Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Intangible Assets

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Note 5 - Intangible Assets
6 Months Ended
Jul. 31, 2023
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]

(5)    Intangible Assets

 

Intangible assets consisted of the following (in thousands):

 

   

July 31, 2023

   

January 31, 2023

 
   

Gross

           

Net

   

Gross

           

Net

 
   

Carrying

   

Accumulated

   

Carrying

   

Carrying

   

Accumulated

   

Carrying

 
   

Amount

   

Amortization

   

Amount

   

Amount

   

Amortization

   

Amount

 

Developed software/ courseware

  $ 379,281     $ 164,242     $ 215,039     $ 374,057     $ 123,219     $ 250,838  

Customer contracts/ relationships

    338,313       64,945       273,368       336,182       42,026       294,156  

Vendor relationships

    40,439       37,864       2,575       39,887       36,666       3,221  

Trademarks and trade names

    44,000       3,202       40,798       44,000       1,454       42,546  

Publishing rights

    41,100       17,559       23,541       41,100       13,449       27,651  

Backlog

    49,700       39,360       10,340       49,700       32,780       16,920  

Skillsoft trademark

    84,700             84,700       84,700             84,700  

Global Knowledge trademark

    23,403       5,889       17,514       23,080       5,046       18,034  

Total intangible assets

  $ 1,000,936     $ 333,061     $ 667,875     $ 992,706     $ 254,640     $ 738,066  

 

Amortization expense related to the existing finite-lived intangible assets is expected to be as follows (in thousands):

 

For fiscal years ended January 31:

 

Amortization Expense

 

2024 (six months remaining)

  $ 75,353  

2025

    132,178  

2026

    128,356  

2027

    81,756  

2028

    41,957  

Thereafter

    123,575  

Total future amortization

  $ 583,175  

 

Amortization expense related to intangible assets in the aggregate was $39.2 million, $77.5 million, $45.2 million and $84.8 million for the three and six months ended July 31, 2023 and the three and six months ended July 31, 2022, respectively.

 

Impairment Review Requirements

 

The Company reviews intangible assets subject to amortization if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in remaining useful life. The Company reviews indefinite lived intangible assets, including goodwill, on the annual impairment test date ( January 1) or more frequently if there are indicators of impairment.

 

In connection with the impairment evaluation, the Company may first consider qualitative factors to determine whether the existence of events or circumstances indicates that it is more likely than not (i.e., a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. Performing a quantitative goodwill impairment test is not necessary if an entity determines based on this assessment that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company fails or elects to bypass the qualitative assessment, the goodwill impairment test must be performed. This test requires a comparison of the carrying value of the reporting unit to its estimated fair value. If the carrying value of a reporting unit’s goodwill exceeds its fair value, an impairment loss equal to the difference is recorded, not to exceed the amount of goodwill allocated to the reporting unit. In determining reporting units, the Company first identifies its operating segments, and then assesses whether any components of these segments constitute a business for which discrete financial information is available and where segment management regularly reviews the operating results of that component.

 

The Company completed the qualitative assessment discussed above for the six months ended July 31, 2023 and concluded that there were not indicators of impairment for our reporting units.

 

A roll forward of goodwill is as follows:

 

Description

 

Content & Platform

   

Instructor-Led Training

   

Consolidated

 

Goodwill, net January 31, 2023

  $ 417,340     $ 40,404     $ 457,744  

Foreign currency translation adjustment

    (635 )     858       223  

Goodwill, net July 31, 2023

  $ 416,705     $ 41,262     $ 457,967  

 

As of July 31, 2023, there was $569.3 million and $72.1 million of accumulated impairment losses for the Content & Platform (formerly referred to as Skillsoft Content) and Instructor-Led Training (formerly referred to as Global Knowledge) segments, respectively.

 

If current discount rates rise or if relevant market-based inputs for our impairment assessment worsen during the remainder of fiscal 2024, and if our stock price and market capitalization remain at current levels for a prolonged period of time, we will need to reassess intangible impairment at the end of each quarter. Subsequent reviews of goodwill and intangibles could result in impairment during fiscal 2024. Factors that could result in an impairment include, but are not limited to, the following:

 

 

Prolonged period of our estimated fair value of our reporting units exceeding our market capitalization;

 

Lower expectations for future profitability of bookings or EBITDA, which in part, could be impacted by legislative, regulatory or tax changes that affect the cost of, or demand for, products and services as well as the loss of key personnel;

 

Deterioration in key assumptions used in our income approach estimates of fair value, such as higher discount rates from higher stock market volatility; and

 

Valuations of significant mergers or acquisitions of companies that provide relevant market-based inputs for our impairment assessment that could support less favorable conclusions regarding the estimated fair value of our reporting units.