Goodwill |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill |
Note 7. Goodwill Changes in the carrying amount of the Company’s goodwill for the years ended December 31, 2022 and 2021 were as follows:
(1) In the third quarter of 2020, primarily as a result of the COVID-19 impact on the global economy and the Company’s business, the Company recorded a goodwill impairment charge of $386.2 million, the entire reporting unit's goodwill balance at the time (2) The goodwill balance as of December 31, 2021 and 2022 was acquired as part of Origin, RPS and XAAR acquisitions, see Note 2, and were allocated as part of Stratasys-Core reporting unit. During the fourth quarter of 2021, the Company
performed its annual impairment test for goodwill impairment. Based on the
Company's qualitative analysis, which considered the Company's market
valuation, its operation results and projections, and the timing of its
goodwill acquisitions, no goodwill was determined to be impaired as of December
31, 2021.
Goodwill impairment
assessment for the year ended December 31, 2022
During
the fourth quarter of 2022, the Company noted
that indicators of potential impairment existed which required an interim
goodwill impairment analysis for Stratasys-Core reporting unit. These
indicators included sustained decline in the Company’s market capitalization
during the last quarter, all, primarily as a result of the global economy and the Company’s business.
The Company performed a
quantitative assessment for goodwill impairment for its Stratasys-Core reporting unit and concluded that the fair value of Stratasys-Core reporting unit exceeded its carrying amount by approximately 45% with
a carrying amount of goodwill assigned to this reporting unit in the amount of
$65.0 million. When evaluating the fair value of
Stratasys-Core reporting unit under the income approach, the Company
used a discounted cash flow model which utilized Level 3 measures that
represent unobservable inputs. Key assumptions used to determine the estimated
fair value include: (a) internal cash flows forecasts for 5 years following the
assessment date, including expected revenue growth, costs to produce, operating
profit margins and estimated capital needs; (b) an estimated terminal value
using a terminal year long-term future growth determined based on
the growth prospects of the reporting unit; and (c) a discount rate which reflects the weighted average cost of capital adjusted for the relevant
risk associated with the Stratasys-Core reporting unit operations
and the uncertainty inherent in the Company's internally developed forecasts.
In order to assess the reasonableness
of its cash flow projections used for its goodwill impairment analysis, the
Company compared the aggregate fair value of its reporting units to its market
capitalization and calculated the implied control premium. The Company believes
that its fair value assessment is reasonably supported by its calculated market
capitalization.
Actual results may differ from those
assumed in the Company's valuation method. It is reasonably possible that the
Company's assumptions described above could change in future periods. If any of
these were to vary materially from the Company's plans, it may record
impairment of goodwill allocated to this reporting unit in the future.
Based on the Company’s assessment as
of December 31, 2022, no goodwill was determined to be impaired.
The Company will continue to monitor
the fair value of its Stratasys-Core reporting unit to determine whether
events and changes in circumstances such as further deterioration in the
business climate or operating results, significant decline in the Company's
share price, changes in management’s business strategy or downward changes of
the Company's cash flows projections, warrant further interim impairment
testing.
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