Fair Value Measurements

9 Months Ended

Sep. 30, 2024

Fair Value Measurements

Fair Value Measurements

3. Fair Value Measurements

The following tables present the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis (in thousands):

	Fair Value Measurements at September 30, 2024 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents - Money market funds	$	21,822	$	—	$	—	$	21,822
Marketable securities - U.S. Treasury securities due in 3 - 6 months		—		26,661		—		26,661
Total assets measured at fair value	$	21,822	$	26,661	$	—	$	48,483
Other long-term liabilities:
Acquisition-related contingent consideration		—		—		3,359		3,359
Total liabilities measured at fair value	$	—	$	—	$	3,359	$	3,359

	Fair Value Measurements at December 31, 2023 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents - Money market funds	$	94,165	$	—	$	—	$	94,165
Cash equivalents - U.S. Treasury securities		—		4,964		—		4,964
Marketable securities - U.S. Treasury securities due in 3 - 6 months		—		24,641		—		24,641
Total assets measured at fair value	$	94,165	$	29,605	$	—	$	123,770
Other current liabilities:
Acquisition-related contingent consideration		—		—		500		500
Total liabilities measured at fair value	$	—	$	—	$	500	$	500

Money Market Funds

Money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. There were no transfers between Level 1, Level 2 or Level 3 during the nine months ended September 30, 2024 or 2023.

Marketable Securities

U.S. Treasury securities were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy.

Contingent Consideration

The Company recognizes acquisition-related contingent consideration which represents the estimated fair value of future payments or issuance of the Company’s common stock to the former owners of an acquired entity as part of certain transactions. Acquisition-related contingent consideration is measured and reported at fair value using the Monte Carlo simulation method or probability weighted scenario based on the unobservable inputs, which are significant to the fair value and classified with Level 3 of the fair value hierarchy.

For the acquisition of TRACE Analytics GmbH, located in Braunschweig, Germany (“Trace”) in August 2022, the amount is contingent based on the acquired business’ performance for the milestones ranging from the date of acquisition to June 30, 2024. The unobservable inputs used in the fair value measurements include the probabilities of successful achievement of certain technological integration targets, forecasted results or targets, volatility of the common stock price of the Company, and discount rates. The sellers in the Trace acquisition achieved two of three milestones under the share purchase and transfer agreement, and accordingly the Company paid the sellers $0.5 million in August 2023 and $0.5 million in February 2024. During the fourth quarter of 2023, the probability weighted fair value of the remaining future earnout related to the Trace acquisition was determined to be zero and the accumulated accretion under the last milestone and the relative contingent consideration have been reduced to zero. During the second quarter of 2024, the sellers did not meet the last milestone and the measurement period for the milestone ended on June 30, 2024.

For the acquisition of RedWave in April 2024, the amount of contingent consideration to be issued is contingent based on the amount of revenue the Company generates from the sale of certain RedWave products and services during the two-year period from May 1, 2024 through April 30, 2026. As of the acquisition date of RedWave, the fair value of the contingent consideration was estimated using a Monte Carlo simulation, utilizing the closing price of the Company’s common stock on the Nasdaq Global Market of $5.76 per share, revenue projections, an equity volatility rate of the Company of 90%, a revenue volatility rate of 30% and a discount rate of 26.5%.

As of September 30, 2024, the fair value of the contingent consideration was estimated utilizing the closing price of the Company’s common stock on the Nasdaq Global Market of $3.47 per share, revenue projections, an equity volatility rate of the Company of 75%, a revenue volatility rate of 26% and a discount rate of 19%. The fair value of contingent consideration decreased by $12.1 million, primarily due to the change in revenue projections from operating decisions made post-acquisition and sustained decreases in the Company’s publicly quoted share price during the third quarter of 2024. The following table provides a roll-forward of the fair value of the Company’s contingent consideration, for which fair value is determined using Level 3 inputs (in thousands):

Balance as of December 31, 2023	$	500
Acquisition date fair value of contingent consideration - earnout		15,500
Decrease in fair value of contingent consideration earnouts		(12,141)
Contingent consideration payment		(500)
Balance as of September 30, 2024	$	3,359

The change in the fair value of contingent consideration liability is included in loss from operations.