Goodwill and Intangible Assets

6 Months Ended

Mar. 31, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

6. Goodwill and Intangible Assets

The Company conducts an impairment assessment annually, or more frequently if impairment indicators are present. Changes to the Company’s operating segments effective October 1, 2023 resulted in a change to the Company’s reporting units, which are aligned to the Company’s operating and reportable segments (as further described in Note 15, Segment and Geographic Information below).

As a result of this segment realignment, the Company allocated goodwill to the reporting units existing under the new organizational structure on a relative fair value basis as of October 1, 2023. The Company estimated the fair values of the affected businesses based upon the present value of their anticipated future cash flows. The Company’s determination of fair value involved judgment and the use of significant estimates and assumptions, as described in the notes to the audited consolidated financial statements included in the section titled “Financial Statements and Supplementary Data” in Part II, Item 8 of the 2023 Annual Report on Form 10-K and in the “Critical Accounting

Policies and Estimates” included in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the 2023 Annual Report on Form 10-K.

In conjunction with the goodwill allocation described above, the Company tested its reporting units for potential impairment immediately before and after the segment realignment and concluded that the estimated fair value of each reporting unit exceeded its respective carrying value. As of October 1, 2023, the fair value of the B Medical Systems reporting unit exceeded its carrying value by approximately 5 percent.

During the second quarter of fiscal year 2024, as part of the Company’s routine long-term planning process, the Company assessed several events and circumstances that could affect the significant inputs used to determine the fair value of its reporting units, including updates to forecasted cash flows, the impact of the Company’s planned transformation initiatives and the overall change in the economic climate since its last impairment assessment in October 2023. The Company concluded it was more likely than not the fair value of the Company’s B Medical Systems segment was less than its carrying amount resulting from the reduction in the Company’s anticipated revenue growth rates for the current and subsequent years as compared to prior projections. As a result, the Company completed a quantitative goodwill impairment test for its reporting units in accordance with ASC 350, Intangibles – Goodwill (“ASC 350”) as of March 31, 2024.

For the quantitative goodwill impairment analyses performed, the Company compared the estimated fair values of each of its reporting units to their respective carrying amounts. The estimated fair values of each of the reporting units were derived using the income approach, specifically the Discounted Cash Flow (“DCF”) method. The DCF models used in the analysis reflected the Company’s assumptions regarding revenue growth rates, projected gross profit margins, risk-adjusted discount rates, terminal period growth rates, economic and market trends, and other expectations about the anticipated operating results of its reporting units. As part of the goodwill impairment test, the Company also considered its market capitalization and guideline public companies in assessing the reasonableness of the combined fair values estimated for its reporting units. Goodwill impairment is measured as the excess of a reporting unit's carrying amount over its estimated fair value, not to exceed the carrying amount of goodwill for that reporting unit.

The results of the Company’s quantitative goodwill impairment analyses as of March 31, 2024 indicated an impairment of goodwill within its B Medical Systems reporting unit resulting in a non-cash impairment charge of $111.3 million recorded within "Impairment of goodwill and intangible assets" in its Condensed Consolidated Statements of Operations during the three months ended March 31, 2024. The Company concluded that there was no impairment to goodwill for the SMS and Multiomics reporting units as of March 31, 2024 or April 1, 2024 (the date of the Company’s annual goodwill test).

In the event the financial performance of any of the reporting units does not meet management’s expectations in the future, the Company experiences a prolonged macroeconomic downturn, or there are other negative revisions to key assumptions used in the DCF method used to value the reporting units, the Company may be required to perform additional impairment analyses with respect to such reporting units and could be required to recognize additional impairment charges.

The following table sets forth the changes in the carrying amount of goodwill by reportable segment since October 1, 2023 (in thousands). The Company has presented the October 1, 2023 balances to be consistent with the current segment structure.

	Sample Management Solutions		Multiomics		B Medical Systems		Total
Balance - October 1, 2023	$	478,601	$	196,760	$	108,978	$	784,339
Impairment		—		—		(111,317)		(111,317)
Currency translation adjustments		5,779		—		2,339		8,118
Balance - March 31, 2024	$	484,380	$	196,760	$	—	$	681,140
Accumulated goodwill impairments, March 31, 2024	$	—	$	—	$	(111,317)	$	(111,317)

As of March 31, 2024, prior to performing the quantitative goodwill impairment analyses, the Company performed a recoverability test of B Medical Systems long-lived assets in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets. The Company concluded no impairment of the B Medical Systems long-lived asset group existed as of March 31, 2024. The Company’s assessment was based on its estimates and assumptions, similar to those described above related to goodwill, a number of which are based on external factors and the exercise of management judgment.

The components of the Company’s identifiable intangible assets as of March 31, 2024 and September 30, 2023 are as follows (in thousands):

	March 31, 2024						September 30, 2023
			Accumulated		Net Book				Accumulated		Net Book
	Cost		Amortization		Value		Cost		Amortization		Value
Patents	$	1,226	$	1,185	$	41	$	1,226	$	1,175	$	51
Completed technology		225,235		74,969		150,266		215,430		56,021		159,409
Trademarks and trade names		6,763		2,250		4,513		6,630		1,445		5,185
Non-competition agreements		—		—		—		681		568		113
Customer relationships		285,116		172,310		112,806		290,800		161,257		129,543
Other intangibles		887		887		—		869		869		—
Total	$	519,227	$	251,601	$	267,626	$	515,636	$	221,335	$	294,301

Amortization expense for intangible assets was $13.0 million and $12.4 million, respectively, for the three months ended March 31, 2024 and 2023. Amortization expense for intangible assets was $25.5 million and $24.0 million, respectively, for the six months ended March 31, 2024 and 2023.

During the second quarter of fiscal year 2024, the Company discontinued its sample sourcing product offering (a product line within the SMS segment). As a result, the Company recorded a $4.7 million impairment of intangible assets related to the sample sourcing business which is included in "Impairment of goodwill and intangible assets" in the Company’s Condensed Consolidated Statements of Operations in the three months ended March 31, 2024.

Estimated future amortization expense for the intangible assets for the remainder of fiscal year 2024 and the subsequent five fiscal years is as follows (in thousands):

Remainder of fiscal year 2024	$	25,632
2025		48,883
2026		44,424
2027		36,368
2028		30,051
2029		24,386