Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Fair Value MeasurementsThe following table summarizes the Company’s financial instruments measured at fair value on a recurring basis by level, within the valuation hierarchy:


	June 30, 2022
(in thousands)	Level 1		Level 2		Level 3		Total
Liabilities
Contingent consideration	$	—	$	—	$	4,162	$	4,162
Total liabilities	$	—	$	—	$	4,162	$	4,162

December 31, 2021

(in thousands)

Level 1

Level 2

Level 3

Total

Liabilities

Contingent consideration

—

Total liabilities

—

Contingent consideration

Contingent consideration is measured at fair value on a recurring basis using significant unobservable inputs and thus represent a Level 3 measurement in the valuation hierarchy. The following table summarizes the changes in the contingent consideration:


	Three months ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Beginning fair value	$	—	$	—	$	—	$	—
Additions in the period	7,007		—		7,007		—
Change in fair value	(2,845)		—		(2,845)		—
Ending fair value	$	4,162	$	—	$	4,162	$	—

Contingent consideration relates to the estimated amount of additional cash consideration to be paid in connection with the Company's acquisition of CHT. The fair value is dependent on the probability of achieving certain revenue and gross profit margin targets for the two successive 12-month periods following the closing of the acquisition. The Company used the Monte Carlo simulation approach to estimate the fair value of the revenue and gross margin targets and were determined using risk-adjusted discount rates and volatility for the revenue target of 6.0% and 12.5%, respectively and for the gross profit target of 19.0% and 70.0%, respectively. A change in any of these unobservable inputs can significantly change the fair value of the contingent consideration.

The fair value of the contingent consideration was remeasured as of June 30, 2022, and was determined to be $4.2 million based on CHT's projected revenue and gross margin for the applicable periods, and the resulting projected achievement levels of the financial targets. As of June 30, 2022, $1.0 million was included within accrued expenses as current and $3.2 million included within other long term liabilities on the Company's consolidated balance sheets.

- 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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