Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

In accordance with FASB ASC Topic No. 350, Intangibles-Goodwill and Other, Smith Micro reviews the recoverability of the carrying value of its single reporting unit goodwill at least annually or whenever events or circumstances indicate a potential impairment. Different judgments relating to the determination of reporting units could significantly affect the testing of goodwill for impairment and the amount of any impairment recognized. Recoverability of goodwill is determined by comparing the estimated fair value of reporting units to the carrying value of the underlying net assets in the reporting units. If the estimated fair value of a reporting unit is determined to be less than the fair value of its net assets, goodwill is deemed impaired, and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the estimated fair value of the reporting unit and the fair value of its other assets and liabilities.

During the three months ended March 31, 2024, the Company conducted an interim quantitative impairment test of its goodwill as of February 29, 2024 and recorded a goodwill impairment charge totaling $24.0 million during the three months ended March 31, 2024. The fair value of the reporting unit was determined utilizing level 3 inputs (including estimates of revenue growth, earnings before interest taxes depreciation and amortization ("EBITDA") contribution and discount rates) and a combination of the income approach using the estimated discounted cash flows and a market-based valuation methodology. If current projections are not achieved or specific valuation factors outside the Company's control, such as discount rates and economic and industry challenges, significantly change, goodwill could be subject to future impairment.

The components of the Company’s intangible assets were as follows for the periods presented (unaudited except for December 31, 2023, in thousands, except for useful life data):


	September 30, 2024

	Weighted Average Remaining Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Purchased technology	4	$	13,330	$	(8,382)	$	4,948
Customer relationships	10	27,548		(10,637)		16,911
Customer contracts	0	7,000		(6,628)		372
Software license	5	5,419		(2,933)		2,486
Patents	2	600		(386)		214
Total		$	53,897	$	(28,966)	$	24,931


	December 31, 2023

	Weighted Average Remaining Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Purchased technology	5	$	13,330	$	(7,243)	$	6,087
Customer relationships	11	27,548		(8,111)		19,437
Customer contracts	1	7,000		(6,337)		663
Software license	6	5,419		(2,353)		3,066

Patents	3	600		(321)		279
Total		$	53,897	$	(24,365)	$	29,532

The Company amortizes intangible assets over the pattern of economic benefit expected to be generated from the use of the assets, with a total weighted average amortization period of approximately eight years as of September 30, 2024 and nine years as of December 31, 2023. During the three months ended September 30, 2024 and 2023, intangible asset amortization expense was $1.3 million and $1.5 million, respectively. During the nine months ended September 30, 2024 and 2023, intangible asset amortization expense was $4.6 million and $4.4 million, respectively.

As of September 30, 2024, estimated amortization expense for the remainder of 2024 and thereafter was as follows (unaudited, in thousands):


Year Ending December 31,	Amortization Expense
2024	$	1,334
2025	5,105
2026	4,709
2027	3,834
2028	2,790
2029 and thereafter	7,159
Total	$	24,931