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Fair Value of Financial Instruments

9 Months Ended

Mar. 31, 2022

FAIR VALUE OF FINANCIAL INSTRUMENTS

Accounting guidance on fair value measurements for certain financial assets and liabilities requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1 Quoted market prices in active markets for identical assets and liabilities.

Level 2 Observable market-based inputs other than quoted prices in active markets for identical assets and liabilities.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

In valuing assets and liabilities, the Company is required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The Company calculates the fair value of its Level 1 and Level 2 instruments, as applicable, based on the exchange traded price of similar or identical instruments where available or based on other observable instruments. These calculations take into consideration the credit risk of both the Company and its counterparties. The Company has not changed its valuation techniques in measuring the fair value of any financial assets and liabilities during the period.

The fair values of the contingent consideration obligations are based on a probability weighted approach derived from the estimates of earn-out criteria and the probability assessment with respect to the likelihood of achieving those criteria. The measurement is based on significant inputs that are not observable in the market, therefore, the Company classifies this liability as Level 3 in the table below.

The following tables set forth the Company’s financial assets and liabilities at March 31, 2022 and June 30, 2021, respectively, that are recorded at fair value, segregated by level within the fair value hierarchy:


	March 31, 2022
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets:
Cash and cash equivalents:
Money market funds (a)	$	—	$	—	$	—	$	—
Other current assets:
Securities	0.6		—		—		0.6
Other non-current assets:
Securities	126.9		—		—		126.9
Derivative asset	—		28.1		—		28.1
Total assets as of March 31, 2022	$	127.5	$	28.1	$	—	$	155.5
Liabilities:
Contingent consideration obligations	—		—		18.3		18.3
Total liabilities as of March 31, 2022	$	—	$	—	$	18.3	$	18.3


	June 30, 2021
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets:
Cash and cash equivalents:
Money market funds (a)	$	—	$	—	$	—	$	—
Other current assets:
Securities	0.7		—		—		0.7
Other non-current assets:
Securities	120.6		—		—		120.6
Total assets as of June 30, 2021	$	121.2	$	—	$	—	$	121.2
Liabilities:
Contingent consideration obligations	—		—		23.2		23.2
Total liabilities as of June 30, 2021	$	—	$	—	$	23.2	$	23.2

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(a)Money market funds include money market deposit account balances of $0.0 million and less than $0.1 million as of March 31, 2022 and June 30, 2021, respectively.

In addition, the Company has non-marketable securities with a carrying amount of $46.4 million and $37.5 million as of March 31, 2022 and June 30, 2021, respectively, that are classified as Level 2 financial assets and included as part of Other non-current assets on the Condensed Consolidated Balance Sheets.

The following table sets forth an analysis of changes during the three and nine months ended March 31, 2022 and 2021, respectively, in Level 3 financial liabilities of the Company:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
	(in millions)
Beginning balance	$	18.8	$	17.8	$	23.2	$	33.1
Net increase in contingent consideration liability	—		—		1.1		—
Foreign currency impact on contingent consideration liability	(0.2)		0.3		(0.8)		1.8
Payments	(0.3)		(0.8)		(5.2)		(17.5)
Ending balance	$	18.3	$	17.3	$	18.3	$	17.3

Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments between levels. The Company’s policy is to record transfers between levels if any, as of the beginning of the fiscal year.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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