Fair Value Measurements

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair value measurements

Accounting Standards Codification (ASC) 820 — Fair Value Measurements and Disclosures creates a single definition of fair value, establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements. ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement is to estimate the price at which an orderly transaction to sell an asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. Assets and liabilities adjusted to fair value in the balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Level inputs, as defined by ASC 820, are as follows:

Level input	Input definition
Level 1	Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level 2	Inputs, other than quoted prices included in Level 1, that are observable for the asset or liability through corroboration with market data at the measurement date.
Level 3	Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The Company’s financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable, accounts payable and accrued expenses. The carrying values of its financial instruments approximate fair value based on their short-term nature.

Cash, cash equivalents and marketable securities

The Company obtained the fair value of its available-for-sale investments, which are not in active markets, from a third-party professional pricing service using quoted market prices for identical or comparable instruments, rather than direct observations of quoted prices in active markets. The Company's professional pricing service gathers observable inputs for all of its fixed income securities from a variety of industry data providers (e.g., large custodial institutions) and other third-party sources. Once the observable inputs are gathered, all data points are considered, and the fair value is determined. The Company validates the quoted market prices provided by its primary pricing service by comparing their assessment of the fair values against the fair values provided by its investment managers. The Company's investment managers use similar techniques to its professional pricing service to derive pricing as described above. As all significant inputs were observable, derived from observable information in the marketplace or supported by observable levels at which transactions are executed in the marketplace, the Company has classified its marketable securities within Level 2 of the fair value hierarchy.

The following table summarizes fair value measurements by level for the assets measured at fair value on a recurring basis for cash, cash equivalents and marketable securities:

	As of March 31, 2022
			Gross					Cash
	Adjusted		unrealized					and cash		Marketable
	cost		losses			Fair value		equivalents		securities
Cash	$	36,677	$	—		$	36,677	$	36,677	$	—
Level 1:
Money market accounts		176,722		—			176,722		176,722		—
Level 2:
Corporate bonds		9,996		(7	)		9,989		—		9,989
Total	$	223,395	$	(7	)	$	223,388	$	213,399	$	9,989
	As of December 31, 2021
			Gross					Cash
	Adjusted		unrealized					and cash		Marketable
	cost		gains			Fair value		equivalents		securities
Cash	$	48,817	$	—		$	48,817	$	48,817	$	—
Level 1:
Money market accounts		186,707		—			186,707		186,707		—
Level 2:
Corporate bonds		9,988		1			9,989		—		9,989
Total	$	245,512	$	1		$	245,513	$	235,524	$	9,989

Derivative instruments and hedging activities

The Company records the assets or liabilities associated with derivative instruments and hedging activities at fair value based on Level 2 inputs in other current assets or other current liabilities, respectively, in the consolidated balance sheet. The Company had a related receivable of $1,637 and $1,671 as of March 31, 2022 and December 31, 2021, respectively.

Accumulated other comprehensive income

The components of accumulated other comprehensive income (loss) were as follows:

	Foreign			Unrealized			Unrealized			Accumulated
	currency			gains (losses)			gains (losses)			other
	translation			on marketable			on cash			comprehensive
	adjustments			securities			flow hedges			income
Balance as of December 31, 2021	$	328		$	1		$	1,140		$	1,469
Other comprehensive loss		(203	)		(8	)		(74	)		(285	)
Balance as of March 31, 2022	$	125		$	(7	)	$	1,066		$	1,184

Comprehensive income (loss) is the total net earnings and all other non-owner changes in equity. Except for net income (loss) and unrealized gains and losses on cash flow hedges, the Company does not have any transactions or other economic events that qualify as other comprehensive income (loss).

Earnout liability

The Company has obligations to pay up to $31,400 in earnout payments in cash if certain future financial results are met. The earnout liability was valued using Level 3 inputs. The fair value of the earnout was determined by employing a Monte Carlo simulation in a risk-neutral framework. The underlying simulated variable includes recognized revenue. The recognized revenue volatility estimate was based on a study of historical asset volatility for a set of comparable public companies. The model includes other assumptions including the market price of risk, which was calculated as the weighted average cost of capital (WACC) less the long-term risk free rate. The earnout period for recognized revenue is each calendar year beginning with calendar year 2019 and ending on the calendar year in which the earnout consideration equals the earnout cap.

The following table provides quantitative information about Level 3 inputs for fair value measurement of the earnout liability as of March 31, 2022 and December 31, 2021. Significant increases or decreases in these inputs in isolation could result in a significant impact on the fair value measurement:

Simulation input	March 31, 2022			December 31, 2021
Revenue volatility		15.00	%		15.00	%
WACC		11.50	%		10.50	%
20-year risk free rate		2.59	%		2.02	%
Market price of risk		2.30	%		2.68	%

The reconciliation of the earnout liability measured and carried at fair value on a recurring basis is as follows:

	Three months ended
	March 31, 2022
Balance at beginning of period	$	16,016
Change in fair value		630
Balance at end of period	$	16,646

The Company recorded $630 and $630 of preacquisition loss recoveries that can be withheld from any earnout amounts payable as of  March 31, 2022 and December 31, 2021, respectively.