Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2024

The following table presents the financial instruments and liabilities that are carried at fair value and summarizes their valuation by the respective pricing levels as of March 31, 2024 and December 31, 2023:


	As of March 31, 2024
(In thousands)	Total		Quoted Market Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets carried at fair value
Money market funds	$	4,335	$	4,335	$	—	$	—
Time deposits	13,419		—		13,419		—
U.S. Government bonds and notes	149,442		—		149,442		—
Corporate bonds, commercial paper and notes	116,576		—		116,576		—
Total assets carried at fair value	$	283,772	$	4,335	$	279,437	$	—
Liabilities carried at fair value
Earn-out consideration related to PLDA acquisition	$	13,200	$	—	$	—	$	13,200
Total liabilities carried at fair value	$	13,200	$	—	$	—	$	13,200


	As of December 31, 2023
(In thousands)	Total		Quoted Market Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets carried at fair value
Money market funds	$	3,790	$	3,790	$	—	$	—
U.S. Government bonds and notes	196,919		—		196,919		—
Corporate bonds, commercial paper and notes	136,649		—		136,649		—
Total available-for-sale securities	$	337,358	$	3,790	$	333,568	$	—
Liabilities carried at fair value
Earn-out consideration related to PLDA acquisition	$	12,500	$	—	$	—	$	12,500
Total liabilities carried at fair value	$	12,500	$	—	$	—	$	12,500

The Company’s liabilities related to earn-out consideration are classified within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs. The following table presents additional information about liabilities measured at fair value for which the Company utilizes Level 3 inputs to determine fair value, as of March 31, 2024 and 2023.


	Three Months Ended
	March 31,
(In thousands)	2024		2023
Balance as of beginning of period	$	12,500	$	14,800

Change in fair value of earn-out liability due to remeasurement	700		6,900


Balance as of end of period	$	13,200	$	21,700

For the three months ended March 31, 2024 and 2023, the changes in the fair value of the earn-out liability related to the 2021 acquisition of PLDA Group (“PLDA”), which is subject to certain revenue targets of the acquired business for a period of three years from the date of acquisition, and which is settled annually in shares of the Company’s common stock based on the fair value of that common stock fixed at the time the Company acquired PLDA. The fair value of the earn-out liability is remeasured each quarter, depending on the acquired business’s revenue performance relative to target over the applicable period, and adjusted to reflect changes in the per share value of the Company’s common stock. The Company has classified its liability for the contingent earn-out consideration related to the PLDA acquisition within Level 3 of the fair value hierarchy because the fair value calculation includes significant unobservable inputs, such as revenue forecast, revenue volatility, equity volatility and weighted average cost of capital. During the three months ended March 31, 2024 and 2023, the Company

remeasured the fair value of the earn-out liability, which resulted in additional expenses of $0.7 million and $6.9 million, respectively, in the Company’s Unaudited Condensed Consolidated Statements of Operations.

The Company monitors its investments for impairment and records appropriate reductions in carrying value when necessary. The Company monitors its investments for impairment by considering current factors, including the economic environment, market conditions, operational performance and other specific factors relating to the business underlying the investment, reductions in carrying values when necessary and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in the market. Any impairment is reported under “Interest and other income (expense), net” in the Unaudited Condensed Consolidated Statements of Operations.

In 2018, the Company made an investment in a non-marketable equity security of a private company. This equity investment was accounted for under the equity method of accounting, and the Company accounted for its equity method share of the income (loss) on a quarterly basis. During the fourth quarter of 2023, the Company sold its 25.0% ownership share in the equity investment for approximately $25.0 million, which represented a gross gain on this transaction for the same amount. The gross gain was offset by transaction costs of approximately $1.1 million, resulting in a net gain of approximately $23.9 million, which was included in the Company’s Consolidated Statement of Operations for the year ended December 31, 2023. Subsequently, the Company received proceeds, net of tax, of approximately $22.8 million from this transaction during the three months ended March 31, 2024.

During the three months ended March 31, 2024 and 2023, there were no transfers of financial instruments between different categories of fair value.

- 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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