INTANGIBLE ASSETS AND GOODWILL

3 Months Ended

Mar. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

The activity for goodwill as of March 31, 2022 is as follows:


(in thousands)
Balance at December 31, 2021	$	455,206
Measurement period adjustments	—
Acquisitions (see Note 4)	27,352
Impairment	—
Balance at March 31, 2022	$	482,558

The carrying amount of goodwill by reporting unit as of March 31, 2022 is $88.9 million for Advanced Plan Administration (“APA”), $190.2 million for Supplemental Benefits Administration (“SBA”), $138.2 million for Value Based Payment Assurance (“VBPA”), $37.9 million for Advisory Services (“Advisory”) and $27.4 million for HealthSmart acquisition, respectively.

The goodwill allocated to the Technology Enabled Solutions and Advisory Services reportable segments is $444.7 million and $37.9 million, respectively as of March 31, 2022. Goodwill is assessed for impairment on an annual basis (on October 1 of each year) and on an interim basis when indicators of impairment exist.

As a result of the decline in our stock price since December 31, 2021, we performed an interim impairment test for goodwill for APA, SBA, VBPA and Advisory reporting units using the quantitative approach as of March 31, 2022. Since HealthSmart was recently acquired, no impairment test was performed on that reporting unit. Based on our evaluation performed, we determined the fair value of each of the reporting units exceeded its respective carrying amount, and therefore, we determined that goodwill was not impaired at any of our reporting units as of March 31, 2022. We define “headroom” as the percentage difference between the fair value of a reporting unit and its carrying value. For the interim impairment test, the headroom for the reporting units ranged between eight percent to sixty-five percent. Our SBA reporting unit and our VBPA reporting unit have headroom at the low-end of that range (8.4% for SBA and 12.5% for VBPA) and could experience

impairment in the future if we do not achieve our profitability projections, there is a change in key assumptions underlying the valuation or if we continue to experience a substantial decrease in our stock price.

Evaluation of goodwill for impairment requires judgment, including the identification of reporting units, assignment of assets, liabilities and goodwill to reporting units and determination of the fair value of each reporting unit. We estimate the fair value of our reporting units using a combination of an income approach, utilizing a discounted cash flow analysis, and a market approach, using market multiples. Under the income approach, we estimate projected future cash flows, the timing of such cash flows and long-term growth rates, and determine the appropriate discount rate that reflects the risk inherent in the projected future cash flows. The discount rate used is based on a market participant weighted-average cost of capital and may be adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit’s ability to execute on the projected future cash flows. Under the market approach, we estimate fair value based on market multiples of revenues and earnings derived from comparable publicly-traded companies with characteristics similar to the reporting unit. The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions and other factors. The assumptions and estimates used in determining the fair values of the reporting units contain uncertainties, and any changes to these assumptions and estimates could have a negative impact and result in a future impairment.

The carrying value of identifiable intangible assets consisted of the following as of March 31, 2022:


(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized intangible assets
Trade names	$	35,900	$	(3,830)	$	32,070
Customer relationships	214,500		(44,636)		169,864
Technology	47,800		(12,348)		35,452
Capitalized software development costs	13,026		(2,419)		10,607
Total intangible assets	$	311,226	$	(63,233)	$	247,993

The carrying value of identifiable intangible assets consisted of the following as of December 31, 2021:


(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized intangible assets
Trade names	$	27,300	$	(3,395)	$	23,905
Customer relationships	189,000		(40,091)		148,909
Technology	47,800		(11,153)		36,647
Capitalized software development costs	12,454		(1,901)		10,553
Total intangible assets	$	276,554	$	(56,540)	$	220,014

Amortization expense for Trade names, Customer relationships and Technology for the three months ended March 31, 2022, and 2021, totaled $6.2 million and $5.9 million, respectively.

Amortization expense for Capitalized software development costs for the three months ended March 31, 2022, and 2021, totaled $0.5 million and $0.1 million, respectively.