Fair Value Measurements

6 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

Financial assets and liabilities are classified in the following fair value hierarchy based on the lowest level input that is significant to the fair value measurement: Level 1 (unadjusted quoted prices in active markets for identical assets or liabilities); Level 2 (observable market inputs, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

The following tables provide information by level for financial liabilities that are measured at fair value on a recurring basis (in thousands):

	Total Fair Value at		Fair Value Measurements Using  Inputs Considered as
	March 31, 2022		Level 1		Level 2		Level 3
Liabilities:
Contingent consideration on acquired business	$	6,200	$	—	$	—	$	6,200
Total liabilities measured at fair value	$	6,200	$	—	$	—	$	6,200

	Total Fair Value at		Fair Value Measurements Using  Inputs Considered as
	September 30, 2021		Level 1		Level 2		Level 3
Liabilities:
Contingent consideration on acquired business	$	6,200	$	—	$	—	$	6,200
Total liabilities measured at fair value	$	6,200	$	—	$	—	$	6,200

In connection with our acquisition of Opengear, we agreed to make contingent payments, based upon certain revenue thresholds. We paid the final installment of $10.0 million during the second quarter of fiscal 2021.

In connection with our acquisition of Haxiot, we agreed to make contingent earn-out payments, based upon certain revenue thresholds. In the fiscal third quarter of fiscal 2021, the preliminary purchase price allocation was updated, including related determination of fair value and income tax implications. As a result, we reduced contingent consideration by $2.1 million in the third fiscal quarter of 2021. The fair value of the remaining liability for contingent consideration for the acquisition of Haxiot was $5.9 million at March 31, 2022.

In connection with our acquisition of Ctek, we agreed to make contingent earn-out payments, based upon certain revenue thresholds. The fair value of the remaining liability for contingent consideration for the acquisition of Ctek was $0.3 million at March 31, 2022.

The following table presents a reconciliation of the contingent consideration liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):

	Three months ended March 31,				Six months ended March 31,
	2022		2021		2022		2021
Fair value at beginning of period	$	6,200	$	10,000	$	6,200	$	4,228
Contingent consideration recognized for acquired business	—		8,000		—		8,000
Contingent consideration payments	—		(10,000)		—		(10,000)
Change in fair value of contingent consideration	—		—		—		5,772
Fair value at end of period	$	6,200	$	8,000	$	6,200	$	8,000

The change in fair value of contingent consideration reflects our estimates of the probabilities of achieving the relevant targets and is discounted based on our estimated discount rate. The fair value of the contingent consideration at March 31, 2022 is based on the probability of achieving the specified revenue thresholds for Haxiot and Ctek.