Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

(6) Fair Value Measurements

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the short maturity of these items.

Certain assets, including long-lived assets, goodwill and intangible assets are also subject to measurement at fair value on a non-recurring basis if they are deemed to be impaired as a result of an impairment review. For the nine months ended September 30, 2021 and year ended December 31, 2020, no impairments were identified.

The following table summarizes the Company's financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy. Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):

	As of September 30, 2021
	Quoted		Significant
	Prices in		Other		Significant
	Active		Observable		Unobservable
	Markets		Inputs		Inputs		Total Fair
	(Level 1)		(Level 2)		(Level 3)		Value
Assets:
Cash equivalents:
Money market funds	$	489,664	$	—	$	—	$	489,664
Total financial assets	$	489,664	$	—	$	—	$	489,664
Liabilities:
Derivative instruments - acquisition-related deferred    common stock consideration		—		1,024		—		1,024
Total financial liabilities	$	—	$	1,024	$	—	$	1,024
	As of December 31, 2020
	Quoted		Significant
	Prices in		Other		Significant
	Active		Observable		Unobservable
	Markets		Inputs		Inputs		Total Fair
	(Level 1)		(Level 2)		(Level 3)		Value
Assets:
Cash equivalents:
Money market funds	$	432,560	$	—	$	—	$	432,560
Total financial assets	$	432,560	$	—	$	—	$	432,560
Liabilities:
Contingent consideration	$	—	$	—	$	10,619	$	10,619
Derivative instruments - acquisition-related deferred    common stock consideration		—		1,011		—		1,011
Total financial liabilities	$	—	$	1,011	$	10,619	$	11,630

The Company classifies and discloses fair value measurements in one of the following three categories of fair value hierarchy:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities.

Level 2 - Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.

Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The Company’s assets that are measured by management at fair value on a recurring basis are generally classified within Level 1 or Level 2 of the fair value hierarchy. The Company did not have any transfers into and out of Level 1 or Level 2 during the nine months ended September 30, 2021.  

The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents. The fair value of the Company’s investments in certain money market funds is their face value and such instruments are classified as Level 1 and are included in cash and cash equivalents on the consolidated balance sheets.

On May 27, 2020, the Company entered into a Stock Purchase Agreement with Techwan SA (“Techwan”) pursuant to which the Company purchased all of the issued and outstanding shares of stock of Techwan (see Note 8). In accordance with the Stock Purchase Agreement, 6,779 shares of the Company’s common stock were reserved and are expected to be issued to the sellers in November 2021 subject to the provisions in the Stock Purchase Agreement. Management analyzed the liability for derivative accounting consideration under ASC 815, Derivatives and Hedging, and determined that the liability qualifies for derivative accounting. The derivative liability is not designated as a hedging instrument. In accordance with ASC 815, the Company recorded the acquisition-related deferred common stock consideration derivative liability, which is carried at fair value, in other long-term liabilities on the condensed consolidated balance sheet. The derivative liability will be marked-to-market each measurement period. The change in fair value during the three and nine months ended September 30, 2021 of $0.1 million and less than $0.1 million, respectively, was recorded as a component of other expense, net on the condensed consolidated statement of operations. The change in fair value during the three months ended September 30, 2020 of $(0.1) million was recorded as a component of other expense, net on the condensed consolidated statement of operations. The fair value is derived from the Company’s stock price. The acquisition-related deferred common stock consideration derivative liability will remain in effect until such time as the associated shares are issued and the resulting derivative liability will be transitioned from a liability to equity as of such date.

The following tables summarize the changes in Level 3 financial instruments (in thousands):

Fair value at December 31, 2019	$	—
Contingent consideration from Connexient acquisition		340
Contingent consideration from one2many acquisition		2,190
Fair value at March 31, 2020		2,530
Contingent consideration from Techwan acquisition		2,030
Adjustment for Connexient acquisition		(340	)
Foreign currency translation		72
Fair value at June 30, 2020		4,292
Contingent consideration from SnapComms acquisition		2,047
Adjustment for one2many acquisition		1,370
Adjustment for Techwan acquisition		130
Foreign currency translation		157
Fair value at September 30, 2020	$	7,996

Fair value at December 31, 2020	$	10,619
Contingent consideration from RedSky acquisition		9,135
Adjustment for one2many acquisition		(690	)
Adjustment for SnapComms acquisition		732
Foreign currency translation		(465	)
Fair value at March 31, 2021		19,331
Adjustment for one2many acquisition		38
Adjustment for SnapComms acquisition		(23	)
Payment for SnapComms acquisition		(720	)
Foreign currency translation		149
Fair value at June 30, 2021		18,775
Adjustment for one2many acquisition		1,060
Adjustment for RedSky acquisition		(8,163	)
Payment for one2many acquisition		(10,679	)
Payment for RedSky acquisition		(972	)
Foreign currency translation		(21	)
Fair value at September 30, 2021	$	—

The valuation of the contingent consideration was derived using estimates of the probability of achievement within specified time periods based on projections of future revenue metrics per the terms of the applicable agreements. These include estimates of the Company’s assessment of the probability of meeting such results, with the probability-weighted earn-out using a Monte Carlo Simulation Model then discounted to estimate fair value. Fair value is estimated using the probability weighted cash flow estimate closer to the measurement date. The various operating performance measures included in these contingent consideration agreements primarily relate to product revenue. As these are unobservable inputs, the contingent consideration liabilities are included in Level 3 inputs.

During the six months ended June 30, 2021, as a result of assessing the probabilities of SnapComms Limited (“SnapComms”) meeting revenue metrics during the period of April 1, 2020 through March 31, 2021, the Company recognized an increase in the fair value of SnapComms’ contingent consideration obligation in the amount of $0.7 million. During the three months ended June 30, 2021, the Company issued 6,188 shares of the Company’s common stock to settle SnapComms’ contingent consideration liability.

During the three and nine months ended September 30, 2021, as a result of assessing the probabilities of One2Many Group B.V. (“one2many”) meeting revenue metrics during the period of March 1, 2020 through February 28, 2021 and the payment of the contingent consideration liability, the Company recognized an increase in the fair value of one2many’s contingent consideration obligation in the amount of $1.1 million and $0.4 million, respectively. During the three months ended September 30, 2021, the Company paid €4.1 million in cash and issued 41,668 shares of the Company’s common stock to settle one2many’s contingent consideration liability.

During the three months ended September 30, 2021, as a result of assessing the probabilities of Red Sky Technologies Inc. (“RedSky”) meeting certain revenue targets through the contractual measurement period, the Company recognized a decrease in the fair value of RedSky’s contingent consideration obligation in the amount of $8.2 million. During the three months ended September 30, 2021, the Company paid $0.4 million in cash and issued 4,058 shares of the Company’s common stock to settle RedSky’s contingent consideration liability.

The Company estimates the fair value of the convertible senior notes based on market-observable inputs (Level 2).  As of September 30, 2021, the fair value of the 0% convertible senior notes due March 15, 2026 (the “2026 Notes”) was determined to be $421.5 million and the principal amount of the notes was $375.0 million. As of September 30, 2021 and December 31, 2020, the fair value of the 0.125% convertible senior notes due December 15, 2024 (the “2024 Notes”) was determined to be $670.1 million and $663.6 million, respectively, and the principal amount of the notes was $450.0 million for each period. As of September 30, 2021 and December 31, 2020, the fair value of the 1.50% convertible senior notes due November 1, 2022 (the “2022 Notes”) was determined to be $1.4 million and $265.5 million, respectively, and the principal amount of the notes was $0.3 million and $79.8 million, respectively.