Fair Value Measurements (Tables)
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6 Months Ended |
Jun. 30, 2022 |
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| Fair Value Disclosures [Abstract] |
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| Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis |
The following financial assets and liabilities are measured at fair value on a recurring basis. The fair values recognized in the accompanying consolidated balance sheets and the level within the fair value hierarchy in which the fair value measurements fall is as follows (in thousands):
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Fair Value Measurements Using |
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Quoted Prices |
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Significant |
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in Active |
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Other |
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Significant |
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Markets for |
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Observable |
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Unobservable |
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Fair |
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Identical Assets |
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Inputs |
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Inputs |
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June 30, 2022 |
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Value |
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(Level 1) |
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(Level 2) |
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(Level 3) |
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Money market funds |
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$ |
1,393,015 |
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$ |
1,393,015 |
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$ |
— |
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$ |
— |
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Available-for-sale securities: |
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U.S. treasury securities |
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283 |
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283 |
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— |
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— |
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Earnouts related to business combinations |
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96,640 |
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— |
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— |
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96,640 |
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Fair Value Measurements Using |
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Quoted Prices |
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Significant |
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in Active |
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Other |
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Significant |
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Markets for |
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Observable |
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Unobservable |
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Fair |
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Identical Assets |
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Inputs |
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Inputs |
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December 31, 2021 |
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Value |
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(Level 1) |
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(Level 2) |
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(Level 3) |
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Money market funds |
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$ |
1,439,522 |
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$ |
1,439,522 |
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$ |
— |
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$ |
— |
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Available-for-sale securities: |
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U.S. treasury securities |
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370 |
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370 |
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— |
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— |
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Earnouts related to business combinations |
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113,978 |
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— |
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— |
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113,978 |
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| Summary of Assumptions Used to Calculate the Estimated Earnout Liabilities |
The following table provides summary information of the assumptions used to calculate the estimated earnout liabilities related to 2021 and 2020 acquisitions (in thousands):
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Year of |
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Discount Rate as of |
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Balance
as of |
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Balance
as of |
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Acquisition |
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Acquisition |
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Earnout Target |
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Method |
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Earnout Period |
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June 30, 2022 |
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June 30, 2022 |
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December 31, 2021 |
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CrowdReason |
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2021 |
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Specific revenue growth thresholds through October 2024, with a cap of $30.0 million; to be settled in cash. |
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Probability-weighted discounted cash flows and Monte Carlo simulation |
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October 2024 |
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6.0 |
% |
(a) |
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$ |
23,261 |
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$ |
26,320 |
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Track1099 |
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2021 |
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Specific revenue growth thresholds through April 2023, with a cap of $12.5 million; to be settled in cash. |
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Probability-weighted discounted cash flows and Monte Carlo simulation |
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April 2023 |
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14.0 |
% |
(a) |
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6,639 |
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7,880 |
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Davo |
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2021 |
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Specific revenue growth thresholds through March 2023, with no cap; to be settled in cash. |
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Probability-weighted discounted cash flows and Monte Carlo simulation |
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March 2023 |
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9.5 |
% |
(a) |
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36,140 |
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35,885 |
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Transaction Tax Resources (“TTR”) |
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2020 |
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Specific revenue growth thresholds through December 2022, with cap of $26.4 million; to be settled in cash. (c) |
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Probability-weighted discounted cash flows and Monte Carlo simulation |
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December 2022 |
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16.0 |
% |
(c) |
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12,200 |
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24,830 |
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Business Licenses |
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2020 |
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Achievement of certain performance metrics through November 2024, with cap of $20.7 million; to be settled in common stock. |
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Scenario-based approach |
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November 2024 |
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9.5 |
% |
(b) |
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18,400 |
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19,063 |
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Balance end of period |
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$ |
96,640 |
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$ |
113,978 |
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(a) The discount rate was calculated using the build-up method with a risk-free rate commensurate with the term of the earnout based on the equity, asset and revenue betas, size premium, and the Company’s specific risk premium, as well as the market risk premium using a bottom-up approach. |
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(b) The discount rate was based on the Company's estimated credit yield. The Business Licenses earnout was assumed by management to have a high probability of achievement. |
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(c) $13.2 million was paid on March 2, 2022 in satisfaction of the first earnout period for TTR. The second earnout period, if achieved, is payable in March 2023. The discount rate of 16% was only used for revenue that was non-contracted as of June 30, 2022. The discount rate of 16% was calculated using the build-up method with a risk-free rate commensurate with the term of the earnout based on the equity, asset and revenue betas, size premium, and the Company’s specific risk premium, as well as the market risk premium using a bottom-up approach. For contracted revenue, no risk adjusted discount rate was assumed, other than the cost of debt, as it is not subject to forecasting uncertainty. |
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| Summary of Reconciliation of Beginning and Ending Balances of Recurring Fair Value Measurements |
A reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying consolidated balance sheets using significant unobservable (Level 3) inputs, is as follows (in thousands):
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Three Months Ended June 30, |
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2022 |
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2021 |
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Earnout liabilities related to business combinations: |
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Balance beginning of period |
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$ |
96,757 |
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$ |
37,653 |
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Fair value recorded at acquisition |
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— |
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28,620 |
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Fair value changes included in other (income) expense, net |
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(117 |
) |
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1,181 |
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Balance end of period |
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$ |
96,640 |
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$ |
67,454 |
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For the Six Months Ended June 30, |
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2022 |
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2021 |
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Earnout liabilities related to business combinations: |
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Balance beginning of period |
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$ |
113,978 |
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$ |
34,501 |
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Fair value recorded at acquisition |
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— |
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28,620 |
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Measurement period adjustments |
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— |
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1,802 |
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Payments of earnout liabilities |
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(13,220 |
) |
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— |
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Fair value changes included in total other (income) expense, net |
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(4,118 |
) |
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2,531 |
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Balance end of period |
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$ |
96,640 |
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$ |
67,454 |
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