Note 3 - Goodwill and Intangibles

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE 3. GOODWILL AND INTANGIBLES

Changes in the carrying amount of goodwill are as follows (in thousands):

	Gross Carrying Amount
	EGM		Table Products		Interactive(1)		Total
December 31, 2021	$	277,725	$	7,821	$	-	$	285,546
Foreign currency adjustments		330		-		-		330
Acquisition		-		1,230		-		1,230
Balance at September 30, 2022	$	278,055	$	9,051	$	-	$	287,106

⁽¹⁾ Accumulated goodwill impairment charges for the Interactive segment as of  September 30, 2022 were $8.4 million.

Intangible assets consist of the following (in thousands):

			September 30, 2022							December 31, 2021
	Useful Life		Gross		Accumulated			Net Carrying		Gross		Accumulated			Net Carrying
	(years)		Value		Amortization			Value		Value		Amortization			Value
Indefinite lived trade names	Indefinite		$	12,126	$	-		$	12,126	$	12,126	$	-		$	12,126
Trade and brand names		5 - 7		14,990		(14,677	)		313		14,870		(14,495	)		375
Customer relationships		5 - 12		219,146		(164,537	)		54,609		218,247		(155,140	)		63,107
Contract rights under development and placement fees		1 - 7		42,395		(22,288	)		20,107		42,535		(17,639	)		24,896
Gaming software and technology platforms		1 - 7		192,903		(142,421	)		50,482		177,686		(126,182	)		51,504
Intellectual property		10 - 12		21,845		(12,898	)		8,947		19,345		(11,309	)		8,036
Total intangible assets			$	503,405	$	(356,821	)	$	146,584	$	484,809	$	(324,765	)	$	160,044

Intangible assets are amortized over their respective estimated useful lives ranging from one to twelve years. Amortization expense related to intangible assets was $8.8 million and $9.0 million for the three months ended September 30, 2022 and 2021, respectively. Amortization expense related to intangible assets was $27.5 million and $27.0 million for the nine months ended September 30, 2022 and 2021, respectively. 

Management reviews intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We recorded no impairments for the nine months ended September 30, 2022. We recorded impairments related to internally developed gaming titles of $0.7 million for the nine months ended September 30, 2021, as it was determined by management that the gaming titles would no longer be used. 

The Company enters into development agreements and placement fee agreements with certain customers to secure floor space under lease agreements for its gaming machines. Amounts paid in connection with the development agreements are repaid to the Company in accordance with the terms of the agreement, whereas placements fees are not reimbursed. Amounts paid against the placement fee agreements with payment terms greater than ninety days are disclosed in the Financing section of the Condensed Consolidated Statement of Cash Flows. Amounts paid for the placement fee agreements with the agreement terms less than ninety days, are disclosed in the Investing section of the Condensed Consolidated Statement of Cash Flows. 

For development agreements in the form of a loan, interest income is recognized on the repayment of the notes based on the stated rate or, if not stated explicitly in the development agreement, on an imputed interest rate. If the stated interest rate is deemed to be other than a market rate or zero, a discount is recorded on the note receivable as a result of the difference between the stated and market rate and a corresponding intangible asset is recorded. The intangible asset is recognized in the financial statements as a contract right under development agreement and amortized as a reduction in revenue over the term of the agreement. Placement fees can be in the form of cash paid upfront or free lease periods and are accreted over the life of the contract and the expense is recorded as a reduction of revenue. We recorded a reduction of gaming operations revenue from the accretion of contract rights under development agreements and placement fees of $1.6 million for the three months ended September 30, 2022 and 2021. We recorded a reduction of gaming operations revenue from the accretion of contract rights under development agreements and placement fees of $4.8 million and $4.9 million for the nine months ended September 30, 2022 and 2021, respectively.