Goodwill

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 8. GOODWILL

We account for goodwill in accordance with FASB ASC Topic 350

Intangibles—Goodwill and Other

. We do not amortize goodwill, but rather test for impairment annually or more frequently if events or circumstances indicate that an asset may be impaired. We perform our annual impairment testing during the fourth quarter of each year, which coincides with our budget and planning process for the upcoming year.

As a result of changes in macroeconomic conditions and revenue forecasts, we performed an interim review of goodwill for impairment at June 30, 2023 and September 30, 2023. We assessed a variety of factors, including forecasts for the remainder of 2023 and the amount by which the prior estimated fair value exceeded the carrying value including goodwill.

Based on our qualitative review, we tested one digital media entity for goodwill impairment at June 30, 2023 and two digital media entities and two publishing entities goodwill at September 30, 2023. We engaged Bond & Pecaro, an independent appraisal and valuation firm, to assist us in estimating the enterprise value of Salem Web Network, Townhall.com

, Regnery

Publishing and Salem Author Services to test goodwill for impairment. The enterprise valuation assumes that the subject assets are installed as part of an operating business rather than as a hypothetical

start-up.

The following table presents the changes in goodwill including business acquisitions and dispositions as discussed in Note 3 of our Condensed Consolidated Financial Statements.


Goodwill	Twelve Months Ended December 31, 2022			Nine Months Ended September 30, 2023

	(Dollars in thousands)
Balance, beginning of period before cumulative loss on impairment	$	28,749		$	28,975
Accumulated loss on impairment		(4,763	)		(4,890	)

Balance, beginning of period after cumulative loss on impairment		23,986			24,085

Acquisitions of radio stations		—			80
Acquisitions of digital media entities		226			1,181
Loss on impairment		(127	)		(2,580	)

Ending period balance	$	24,085		$	22,766

Balance, end of period before cumulative loss on impairment		28,975			30,236
Accumulated loss on impairment		(4,890	)		(7,470	)

Ending period balance	$	24,085		$	22,766

The key estimates and assumptions used for our enterprise valuations were as follows:


Digital Media Enterprise Valuations	December 31, 2022	June 30, 2023	September 30, 2023
Risk-adjusted discount rate	10.5%	10.5%	11.0%
Operating profit margin ranges	0.9% –5.3%	(1.5)% – 3.0%	(13.6)% – 21%
Long-term revenue growth rates	0.6%	0.6%	0.5%


Publishing Enterprise Valuations	December 31, 2022	September 30, 2023
Risk-adjusted discount rate	10.5%	11.0%
Operating profit margin ranges	(9.0)% - 4.9%	(17.9)% – 2.4%
Long-term revenue growth rates	0.5%	0.5%

The risk-adjusted discount rate reflects the WACC developed based on data from same or similar industry participants and publicly available market data as of the measurement date.

Based on our review and analysis, we recorded an impairment charge of $0.7

million to the carrying value of goodwill associated with Townhall.com

and Salem Author Services at September 30, 2023 and a $1.8 million impairment charge to the carrying value of goodwill associated with Townhall.com

at June 30, 2023. The impairment charge was driven by an increase in the WACC and the decreased revenue growth rates within the industry over those used in the

year-end

valuation forecasts and increases. We believe that this decrease is indicative of trends in the industry as a whole and not unique to our company or operations.

SALEM MEDIA GROUP, INC. /DE/ 10-Q