Goodwill and Intangible Assets

6 Months Ended

Aug. 31, 2022

Goodwill and Intangible Assets

Goodwill and Intangible Assets

(5)   Goodwill and Intangible Assets

The following table presents changes in the carrying amount of goodwill for the six months ended August 31, 2022:

Balance, February 28, 2022	$	577,896
Impairment		(299,705)
Balance, August 31, 2022	$	278,191

Annually, and upon the identification of a triggering event, management is required to perform an evaluation of the recoverability of goodwill. Triggering events potentially warranting an interim goodwill impairment test include, among other factors, declines in historical or projected revenue, operating income or cash flows, and sustained declines in the Company’s stock price or market capitalization, considered both in absolute terms and relative to peers.

As a result of sustained decreases in the Company’s stock price and market capitalization, the Company conducted an impairment test of its goodwill and intangible assets as of May 31, 2022. As a result of this testing, the Company recorded a non-cash goodwill impairment charge of $299,705 (equivalent to $4.27 per basic and diluted share for the six months ended August 31, 2022) during the first quarter of fiscal 2023. No impairments to goodwill were recorded during the three months ended August 31, 2022 and no impairments were recorded to intangible assets during the six months ended August 31, 2022.

The Company’s May 31, 2022 goodwill impairment test reflected an allocation of 70% and 30% between income and market-based approaches, respectively. The Company believes the 70% weighting to the income-based approach is appropriate as it more directly reflects its future growth and profitability expectations. Significant inputs into the valuation models included the discount rate, revenue market multiples, and estimated future cash flows. Management used a discount rate of 11% and guideline peer group and public transaction revenue multiples between 1.1x and 1.8x current and forward-looking revenues in the goodwill impairment test. Subsequent to the impairment, there was no excess of reporting unit fair value over carrying value.

While management cannot predict if or when additional future goodwill impairments may occur, additional goodwill impairments could have material adverse effects on the Company’s operating income, net assets, and/or the Company’s cost of, or access to, capital.

Intangible assets consist of the following as of August 31, 2022:

		As of August 31, 2022
	Useful Life	Gross Value		Accumulated Amortization		Net Carrying Value		Weighted Average Remaining Useful Life
Customer relationships	2 to 20 years	$	124,050	$	(11,406)	$	112,644	18.2
Technology	2 to 5 years		111,526		(33,501)		78,025	3.5
Supplier-based network	5 years		25,000		(7,500)		17,500	3.5
Trade name	10 years		13,700		(1,798)		11,902	8.7
Non-compete agreement	2 to 3 years		9,300		(5,425)		3,875	1.1
		$	283,576	$	(59,630)	$	223,946

Amortization expense for intangible assets was $10,372 and $9,533 during the three months ended August 31, 2022 and 2021, respectively, and $20,744 and $16,138 during the six months ended August 31, 2022 and 2021, respectively.