 million for the years ended December 31, 2020, 2021 and 2022, respectively. In 2023, the Company will recognize the remaining $9.1 million of amortization expense related to its finite-lived intangible assets.

Indefinite-lived intangible assets not subject to amortization consist of trade names. The Company assigned an indefinite useful life to its trade name intangible assets, as it is believed these assets have the ability to generate cash flows indefinitely. In addition, there are no legal, regulatory, contractual, economic, or other factors to limit the useful life of the trade name intangibles.

The Company assesses indefinite-lived intangible assets at least annually for impairment during the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective indefinite-lived intangible asset below its carrying amount.

In 2022, the Company performed a qualitative impairment assessment related to its indefinite-lived intangible assets, except for the ANZ trade names, using the first day of the fourth quarter of 2022 as the assessment date. The Company evaluated the likelihood of impairment by considering qualitative factors, such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and any other factors that have a significant bearing on fair value. Based on the results of its qualitative impairment analysis, the Company determined that no impairment indicators existed for these indefinite-lived intangible assets as of the assessment date.

In 2022, the Company performed a quantitative impairment assessment for indefinite-lived intangible assets related to the ANZ trade names using the first day of the fourth quarter of 2022 as the assessment date. The Company used an income-based approach to determine the fair value of the ANZ trade names. The income approach consisted of a discounted cash flow model, using the relief from royalty method, which included a projection of future revenues for ANZ, identifying a royalty rate, calculating a terminal value, and discounting such cash flows by a risk adjusted rate of return. The determination of fair value of the ANZ trade name primarily consists of using unobservable inputs under the fair value measurement standards.

The Company believes that the most critical assumptions and estimates used in determining the estimated fair value of the ANZ trade names include, but are not limited to, the amounts and timing of future revenue growth rates, the royalty rate, the discount rate, and the terminal growth rate. The assumptions used in determining the expected future revenue growth rates consider various factors such as historical operating trends, particularly in student enrollment and pricing, anticipated economic and regulatory conditions, reasonable expectations for planned business expansion opportunities, and long-term operating strategies and initiatives. The royalty rate is based on the Company’s assumption of what a reasonable market participant would pay to license the ANZ trade names, expressed as a percentage of revenues. The discount rate is based on the Company’s assumption of a prudent investor’s required rate of return for assuming the risk of investing in a particular company. The terminal growth rate reflects the sustainable revenue growth the business could generate in a perpetual state as a function of inflationary expectations. The Company believes that these assumptions are consistent with a reasonable market participant view while employing the concept of highest and best use of the asset.

Based on the results of its quantitative impairment assessment, the Company concluded that the fair value of the ANZ trade names exceeded its carrying value. Accordingly, there were no impairment charges related to indefinite-lived intangible assets recorded during the years ended December 31, 2020, 2021, and 2022.