Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2014

Goodwill And Intangible Assets Disclosure [Abstract]

5. Goodwill and Intangible Assets

The changes in the carry amounts of goodwill for the six months ended June 30, 2014 are due to the addition of goodwill resulting from the acquisition of Ionia (See Note 4 to the Condensed Consolidated Financial Statements).

Changes in goodwill for the six months ended June 30, 2014, are as follows (in thousands):


Balance, December 31, 2013	$	18,712
Goodwill related to the acquisition of Ionia		6,295

Balance, June 30, 2014	$	25,007

Intangible assets consist of the following (in thousands):


			December 31, 2013						June 30, 2014
	Estimated Useful Life		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Trade names		1-5 years	$	666	$	666	$	—	$	676	$	670	$	6
Customer base		5-7 years		3,789		1,901		1,888		5,129		2,199		2,930
Customer backlog		4 months		—		—		—		120		120		—
Domain names		5 years		894		341		553		908		425		483
Software		4 years		299		299		—		299		299		—
Technology		3-6 years		13,963		1,835		12,128		14,363		2,856		11,507
Technology and know-how		3 years		3,176		2,597		579		3,176		3,125		51
Documented know-how		4 years		—		—		—		280		22		258
Non-compete agreements		5 years		162		34		128		162		53		109
Internally developed software		3 years		2,485		875		1,610		3,390		1,258		2,132


			$	25,434	$	8,548	$	16,886	$	28,503	$	11,027	$	17,476

As a result of the acquisition of Ionia, the Company capitalized $120,000 of customer backlog, $280,000 of documented know-how, $10,000 of trade names, and $1.3 million of customer relationships as intangible assets. The Company is amortizing the intangible assets based upon the pattern in which their economic benefit will be realized, or if this pattern cannot be reliably determined, using the straight-line method over their estimated useful lives. The intangible assets have estimated useful lives which range from four months to seven years.

On November 6, 2013, the Company purchased a software asset for $11.5 million. This software asset is recorded as an intangible asset and classified as technology and will be amortized using the straight-line method over an estimated useful life of five years, beginning in February 2014 when the product was made available to customers. In May 2014, the Company paid the remaining $0.5 million for the statement of work in accordance with the agreement. The Company capitalized $0.4 million as completed technology and $0.1 million was expensed as consulting work.

The Company capitalized $317,000 and $413,000 during the three months ended June 30, 2013 and 2014, respectively, and $556,000 and $905,000 during the six months ended June 30, 2013 and 2014, respectively, of costs related to internally developed computer software to be sold as a service incurred during the application development stage and is amortizing these costs over the expected lives of the related services.

The Company is amortizing its intangible assets over the estimated lives noted above. Amortization expense for intangible assets was $633,000 and $1.5 million for the three months ended June 30, 2013 and 2014, respectively, and $1.2 million and $2.5 million for the six months ended June 30, 2013 and 2014, respectively. Amortization relating to software, technology and know-how, documented know-how, and internally developed software is recorded within cost of revenues and the amortization of trade name and trademark, customer base, customer backlog, domain names, and non-compete agreements is recorded within operating expenses. Future estimated amortization expense for intangible assets is as follows at June 30, 2014 (in thousands):


Amortization Expense (Years Ending December 31)	Amount
2014 (Six months ending December 31)		2,346
2015		4,485
2016		3,939
2017		3,339
2018		2,863
Thereafter		504


Total	$	17,476

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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