Note 3 - Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

Goodwill

As of March 31, 2020, the carrying value of goodwill relating to business acquisitions is $196,633. The carrying value of goodwill is allocated to reporting units is as follows:

Reporting Units	Amount
Americas	64,315
India	15,180
Malaysia	47,543
Saudi Arabia	54,840
South Africa	1,578
Argentina	4,991
Australia	8,186
Ending balance, March 31, 2020	$196,633

We perform a goodwill impairment analysis at least annually (in the fourth quarter of each year) unless indicators of impairment exist in interim periods. The Goodwill was allocated to new reporting units using a relative fair value allocation approach. We performed a quantitative assessment to determine if the fair value of each of our reporting units with goodwill exceeded its carrying value.

The assumptions used in the analysis are based on the Company’s internal budget. The Company projected revenue, operating margins and cash flows for a period of five years and applied a perpetual long-term growth rate using discounted cash flows (DCF) method. These assumptions are reviewed annually as part of management’s budgeting and strategic planning cycles. These estimates may differ from actual results. The values assigned to each of the key assumptions reflect the management’s past experience as their assessment of future trends and are consistent with external/internal sources of information.

During the first quarter of 2020, the Company reviewed the carrying value of goodwill due to the events and circumstances surrounding the COVID-19 pandemic. As a result of the recent global economic disruption and uncertainty due to the novel coronavirus ("COVID-19") pandemic, the Company concluded a triggering event had occurred as of March 31, 2020, and accordingly, performed interim impairment testing on the goodwill balances of its reporting units. As quoted market prices are not available for these reporting units, the calculations of their estimated fair values were based on a discounted cash flow model (income approach). 

This approach relied on numerous assumptions and judgments that were subject to various risks and uncertainties. The Company has used internal and external information, including recently signed client engagements for which service delivery has not yet begun and projections adjusted to meet economic forecasts, for the purpose of computation and developing assumptions. It also includes the Company's estimates of future revenue and terminal growth rates, margin assumptions and discount rates to estimate future cash flows. The calculations explicitly addressed factors such as timing, with due consideration given to forecasting risk. While assumptions utilized are subject to a high degree of judgment and complexity, the Company has made every effort to estimate future cash flows as accurately as possible, given the high degree of economic uncertainty that exists as of March 31, 2020.

The results of these interim impairment tests indicated that the estimated fair value of the India, South Africa and Australia reporting unit was less than its carrying value. Consequently, a goodwill impairment charge of $15,820, $4,332 and $2,556 was recorded for the India, South Africa and Australia reporting unit respectively. If the pandemic's economic impact is more severe, or if the economic recovery takes longer to materialize or does not materialize as strongly as anticipated, this could result in further goodwill impairment charges.

The following table presents the changes in goodwill during the period:

	Amount
Opening balance, December 31, 2019	$	219,341
Impairment		(22,708	)
Ending balance, March 31, 2020	$	196,633

Intangible Assets

The following table presents our intangible assets as of March 31, 2020

	Gross Intangibles		Accumulated Amortization		Net Intangibles		Weighted Average Amortization Period (years)
Customer relationships	$	66,220	$	12,078	$	54,142		6.5
Brand		49,500		8,647		40,853		7.1
Trademarks		13,210		1,495		11,715		7.5
Other intangibles		2,130		615		1,515		4.9
	$	131,060	$	22,835	$	108,225	$	-

As a result of the indicator of impairment identified, the Company performed an interim impairment assessment of its intangible assets as of March 31, 2020. Based on the results of our analyses, the estimated fair values of the trade names exceeded the carrying values.

Expected future amortization of intangible assets as of March 31, 2020 is as follows:

Years Ending December 31,	Amount
Remainder of 2020	$	7,762
2021		10,350
2022		10,350
2023		10,306
2024		10,252
Thereafter		59,205