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Fair Value

6 Months Ended

Dec. 31, 2021

Fair Values of Assets and Liabilities

We measure fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the assumptions that market participants would use in pricing an asset or liability (the inputs) are based on a tiered fair value hierarchy consisting of three levels, as follows:

Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.

Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar instruments in active markets or for similar markets that are not active.

Level 3: Unobservable inputs for which there is little or no market data which require us to develop our own assumptions about how market participants would price the asset or liability.

Valuation techniques for assets and liabilities include methodologies such as the market approach, the income approach or the cost approach, and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs are only utilized to the extent that observable inputs are not available or cost-effective to obtain.

At December 31, 2021 and June 30, 2021, our assets and liabilities measured at fair value on a recurring basis were as follows:


	December 31, 2021								June 30, 2021
	Fair Value Measurements Using Input Types								Fair Value Measurements Using Input Types
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Money market funds (cash and cash equivalents)	$	7,597	$	—	$	—	$	7,597	$	340	$	—	$	—	$	340
Available for sale securities - Debt

Government - U.S. treasury securities	—		2,903		—		2,903		—		10,150		—		10,150
Total available for sale securities	$	—	$	2,903	$	—	$	2,903	$	—	$	10,150	$	—	$	10,150

Other investments (long-term)	—		939		1,245		2,184		—		966		1,014		1,980


Total assets	$	7,597	$	3,842	$	1,245	$	12,684	$	340	$	11,116	$	1,014	$	12,470
Liabilities
Interest rate swap (short-term)	$	—	$	1,255	$	—	$	1,255	$	—	$	1,564	$	—	$	1,564
Interest rate swap (long-term)	$	—	$	536	$	—	$	536	$	—	$	1,550	$	—	$	1,550
Total liabilities	$	—	$	1,791	$	—	$	1,791	$	—	$	3,114	$	—	$	3,114

Fair Value of Financial Instruments

We have certain financial instruments which consist of cash and cash equivalents, cash held for customers, marketable securities, accounts receivable, contract assets, equity securities, accounts payable, customer account liabilities, certain derivative instruments, assets related to deposits made to fund future requirements associated with Israeli severance arrangements and debt drawn on our Credit Facility (as defined in Note 12). Fair value information for each of these instruments is as follows:

• Cash and cash equivalents, cash held for customers, accounts receivable, contract assets, accounts payable and customer account liabilities fair values approximate their carrying values, due to the expected duration of these instruments.

• Marketable securities classified as held to maturity, all of which mature within one year, are recorded at amortized cost, which at December 31, 2021 and June 30, 2021, approximated fair value.

• Marketable debt securities classified as available for sale are recorded at fair value. Unrealized gains and losses are included as a component of accumulated other comprehensive income (loss) in stockholders’ equity, net of tax. We use the specific identification method to determine any realized gains or losses from the sale of our marketable debt securities classified as available for sale. We assess securities with an amortized cost basis in excess of estimated fair value for credit loss. As of December 31, 2021 and June 30, 2021, the unrealized losses associated with available for sale securities were not material. No credit loss has been recorded as we do not intend to sell the investments prior to recovering their amortized costs basis.

• The fair value of our interest rate swaps are based on the present value of projected cash flows that will occur over the life of the instruments, after considering certain contractual terms and counterparty credit risk.

• We hold certain other investments accounted for at fair value. The estimated fair value of these investments, which are in a private equity fund, are Level 3 measurements as they rely on significant unobservable inputs and depending on the specific nature of the investment, consider such factors as pricing models that consider a comparative analysis of acquisitions and pricing multiples from market participants as well as discounted cash flow analyses. We also have investments for which there is no readily determinable fair value. The carrying value of these investments was $12.0 million at December 31, 2021 and June 30, 2021, respectively, and are reported as a component of other assets. Investments for which we cannot readily determine fair value are recorded at cost, less impairment (if any), plus or minus adjustments for observable price changes.

• We have borrowings of $130 million against our Credit Facility. The fair value of these borrowings, which are classified as Level 2, approximates their carrying value at December 31, 2021 as the instrument carries a variable rate of interest which reflects current market rates.

Marketable Securities

The table below presents information regarding our marketable securities by major security type as of December 31, 2021 and June 30, 2021.


	December 31, 2021						June 30, 2021
	Held to Maturity		Available for Sale		Total		Held to Maturity		Available for Sale		Total
	(in thousands)
Marketable securities:
Government and other debt securities	$	64	$	2,903	$	2,967	$	66	$	10,150	$	10,216
Total marketable securities	$	64	$	2,903	$	2,967	$	66	$	10,150	$	10,216

The following table summarizes the estimated fair value of our investments in available for sale marketable securities classified by the contractual maturity date of the securities:


	December 31, 2021
	(in thousands)
Due within 1 year	$	2,903
Due in 1 year through 5 years	—
Total	$	2,903

All of our available for sale marketable securities are classified as current assets.

The following table presents the aggregate fair values and gross unrealized losses for those available for sale investments that were in an unrealized loss position as of December 31, 2021 and June 30, 2021, respectively, aggregated by investment category and the length of time that individual securities have been in a continuous loss position:


	At December 31, 2021				At June 30, 2021
	Less than 12 Months
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(in thousands)
Government - U.S. treasury securities	$	2,903	$	(1)	$	5,930	$	(1)
Total	$	2,903	$	(1)	$	5,930	$	(1)

- 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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