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Goodwill and Intangible Assets
 12 Months Ended
Dec. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets Goodwill and Intangible Assets
    In connection with the Rasmussen Acquisition, the Company applied FASB ASC 805, Business Combinations, using the acquisition method of accounting, and recorded $217.2 million of goodwill, representing the excess of the purchase price over the fair value of assets acquired and liabilities assumed, including identifiable intangible assets. The Company previously recorded goodwill in the amount of $38.6 million in connection with its acquisition of HCN, and later recorded impairment charges reducing the carrying value of our goodwill to $26.6 million.

    The Company accounts for goodwill and indefinite-lived intangible assets in accordance with FASB ASC 350, Intangibles Goodwill and Other, and in 2018 adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The Company annually assesses goodwill for impairment, or more frequently if events and circumstances, including a review of any impacts related to the COVID-19 pandemic, indicate that goodwill might be impaired. Goodwill impairment testing consists of an optional qualitative assessment as well as a quantitative test. The quantitative test compares the fair value of the reporting unit to its carrying value. If the carrying value of the reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the carrying value is greater than the fair value, the difference between the two values is recorded as an impairment.

During the year ended December 31, 2019, as a result of circumstances that included HCN’s continued underperformance against revised 2019 internal targets and overall 2019 financial performance, the Company completed interim goodwill impairment tests during the first and third quarters. The implied fair value of goodwill was calculated and compared to the recorded goodwill, and the Company determined the fair value of goodwill was $26.6 million, or $7.3 million
less than its carrying value. There was no impairment of the intangible assets. As a result, the Company recorded a pretax, non-cash charge of $7.3 million to reduce the carrying value of its goodwill in the HCN Segment during 2019. There was no impairment of goodwill or the intangible assets during the years ended December 31, 2020 and 2021.
    
    The Company engaged an independent valuation firm to assist with the valuation and determination of the fair value of HCN for both assessments. The independent valuation firm weighted the results of four different valuation methods: (1) discounted cash flows; (2) guideline company; (3) guideline transaction for comparable transactions; and (4) guideline transaction for private equity transactions. Under the discounted cash flow method, cash flows were discounted by an estimated risk weighted average cost of capital, which was intended to reflect the overall level of inherent risk of HCN. Under the guideline company method, valuation metrics from other education companies were used to determine the value. Under the comparable transaction method, pricing terms from other transactions in the higher education market were used to determine the value. Under the private equity method, pricing terms from private equity transactions were used to determine the value. Values derived under the four valuation methods were then weighted to estimate HCN’s enterprise value.

    The goodwill impairment charges recorded in 2019 eliminated the difference between the fair value of goodwill and the carrying value of goodwill.

For the year ended December 31, 2020, the Company completed its annual assessment of goodwill and concluded that HCN’s fair value was more than the carrying value; consequently, there was no impairment.

For the year ended December 31, 2021, the Company completed its annual assessment of goodwill and concluded that the fair value of HCN exceeded the carrying value by approximately $20.1 million, or 51.8%.

Changes in the carrying amount of goodwill by reportable segment during the years ended December 31, 2020 and 2021 are as follows (in thousands):
APUS SegmentRU SegmentHCN SegmentTotal Goodwill
Goodwill as of December 31, 2019
$— $— $26,563 $26,563 
Impairment— — — — 
Goodwill as of December 31, 2020
$— $— $26,563 $26,563 
Goodwill acquired— 217,203 — 217,203 
Impairment— — — — 
Adjustments— (280)— (280)
Goodwill as of December 31, 2021
$— $216,923 $26,563 $243,486 

In addition to goodwill, in connection with the acquisitions of RU and HCN, the Company recorded identified intangible assets with an indefinite useful life in the aggregate amount of $51.0 million and $3.7 million, respectively, which includes trade name, accreditation, licensing and Title IV, and affiliate agreements, and recorded $35.5 million and $4.4 million, respectively, of identified intangible assets with a definite useful life. At the acquisition dates, the useful life assigned to each type of intangible asset with a definite useful life was as follows:

Useful Life
Student contracts and relationships6 years
Non-compete agreements5 years
Curricula3 years
Lead conversions2 years
Student Roster2 years
The future amortization of finite-lived intangible assets is as follows (in thousands):

Future Amortization of IntangiblesAmortization
2022$15,417 
202311,833 
20243,111 
Total$30,361 

As of December 31, 2020 and 2021, all HCN Segment recorded identified intangible assets with a definite useful life were fully amortized.

RU Segment Intangible assets consist of the following as of December 31, 2021 (in thousands):
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Finite-lived intangible assets
Student roster$20,000 $3,333 $16,667 
Curricula14,000 1,556 12,444 
Lead Conversions1,500 250 1,250 
Total finite-lived intangible assets35,500 5,139 30,361 
Indefinite-lived intangible assets
Trade name
26,500 — 26,500 
Accreditation, licensing and Title IV
24,500 — 24,500 
Total indefinite-lived intangible assets
51,000 — 51,000 
Total intangible assets
$86,500 $5,139 $81,361 

HCN Segment intangible assets consist of the following as of December 31, 2020 and 2021 (in thousands):

Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Finite-lived intangible assets
Student contracts and relationships
$3,870 $3,870 $— 
Curricula405 405 — 
Non-compete agreements
86 86 — 
Total finite-lived intangible assets
4,361 4,361 — 
Indefinite-lived intangible assets
Trade name
1,998 — 1,998 
Accreditation, licensing and Title IV
1,686 — 1,686 
Affiliation agreements
37 — 37 
Total indefinite-lived intangible assets
3,721 — 3,721 
Total intangible assets
$8,082 $4,361 $3,721 

Finite-lived intangible assets are amortized in a manner that reflects the estimated economic benefit of the intangible assets. Student roster, curricula, lead conversions and non-compete agreements are amortized on a straight-line basis. Student contracts and relationships were amortized using an accelerated method.
    Determining fair value requires judgment and the use of significant estimates and assumptions, including fluctuations in enrollments, revenue growth rates, EBITDA margins, discount rates, and future market conditions, among others. Given the current competitive and regulatory environment, the impact of COVID-19, and the uncertainties regarding the related impact on the business, there can be no assurance that the estimates and assumptions made for purposes of the Company’s interim and annual goodwill impairment tests will prove to be accurate predictions of the future. If the Company’s assumptions are not realized, the Company may record additional goodwill impairment charges in future periods. It is not possible at this time to determine if any such future impairment charge would result or whether such charge would be material.