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Goodwill and Intangible Assets
 9 Months Ended
Sep. 30, 2022
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets Goodwill and Intangible Assets
    In connection with its acquisitions, the Company has applied ASC 805, using the acquisition method of accounting. The Company recorded $217.4 million of goodwill in connection with the Rasmussen Acquisition, 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 non-cash impairment charges reducing the carrying value of HCN Segment goodwill to $26.6 million. There was no goodwill recorded in connection with the acquisition of GSUSA.

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. There were no indefinite useful life intangible assets identified as a result of the GSUSA Acquisition. The Company recorded $35.5 million, $4.4 million and $1.0 million, respectively, of identified intangible assets with a definite useful life in connection with the acquisitions of RU, HCN and GSUSA. Amortization expense related to definite lived intangibles assets was approximately $4.0 million and $11.9 million for the three and nine months ended September 30, 2022, respectively.

The following table represents the balance of the Company’s intangible assets as of September 30, 2022 (in thousands):

Gross Carrying AmountAccumulated AmortizationImpairmentNet Carrying Amount
(Unaudited)
Finite-lived intangible assets
Student roster$20,000 $10,833 $— $9,167 
Curricula
14,563 5,500 — 9,063 
Student and customer contracts and relationships4,614 4,093 — 521 
Lead conversions1,500 813 — 687 
Non-compete agreements
86 86 — — 
Tradename35 26 — 9 
Accreditation and licenses28 9 — 19 
Total finite-lived intangible assets$40,826 $21,360 $— $19,466 
Indefinite-lived intangible assets
Trade name
28,498 — — 28,498 
Accreditation, licensing, and Title IV26,186 — 13,500 12,686 
Affiliation agreements37 — — 37 
Total indefinite-lived intangible assets
54,721 — 13,500 41,221 
Total intangible assets
$95,547 $21,360 $13,500 $60,687 
The following table represents the balance of the Company’s intangible assets as of December 31, 2021 (in thousands):

Gross Carrying AmountAccumulated AmortizationImpairmentNet Carrying Amount
Finite-lived intangible assets
Student roster$20,000 $3,333 $— $16,667 
Curricula14,405 1,961 — 12,444 
Student contracts and relationships3,870 3,870 — — 
Lead conversions1,500 250 — 1,250 
Non-compete agreements86 86 — — 
Total finite-lived intangible assets$39,861 $9,500 $— $30,361 
Indefinite-lived intangible assets
Trade name28,498 — — 28,498 
Accreditation, licensing, and Title IV26,186 — — 26,186 
Affiliation agreements37 — — 37 
Total indefinite-lived intangible assets
54,721 — — 54,721 
Total intangible assets$94,582 $9,500 $— $85,082 

During the three months ended June 30, 2022, in connection with preparation of the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, the Company completed a qualitative assessment to determine if an interim goodwill impairment test was necessary. The Company concluded it was more likely than not the fair value of the Company’s RU Segment was less than its carrying amount as a result of RU’s under performance in the second quarter of 2022 compared to projections at the time of acquisition, along with the decline in market value of the Company and comparable companies. There were no indicators of impairment at HCN. Therefore, the Company proceeded with a quantitative impairment test for the RU Segment as of May 31, 2022. The implied fair value of goodwill was calculated and compared to the recorded goodwill. As a result, the Company recorded a non-cash impairment charge of $131.4 million, and to reflect the corresponding tax impact of $36.0 million, to reduce the carrying value of RU Segment goodwill.

During the three months ended June 30, 2022, the Company also evaluated events and circumstances related to the valuation of its intangibles recorded within the RU and HCN Segments to determine if there were indicators of impairment. This evaluation included consideration of enrollment trends and financial performance, as well as industry and market conditions, and the impact of the COVID-19 pandemic. These evaluations concluded there were indicators of impairment during the three months ended June 30, 2022 of the RU Segment accreditation, licensing, and Title IV indefinite-lived intangible asset. The Company determined the fair value of the intangible asset was $11.0 million, or $13.5 million less than its carrying value. As a result, the Company recorded a non-cash impairment charge of $13.5 million to reduce the carrying value of RU Segment indefinite-lived intangible assets.

In total, the Company recorded non-cash impairment charges of $144.9 million during the three months ended June 30, 2022 related to RU Segment goodwill and intangible assets, and the corresponding tax impact of $36.0 million.

The Company utilized an independent valuation firm to determine the fair value of RU. The independent valuation firm weighted the results of two different valuation methods: discounted cash flow and guideline public company. Under the discounted cash flow method, fair value was determined by discounting the estimated future cash flows of RU at RU’s estimated weighted-average cost of capital. Under the guideline public company method, pricing multiples from other public companies in the public higher education market were used to determine the value of RU. Values derived under the two valuation methods were then weighted to estimate RU’s enterprise value. The income and cost approaches were used, as applicable, to value the RU indefinite-lived intangibles assets. The impairment charge recorded in the quarter ended June 30, 2022 eliminated the difference between the fair value of goodwill and the respective indefinite-lived intangible assets and the book value. Future changes, including minor changes in revenue, operating income, valuation multiples, discount rates, and other inputs to the valuation process may result in future impairment charges, and those charges could be material.
Goodwill is tested for impairment annually and upon occurrence of certain triggering events or substantive changes in circumstances that indicate that fair value may be below carrying value. Upon review, the Company determined that there were no indicators of impairment at RU or HCN during the three months ended September 30, 2022.

The following table summarizes the changes in the carrying amount of goodwill by reportable segment as of December 31, 2021 and September 30, 2022 (in thousands):

APUS SegmentRU SegmentHCN SegmentTotal Goodwill
(Unaudited)
Goodwill as of December 31, 2021$— $216,923 $26,563 $243,486 
Goodwill acquired— — — — 
Impairment— (131,400)— (131,400)
Adjustments— 507 — 507 
Goodwill as of September 30, 2022$— $86,030 $26,563 $112,593 

Determining fair value of goodwill and intangible assets requires judgment and the use of significant estimates and assumptions, including, but not limited to, fluctuations in enrollments, revenue growth rates, operating margins, discount rates, changes in the regulatory environment, and future market conditions. 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 and intangible asset impairment tests will prove to be accurate predictions of the future. If the Company’s assumptions are not realized, the Company may record goodwill and intangible asset 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. Estimates are subjective and are not intended to predict actual future events, and subsequent events are not indicative of the reasonableness of the original estimates of fair value.

    For additional information on goodwill and intangible assets, see the Consolidated Financial Statements and accompanying notes in the Annual Report.