Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The carrying amount of goodwill and the accumulated impairment losses are as follows (in thousands):


	December 31,
	2024		2023
Goodwill, gross	$	35,041	$	35,041
Accumulated impairment losses	(23,989)		—
Goodwill, net	$	11,052	$	35,041

Smith Micro reviews the recoverability of the carrying value of the Company's single reporting unit goodwill at least annually or whenever events or circumstances indicate a potential impairment. The annual impairment

testing date is December 31 of each year. Recoverability of goodwill is determined by comparing the estimated fair value of the reporting unit to the carrying value of the underlying net assets in the reporting unit. If the estimated fair value of a reporting unit is determined to be less than the carrying value, goodwill is deemed impaired, and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the fair value.

During the first quarter of 2023, management concluded that the written notice of termination of a U.S. Tier 1 customer agreement for the Company's family safety solution, as disclosed in Note 16 of the 2022 Form 10-K, represented a triggering event indicating possible impairment of goodwill and long-lived assets, including customer relationships intangible assets. The estimated fair value of the Company's reporting unit exceeded the carrying value as of February 2023, and as such there was not any impairment. For the annual assessment date of December 31, 2023, there was not any impairment of the Company’s goodwill.

In the first quarter of 2024, as a result of the sustained decrease in the Company's common stock share price and overall market capitalization subsequent to February 23, 2024, management concluded that a triggering event occurred, indicating goodwill may be impaired. The Company conducted a quantitative impairment test of its goodwill as of February 29, 2024 and as a result of this interim assessment, including the impact of the projections of revenue growth, earnings before interest taxes depreciation and amortization (“EBITDA”), and discount rates along with market multiples, the Company 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 based on a combination of the income approach using estimated discounted cash flows and a market-based valuation methodology. The assessment utilized level 3 inputs including estimates of revenue growth, EBITDA contribution and discount rates. Subsequent to this impairment charge, the fair value of the Company's single reporting unit approximated its carrying value.

For the annual assessment date of December 31, 2024, the Company elected to perform a quantitative impairment test with a combination of the income approach using estimated discounted cash flows and a market-based approach and concluded that the estimated fair value exceeded the carrying value of the reporting unit as of December 31, 2024, and as such there was not any further impairment of goodwill recorded in the fiscal year. However, if projections are not achieved or specific valuation factors outside the Company's control, such as discount rates and continued economic and industry challenges, significantly change, goodwill could be subject to future impairment.

Intangible Assets

The following table sets forth the Company’s acquired intangible assets by major asset class as of December 31, 2024 and 2023, respectively (in thousands, except for useful life data):


	December 31, 2024
	Weighted Average Remaining Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Purchased technology	4	$	13,330	$	(8,762)	$	4,568
Customer relationships	9	27,548		(11,280)		16,268
Customer contracts	0	7,000		(6,725)		275
Software license	4	5,419		(3,126)		2,293

Patents	2	600		(407)		193
Total		$	53,897	$	(30,300)	$	23,597


	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 recorded amortization expense of $5.9 million and $6.8 million on intangible assets for the years ended December 31, 2024 and 2023, respectively.

Future amortization expense related to intangible assets as of December 31, 2024 are as follows (in thousands):


Year Ending December 31,

2025	$	5,105
2026	4,709
2027	3,834
2028	2,790
2029 and thereafter	7,159
Total	$	23,597

Late in the third quarter of 2023, the Company received notice of a termination of one of its ViewSpot contracts. Subsequently, in the fourth quarter of 2023, the Company was also informed by another ViewSpot customer that they would not enter into a further extension of their existing ViewSpot contract, which was expiring in December 2023. As part of this notice, that customer exercised its right to continued service for a transition period of up to 180 days beyond the expiration of this contract. As a result of these combined customer contract termination and expiration notifications, the Company reviewed its assets, including the customer relationship intangible asset, pertaining to ViewSpot and determined that the carrying amount of the asset group was not in excess of the fair value based upon undiscounted expected future cash flows. The Company then reassessed the lives associated with these assets and is amortizing the remaining customer relationship intangible based on the pattern of economic benefit expected to be generated from the use of that asset, which accelerated $0.9 million of amortization expense in 2023. There was no impairment of any intangible assets for the years ended December 31, 2024 or 2023.