ASC 820, “Fair Value Measurements,” establishes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the third is considered unobservable:

The Company’s cash equivalents are highly liquid investments with original maturities of three months or less, which represent an asset the Company measures at fair value on a recurring basis. The Company determines the fair value of cash equivalents using a market approach based on quoted prices in active markets. The fair values of cash, accounts receivable, income taxes receivable, accounts payable, income taxes payable and accrued expenses and other current liabilities approximate their carrying values because of their short-term nature.

The Company addresses market risks from changes in foreign currency exchange rates through a risk management program that includes the use of derivative financial instruments to mitigate certain balance sheet foreign currency transaction exposures. The Company uses foreign currency forward contracts as a part of its strategy to manage exposures related to foreign currency denominated monetary assets and liabilities. The fair value of these foreign currency forward contracts is reported either in other current assets or in other current liabilities as of the end of the period.

On August 30, 2021, the Company acquired ATI. Under the purchase and sale agreement for the ATI acquisition, the former shareholders of ATI are eligible to receive contingent consideration based on ATI’s fiscal year 2021 Adjusted EBITDA, as defined in the purchase and sale agreement. The contingent consideration will be payable in 2022. The preliminary fair value of the contingent consideration was determined based on the Monte Carlo valuation method and was recorded as part of the purchase price as of the acquisition date. Once the fair value of the contingent consideration is finalized, subsequent changes in the estimated fair value are recorded in the consolidated statement of operations in restructuring, acquisition, and related costs until the liability is fully settled. The fair value of the contingent consideration was $44.0 million as of December 31, 2021. There were no changes in the fair value of the contingent consideration during the three months ended April 1, 2022.

On July 31, 2019, the Company acquired ARGES GmbH (“ARGES”). Under the purchase and sale agreement for the ARGES acquisition, the former owner of ARGES is eligible to receive contingent consideration based on the achievement of certain revenue targets by the Company from August 2019 through December 2026. The undiscounted range of possible contingent consideration is zero to €10.0 million ($11.1 million). If the revenue targets are achieved, the contingent consideration would be payable annually with the first payment due in the first quarter of 2021. The estimated fair value of the contingent consideration of €7.1 million ($7.9 million) was determined based on the Monte Carlo valuation method and was recorded as part of the purchase price as of the acquisition date. Subsequent changes in the estimated fair value of the contingent consideration liability are recorded in the consolidated statement of operations in restructuring, acquisition, and related costs until the liability is fully settled. During 2020, the fair value of the contingent consideration was adjusted to €4.1 million ($5.1 million). During 2021, the fair value of the contingent consideration was adjusted to €3.3 million ($3.8 million). The Company made the first installment payment of €0.4 million ($0.4

million) in March 2021 and the second installment payment of €0.3 million ($0.4 million) in March 2022. These installment payments are reported as cash outflows from financing activities in the consolidated statement of cash flows for the respective periods. Based on the revenue performance and revenue projections as of April 1, 2022, the fair value of the remaining contingent consideration was adjusted to €1.4 million ($1.5 million). There were no other changes in the fair value of the contingent consideration during the three months ended April 1, 2022.

On April 16, 2019, the Company acquired Ingenia CAT, S.L. (“Ingenia”). Under the purchase and sale agreement for the Ingenia acquisition, the shareholders of Ingenia are eligible to receive contingent consideration based on the achievement of certain revenue targets by the Company from April 2019 through March 2022. The undiscounted range of possible contingent consideration is zero to €8.0 million ($9.0 million). If the revenue targets are achieved, the contingent consideration would be payable in cash in three annual installments from 2020 to 2022. The estimated fair value of the contingent consideration of €5.8 million ($6.6 million) was determined based on the Monte Carlo valuation method and was recorded as part of the purchase price as of the acquisition date. Subsequent changes in the estimated fair value of the contingent consideration liability are recorded in the consolidated statement of operations in restructuring, acquisition, and related costs until the liability is fully settled. During 2020, the fair value of the contingent consideration was adjusted to €2.3 million ($2.9 million). During 2021, the fair value of the contingent consideration was adjusted to €1.5 million ($1.7 million).The Company made the first installment payment of €1.0 million ($1.1 million) in May 2020 and the second installment payment of €1.2 million ($1.4 million) in May 2021. These installment payments are reported as cash outflows from financing activities in the consolidated statement of cash flows for the respective periods. Based on the revenue performance as of April 1, 2022, the end of the relevant performance period, the fair value of the remaining contingent consideration was adjusted to €1.1 million ($1.2 million). There were no other changes in the fair value of the contingent consideration during the three month ended April 1, 2022.

On December 14, 2016, the Company acquired certain video signal processing and management technologies used in medical visualization solutions. Under the purchase and sale agreement, the former owners are eligible to receive contingent consideration based on the achievement of certain revenue targets by the Company from 2018 to 2021 from products utilizing the acquired technologies. The undiscounted range of possible contingent consideration is zero to €5.5 million ($6.6 million). If the revenue targets are achieved, the contingent consideration would be payable in cash in four installments from 2019 to 2022. As the acquired assets did not meet the definition of a business, the fair value of the contingent consideration is recognized when probable and estimable and is capitalized as part of the cost of the acquired assets. Subsequent changes in the estimated fair value of this contingent liability are recorded as adjustments to the carrying value of the assets acquired and amortized over the remaining useful life of the underlying assets. Based on revenue achievements against the target, the Company had recognized an aggregate fair value of €5.5 million ($6.3 million) of the acquired intangible assets as of April 1, 2022. The Company made the first installment payment of €2.4 million ($2.6 million) in February 2020, the second installment payment of €1.8 million ($2.2 million) in February 2021, and the final installment payment of €1.3 million ($1.5 million) in March 2022. The installment payments have been reported as cash outflows from investing activities in the consolidated statements of cash flows.

The following table summarizes the fair values of the Company’s assets and liabilities measured at fair value on a recurring basis as of April 1, 2022 (in thousands):

			Quoted Prices in				Significant Other
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents	$	4,325	$	4,325	$	—	$	—
Prepaid expenses and other current assets:
Foreign currency forward contracts		118		—		118		—
	$	4,443	$	4,325	$	118	$	—
Liabilities
Accrued expenses and other current liabilities:
Contingent considerations - Current	$	45,471	$	—	$	—	$	45,471
Foreign currency forward contracts		41		—		41		—
Other liabilities:
Contingent considerations - Long-term		1,259		—		—		1,259
	$	46,771	$	—	$	41	$	46,730

The following table summarizes the fair values of the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 (in thousands):

			Quoted Prices in				Significant Other
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents	$	1,711	$	1,711	$	—	$	—
Prepaid expenses and other current assets:
Foreign currency forward contracts		137		—		137		—
	$	1,848	$	1,711	$	137	$	—
Liabilities
Accrued expenses and other current liabilities:
Contingent considerations - Current	$	47,522	$	—	$	—	$	47,522
Foreign currency forward contracts		160		—		160		—
Other liabilities:
Contingent considerations - Long-term		3,402		—		—		3,402
	$	51,084	$	—	$	160	$	50,924

Changes in the fair value of Level 3 contingent considerations during the three months ended April 1, 2022 were as follows (in thousands):

The following table provides qualitative information associated with the fair value measurement of the Company’s Level 3 liabilities:


Liability	April 1, 2022 Fair Value (in thousands)	Valuation Technique	Unobservable Inputs	Percentage Applied
Contingent consideration (ATI)	$44,000	Monte Carlo method	Adjusted EBITDA for fiscal year 2021	N/A
			EBITDA risk premium	7.2%
			EBITDA volatility	27.0%
			Credit spread	2.1%

Contingent consideration (ARGES)	$1,519	Monte Carlo method	Historical and projected revenues from August 2019 through December 2026	N/A
			Revenue volatility	14.0%
			Cost of debt	3.9%
			Discount rate	2.6%

Contingent consideration (Ingenia)	$1,211	Monte Carlo method	Historical revenues from April 2019 through March 2022	N/A

Increases or decreases in the unobservable inputs noted above would result in a higher or lower fair value measurement.

See Note 9 to Consolidated Financial Statements for a discussion of the estimated fair value of the Company’s outstanding debt.