Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Intangible Assets

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

(5)    Intangible Assets

 

Intangible assets consisted of the following (in thousands):

 

   

October 31, 2023

   

January 31, 2023

 
   

Gross

           

Net

   

Gross

           

Net

 
   

Carrying

   

Accumulated

   

Carrying

   

Carrying

   

Accumulated

   

Carrying

 
   

Amount

   

Amortization

   

Amount

   

Amount

   

Amortization

   

Amount

 

Developed software/courseware

  $ 383,466     $ 185,016     $ 198,450     $ 374,057     $ 123,219     $ 250,838  

Customer contracts/relationships

    335,084       74,084       261,000       336,182       42,026       294,156  

Vendor relationships

    39,158       37,911       1,247       39,887       36,666       3,221  

Trademarks and trade names

    44,000       3,884       40,116       44,000       1,454       42,546  

Publishing rights

    41,100       19,614       21,486       41,100       13,449       27,651  

Backlog

    49,700       42,650       7,050       49,700       32,780       16,920  

Skillsoft trademark

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

Global Knowledge trademark

    22,656       6,302       16,354       23,080       5,046       18,034  

Total intangible assets

  $ 999,864     $ 369,461     $ 630,403     $ 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 the fiscal years ended January 31:

 

   

Amortization Expense

 

2024 (three months remaining)

  $ 37,206  

2025

    133,177  

2026

    129,291  

2027

    82,322  

2028

    42,037  

Thereafter

    121,670  

Total future amortization

  $ 545,703  

 

Amortization expense related to intangible assets in the aggregate was $38.6 million, $116.1 million for the three and nine months ended October 31, 2023, respectively, and, $43.4 million and $128.2 million the three and nine months ended October 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 and indefinite lived intangible 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 nine months ended October 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

    (701 )     725       24  

Goodwill, net October 31, 2023

  $ 416,639     $ 41,129     $ 457,768  

 

As of October 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 bookings, revenue, or profitability, 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.