Note 7 - Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2025

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

7. Goodwill and Intangible Assets

In accordance with FASB ASC Topic No. 350, Intangibles-Goodwill and Other, 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 three months ended March 31, 2024, the Company performed an interim quantitative impairment test on 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.

In connection with the preparation of its quarterly financial statements for the second quarter of 2025, the Company assessed changes in circumstances to determine whether it was more likely than not that the fair value of its single reporting unit was below its carrying amount. While there was no single determinative event or factor, considerations including recent financial performance compared to expected forecasts, trends in stock valuation, pricing of the most recent equity raise, and the receipt of the Nasdaq minimum bid price requirement notice on June 24, 2025 led the Company to conclude that when considering the events and factors in totality it was necessary to perform an interim quantitative valuation assessment.  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 utilizing market multiples. The assessment utilized Level 3 inputs including estimates of revenue growth, EBITDA contribution and discount rates. Based on the results of the assessment, a full goodwill impairment charge of $11.1 million was recorded. 

The components of the Company’s intangible assets were as follows for the periods presented (unaudited, except for December 31, 2024, in thousands, except for useful life data):

	June 30, 2025
	Weighted
	Average
	Remaining		Gross
	Useful Life		Carrying		Accumulated
	(in Years)		Amount		Amortization			Net Book Value
Purchased technology		3	$	11,076	$	(7,227	)	$	3,849
Customer relationships		9		24,573		(9,652	)		14,921
Customer contracts		0		7,000		(6,810	)		190
Software license		4		5,419		(3,485	)		1,934
Patents		2		600		(450	)		150
Total			$	48,668	$	(27,624	)	$	21,044

	December 31, 2024
	Weighted
	Average
	Remaining		Gross
	Useful Life		Carrying		Accumulated
	(in Years)		Amount		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

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 seven years as of June 30, 2025 and eight years as of December 31, 2024. During the three months ended June 30, 2025 and 2024, intangible asset amortization expense was $1.3 million and $1.5 million, respectively. During the six months ended June 30, 2025 and 2024, intangible asset amortization expense was $2.6 million and $3.3 million, respectively.

As of June 30, 2025, estimated amortization expense for the remainder of 2025 and thereafter was as follows (unaudited, in thousands):

	Amortization
Year Ending December 31,	Expense
2025	$	2,552
2026		4,709
2027		3,834
2028		2,790
2029		2,095
2030 and thereafter		5,064
Total	$	21,044