During the three months ended June 30, 2024, the Company identified a triggering event for goodwill and other long-lived assets impairment testing purposes at the CarOffer reporting unit due to recent organizational changes and Transaction volume declines, which resulted in revisions to the Company’s financial projections for the CarOffer reporting unit.

Prior to testing the goodwill and other long-lived assets included in the CarOffer reporting unit for impairment, the Company first evaluated current assets, inclusive of the cash and cash-equivalents, accounts receivable, inventory, prepaid expenses, and other current assets allocated to the CarOffer reporting unit, under applicable guidance and identified no impairment.

The Company then evaluated other long-lived assets included in the CarOffer reporting unit under ASC 360, Property, Plant, and Equipment (“ASC 360”). Other long-lived assets were tested for impairment at the asset group level. The Company identified the asset group as the entire CarOffer reporting unit, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. As the CarOffer asset group did not pass the step one recoverability test on an undiscounted cash flow basis, the Company then compared the fair value of the asset group to its carrying value. To estimate the fair value of the asset group, the Company utilized an income-based valuation approach by means of a discounted cash flow method, based on market participant assumptions. The assumptions used to estimate the fair value using a discounted cash flow method included forecasted revenue and EBITDA, long term expectations for growth rates and operating profit margin, expected needs for annual capital expenditure and net working capital, and a market-participant discount rate derived via the capital asset pricing model. The excess of the carrying value of the asset group over the fair value was first allocated amongst the long-lived asset group (excluding goodwill), noting each individual long-lived asset within the group may not be impaired below its individual fair value.

As discussed below, the Company recognized impairments of CarOffer right-of-use assets of $4,731 and the CarOffer brand intangible asset of $7,538 to bring the long-lived assets’ carrying value to fair value. All other long-lived assets’ carrying value were at or below fair value. Subsequent to performing the impairment assessment of its long-lived assets, the Company then assessed goodwill included in the CarOffer reporting unit, resulting in an impairment charge of $115,206, inclusive of the deferred tax impact of $28,437 due to the goodwill being tax deductible. Refer below for further details of each impairment charge.

Accordingly, during the three months ended June 30, 2024, the Company recognized a $127,475 impairment to the CarOffer reporting unit, reducing its carrying value to its fair value. During the three months ended September 30, 2024, there was no additional impairment related to the CarOffer reporting unit.

Due to the partial impairment of the CarOffer reporting unit goodwill and other assets during the three months ended June 30, 2024, in which the CarOffer reporting unit was reduced to its fair value, there remains a risk for future impairment charges if projected future operating results further decline, including as a result of economic conditions or operational challenges, which could be material and negatively affect its operations.

In connection with the triggering event discussed above, the Company assessed the right-of-use assets associated with CarOffer's Addison, Texas lease for impairment.

As noted above, the carrying value of the CarOffer asset group was determined to not be recoverable. As such, the Company evaluated the fair value of the CarOffer asset group as of June 30, 2024, using a discounted cash flow method that incorporated market participant assumptions. The resulting impairment loss was then allocated to each of the long-lived assets in the asset group, including the CarOffer right-of-use assets. The fair value measurement is categorized as Level 3 within the fair value hierarchy as there are significant unobservable inputs utilized in the valuation technique. The Company estimated fair value using the discounted cash flow method, with key inputs including the selected market rental rates based upon similar office spaces, the discount rate, and other estimated replacement costs.

As of June 30, 2024, a non-cash impairment charge of $4,731 was allocated to the right-of-use assets in the CarOffer asset group, which was recognized within goodwill and other asset impairment operating expenses in the Unaudited Condensed Consolidated Income Statements in the Digital Wholesale segment.

In connection with the triggering event discussed above, the Company recognized an impairment to its brand intangible assets included within the CarOffer asset group as of June 30, 2024 to reduce the carrying value of the brand intangible asset to its fair value. This fair value measurement is categorized as Level 3 within the fair value hierarchy as there are significant unobservable inputs utilized in the valuation technique. The Company estimated fair value using market participant assumptions and the relief from royalty method, with key inputs including forecasted revenue, royalty rate, discount rate, and the useful life.

As of June 30, 2024, a non-cash impairment charge of $7,538 was allocated to the brand intangible asset for the CarOffer asset group, which was recognized within goodwill and other asset impairment operating expenses in the Unaudited Condensed Consolidated Income Statements in the Digital Wholesale segment.

As of September 30, 2024 and December 31, 2023, intangible assets consist of the following:


	As of September 30, 2024
	Weighted Average Remaining Useful Life (years)		Gross Carrying Amount		Accumulated Amortization		Accumulated Impairment		Net Carrying Amount
Brand		6.4	$	32,212	$	12,285	$	7,538	$	12,389
Customer relationships		—		19,870		19,870		—		—
Developed technology		—		65,212		64,565		647		—
Total			$	117,294	$	96,720	$	8,185	$	12,389

	As of December 31, 2023
	Weighted Average Remaining Useful Life (years)		Gross Carrying Amount		Accumulated Amortization		Accumulated Impairment		Net Carrying Amount
Brand		7.4	$	32,193	$	10,262	$	—	$	21,931
Customer relationships	0.0			19,870		19,620		—		250
Developed technology	0.0			65,212		63,690		647		875
Total			$	117,275	$	93,572	$	647	$	23,056

For the three months ended September 30, 2024 and 2023 and for the nine months ended September 30, 2024 and 2023, amortization of intangible assets was $509, $7,508, $3,148, and $22,549, respectively.

For the three months ended September 30, 2024, there was no impairment for intangible assets. For the nine months ended September 30, 2024, the Company impaired $7,538 of Digital Wholesale segment intangible assets within goodwill and other asset impairment operating expenses in the Unaudited Condensed Consolidated Income Statements related to the impairment discussed above.

As of September 30, 2024, estimated amortization expense of intangible assets for future periods is as follows:


Year Ending December 31,	Amortization Expense
Remainder of 2024	$	509
2025		2,035
2026		2,035
2027		2,035
2028		2,035
2029		1,410
Thereafter		2,330
Total	$	12,389

The Company determined that there were no indicators of impairment for the U.S. Marketplace or U.K. Marketplace reporting units and therefore an interim impairment assessment was not performed at June 30, 2024.

In connection with the triggering event discussed above, the Company evaluated the CarOffer reporting unit goodwill for impairment as of June 30, 2024, by comparing its estimated fair value to its carrying value. The Company estimated the fair value of the CarOffer reporting unit using an income-based valuation approach by means of a discounted cash flow method. This fair value measurement is categorized as Level 3 within the fair value hierarchy as there are significant unobservable inputs utilized in the valuation technique. The assumptions used to estimate the fair value of the reporting unit included forecasted revenue and EBITDA, long term expectations for growth rates and operating profit margin, expected needs for annual capital expenditure and net working capital, and a market-participant discount rate derived via the capital asset pricing model.

As of June 30, 2024, the carrying value for the CarOffer reporting unit (after adjustments for other long-lived asset impairments discussed above) exceeded its fair value, resulting in a non-cash impairment charge of $86,769, which was recognized within goodwill and other asset impairment operating expenses in the Unaudited Condensed Consolidated Income Statements in the Digital Wholesale segment. As the goodwill for the CarOffer reporting unit is tax deductible, the Company then calculated the deferred tax effect of the goodwill impairment charge using the simultaneous equation method. This resulted in additional goodwill impairment and deferred tax assets of $28,437, for a total goodwill impairment of $115,206 recognized within goodwill and other asset impairment operating expenses in the Unaudited Condensed Consolidated Income Statements in the Digital Wholesale segment.

During the three months ended September 30, 2024, there was no additional impairment related to the CarOffer reporting unit goodwill.

As of September 30, 2024, changes in the carrying value of goodwill are as follows:


	U.S. Marketplace		Digital Wholesale			Other		Total
Balance as of December 31, 2023	$	12,477	$	130,451		$	14,970	$	157,898
Impairment of goodwill		—		(115,206	)		—		(115,206	)
Other (1)		—		4,323			—		4,323
Foreign currency translation adjustment		—		—			205		205
Balance as of September 30, 2024	$	12,477	$	19,568		$	15,175	$	47,220

(1)

As of September 30, 2024, the Company recognized an immaterial adjustment to goodwill and additional paid-in-capital, associated with the acquisitions of its equity interests in CarOffer.

As of September 30, 2024, the accumulated impairment losses of goodwill were $115,206. As of December 31, 2023, there were no accumulated impairment losses of goodwill.

During the three months ended September 30, 2024, the Company decided to end its CG Buy Online pilot in order to redirect those resources toward other investment opportunities, including continued product innovation and development across the business. The CG Buy Online pilot was one of the initiatives that allowed consumers to purchase vehicles online. The pilot ended on October 31, 2024.

This was identified as a triggering event for long-lived asset impairment testing under ASC 360. Other long-lived assets are tested for impairment at the asset group level, and the Company identified the asset group as the CG Buy Online Pilot assets, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. These assets were included in the CG Buy Online reporting unit. As the asset group did not pass the step one recoverability test on an undiscounted cash flow basis, the Company then compared the fair value of the asset group to its carrying value. As the Company has decided to end this pilot, the estimated future cash flows, and related fair value are both $0. There is no goodwill associated with this asset group.

During the three months ended September 30, 2024, the Company impaired $15,583 and $219 of Digital Wholesale segment capitalized website development costs and furniture and fixtures, respectively, within property and equipment, net in the Unaudited Condensed Consolidated Balance Sheets. Additionally, the Company impaired $527 and $447 of capitalized hosting arrangements within prepaid expenses, prepaid income taxes and other current assets, and other non-current assets, respectively, in the Unaudited Condensed Consolidated Balance Sheets. These costs were included in the CG Buy Online reporting unit. There is an immaterial remaining balance of these assets, that amortized until the end of the pilot on October 31, 2024.

For both the three and nine months ended September 30, 2024, the Company recognized $9,750 and $7,026 of Digital Wholesale segment impairment charges, related to the CG Buy Online pilot, as wholesale cost of revenue and goodwill and other asset impairment operating expense, respectively, in the Unaudited Condensed Consolidated Income Statement.

For the nine months ended September 30, 2024, the Company recognized $16,766 of Digital Wholesale segment impairment charges as goodwill and other asset impairment adjustment to reconcile net income to net cash in the Unaudited Condensed Consolidated Statements of Cash Flows.