Goodwill and Intangible Assets

12 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

NOTE 8: GOODWILL AND INTANGIBLE ASSETS

We test goodwill and intangible assets with indefinite useful lives for impairment annually, or more frequently when there are events or circumstances that indicate a potential impairment exists. During the second quarter of fiscal 2020, there was an indicator of impairment due to a decline in our market capitalization. We performed a quantitative analysis as of March 31, 2020 utilizing the income approach. This approach uses future cash flows and estimated terminal values for each reporting unit (discounted using a market participant perspective) to determine the fair value of each reporting unit, which is then compared to the carrying value of the reporting unit to determine if an impairment exists. The income approach includes assumptions about revenue growth rates, operating margins and terminal growth rates discounted by an estimated weighted-average cost of capital derived from other publicly traded companies that are similar but not identical from an operational and economic standpoint. There is inherent uncertainty associated with these key assumptions, including the duration of the economic downturn associated with COVID-19 and the recovery period. As a result of our quantitative analysis, we determined the fair value of each of our reporting units was below its carrying value because of the impact of COVID-19, including a significant decline in pawn loan balances due to changes in typical customer behavior and mandated store closures in our GPMX countries. These factors impacted the forecast of future net revenues and earnings and resulted in lower present value of future cash flows. We recorded a goodwill impairment charge of $41.3 million in the second quarter of fiscal 2020. In addition, we (a) determined an impairment had occurred in the fair values of trade names of previously acquired entities in our Mexico and GPMX reporting units and recorded a related impairment of $2.9 million and $1.7 million respectively, and (b) determined the carrying amount of certain long-lived asset groups were not recoverable and recorded a related impairment of $1.1 million in the second quarter of 2020. These impairments were recorded under "Impairment of goodwill, intangible and other assets" in the Consolidated Statements of Operations. We further evaluated events and circumstances as of September 30, 2020 and determined there were no indicators of impairment.

The following table presents the changes in the carrying value of goodwill by segment:

	U.S. Pawn		Latin America Pawn		Consolidated
	(in thousands)
Balances as of September 30, 2018	$	247,894	$	51,354	$	299,248
Acquisitions	3,858		(1,721)		2,137
Effect of foreign currency translation changes	—		(858)		(858)
Balances as of September 30, 2019	$	251,752	$	48,775	$	300,527
Measurement period adjustments	176		(149)		27
Goodwill impairment *	(10,000)		(31,340)		(41,340)
Effect of foreign currency translation changes	—		(1,632)		(1,632)
Balances as of September 30, 2020	$	241,928	$	15,654	$	257,582

*    Represents cumulative goodwill impairment.

The following table presents the balance of each major class of intangible assets:

	September 30,
	2020		2019
	(in thousands)
Non-amortizing intangible assets:
Trade names	$	19,094	$	19,938
Accumulated impairment losses	(4,598)		—
	$	14,496	$	19,938
Pawn licenses	9,509		9,517
	$	24,005	$	29,455
Amortizing intangible assets:
Internally developed software	$	67,457	$	59,436
Accumulated amortization	(33,646)		(24,280)
Accumulated impairment losses	$	(2,579)	—
	$	31,232	$	35,156
Non-compete agreements	$	3,417	$	3,563
Accumulated amortization	(3,394)		(3,399)
	$	23	$	164
Other	$	5,600	$	5,598
Accumulated amortization	(2,222)		(2,329)
	$	3,378	$	3,269
Intangible assets, net	$	58,638	$	68,044

The amortization of most definite-lived intangible assets is recorded as amortization expense and included under “Depreciation and amortization” expense in our consolidated statements of operations. These amounts were $11.2 million, $7.8 million and $5.8 million for fiscal 2020, 2019 and 2018, respectively.

The following table presents our estimate of future amortization expense for definite-lived intangible assets:

Fiscal Year Ended September 30,	Amortization expense
	(in thousands)
2021	$	8,344
2022	7,631
2023	5,892
2024	5,159
2025	1,685

As acquisitions and dispositions occur in the future, amortization expense may vary from these estimates.