GOODWILL AND INTANGIBLE ASSETS, NET

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Primarily due to a sustained decline in the Company's market value of common stock and market conditions, the Company identified a triggering event requiring a test for impairment as of June 30, 2022. The Company completed its goodwill impairment testing and recorded an impairment charge of $189,572 as the test determined that the carrying value of the goodwill reporting units of U.S. and Canada was in excess of the fair value. The recognized impairment reduced the goodwill balance to zero as of June 30, 2022. The impairment was primarily due to a deterioration in customer demand in the U.S. and Canada caused by macroeconomic and industry conditions.

The Company determined the fair value of the U.S. and Canada reporting units based on an income approach, using the present value of future discounted cash flows, and based on a market approach. The fair values were reconciled to the market value of common stock of Hydrofarm to corroborate the estimates used in the interim test for impairment. Significant estimates used to determine fair value include the weighted average cost of capital, financial forecasts, and pricing multiples derived from publicly-traded companies that are comparable to the reporting units. Refer to Note 14 - Fair Value Measurements, for further discussion of valuation inputs. There was no goodwill impairment recognized during the year ended December 31, 2021. The changes in goodwill are as follows:


	Goodwill
Balance at December 31, 2021	$	204,868
Acquisition - IGE Entities - measurement period adjustments	(21,304)
Acquisition - Greenstar - measurement period adjustments	7,000
Acquisition - all others - measurement period adjustments and foreign currency translation adjustments, net	(992)
Impairments	(189,572)
Balance at June 30, 2022	$	—

Intangible Assets, net

Intangible assets with finite lives and indefinite lives are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. For the quarter ended June 30, 2022, the Company performed an evaluation of intangible assets for impairment in connection with the triggering event identified requiring a quantitative test for goodwill impairment. Based on the Company's evaluation, there was no impairment of intangible assets for the quarter ended June 30, 2022. However, there can be no guarantee that the Company will not record an impairment charge in the future. For a fuller discussion of the risk that such an impairment charge might be required in the future, please see “Item 1.A Risk Factors” and the risk factor captioned “Long-lived assets and inventories represent a significant portion of our total

assets and the Company may be required to record impairments or write-downs in future periods.” Intangible assets, net comprised the following:


	June 30, 2022						December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Finite-lived intangible assets:
Computer software	$	9,283	$	(7,921)	$	1,362	$	8,814	$	(7,208)	$	1,606
Customer relationship	100,456		(20,894)		79,562		101,222		(16,517)		84,705
Technology, formulations and recipes	114,319		(10,469)		103,850		110,561		(3,630)		106,931
Trade names	131,838		(6,728)		125,110		—		—		—
Other	4,839		(4,060)		779		2,428		(1,744)		684
Total finite-lived intangible assets, net	360,735		(50,072)		310,663		223,025		(29,099)		193,926
Indefinite-lived intangible asset:
Trade names	2,801		—		2,801		120,773		—		120,773
Other	—		—		—		120		—		120
Total Intangible assets, net	$	363,536	$	(50,072)	$	313,464	$	343,918	$	(29,099)	$	314,819

Amortization expense related to intangibles was $6,245 and $20,991 for the three and six months ended June 30, 2022, respectively. Amortization expense related to intangibles was $1,766 and $2,972 for the three and six months ended June 30, 2021, respectively. Amortization expense in 2022 includes the impact from intangible assets recorded in connection with five acquisitions completed during the year ended December 31, 2021. The following are the estimated useful lives and the weighted-average amortization period as of June 30, 2022, for the major classes of finite-lived intangible assets:


	Useful lives	Weighted-average amortization period
Computer software	5 years	4 years
Customer relationships	7 to 18 years	11 years
Technology, formulations and recipes	8 to 12 years	11 years
Trade names	15 to 20 years	19 years

The estimated aggregate future amortization expense for intangible assets subject to amortization as of June 30, 2022, is summarized below:


	Estimated Future Amortization Expense
For the period of July 1, 2022 to December 31, 2022	$	12,509
Year ending December 31,
2023	24,583
2024	24,312
2025	24,209
2026	24,131
Thereafter	200,919
Total	$	310,663