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FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2022

NOTE 6. FAIR VALUE MEASUREMENTS

Assets and liabilities measured at fair value on a recurring basis included the following:



(In thousands)	Balance at September 30, 2022		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	2,247	$	2,247	$	—	$	—
Municipal bonds		129,479		—		129,479		—
Corporate debt securities		455,621		—		455,621		—
Commercial paper		8,632		—		8,632		—
Asset-backed securities		113,569		—		113,569		—
Government, federal agency, and other sovereign obligations		67,727		—		67,727		—
Liabilities:
Business acquisition liabilities		64,294		—		—		64,294



(In thousands)	Balance at December 31, 2021		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	26,684	$	3,768	$	22,916	$	—
Municipal bonds		157,247		—		157,247		—
Corporate debt securities		430,996		—		430,996		—
Commercial paper		38,253		—		38,253		—
Asset-backed securities		140,651		—		140,651		—
Government, federal agency, and other sovereign obligations		45,706		—		45,706		—
Liabilities:
Business acquisition liabilities		70,525		—		—		70,525

Our marketable securities are classified as Level 2 within the fair value hierarchy, as we measure their fair value using market prices for similar instruments and inputs such as actual trade data, benchmark yields, broker/dealer quotes and other similar data obtained from quoted market prices or independent pricing vendors.

Assets and Liabilities That Are Measured at Fair Value on a Nonrecurring Basis

Fair value of the revenue-based business acquisition liabilities was determined using a discounted cash flow model and an option pricing model. The significant inputs of such models are not observable in the market, such as certain financial metric growth rates, volatility and discount rates, market price risk adjustment, projections associated with the applicable milestone, the interest rate, and the related probabilities and payment structure in the contingent consideration arrangement.

The following are the significant unobservable inputs used in the two valuation techniques:


Unobservable input	Range			Weighted Average*
Revenue risk premium	2.4%	-	4.9%	3.0%
Revenue volatility	14.0%	-	15.8%	14.9%
Discount rate	3.8%	-	8.5%	6.2%
Projected year of payment	2022	-	2032

* The weighted average rates were calculated based on the relative fair value of each business acquisition liability.

The change in the carrying value of the business acquisition liabilities during the three and nine months ended September 30, 2022 and 2021, respectively included the following:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2022		2021		2022		2021
Beginning balance	$	68,314	$	47,995	$	70,525	$	37,270
Purchase price contingent consideration		—		12,628		4,414		12,628
Contingent cash payments		(2,657)		(1,613)		(7,264)		(4,628)
Contingent RSU grants		(1,116)		(1,311)		(1,532)		(1,671)
Changes in fair value of business acquisition liabilities		(653)		208		(2,043)		14,336
Contractual payable reclassification		406		(65)		194		(93)
Ending balance	$	64,294	$	57,842	$	64,294	$	57,842

Changes in the fair value of business acquisition liabilities are driven by changes in market conditions and the achievement of certain performance conditions.

- 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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