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Fair Value Measurements

12 Months Ended

Dec. 31, 2022

3. Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis include the following as of December 31, 2022, and December 31, 2021 (in thousands):


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	62,956		—		—	$	62,956
Total cash equivalents	$	62,956		—		—	$	62,956

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	140,010		—		—	$	140,010
Total cash equivalents	$	140,010		—		—	$	140,010

Liability classified equity award	$	—		—		2,052	$	2,052

The Company did not have any transfers of assets and liabilities between the levels of the fair value measurement hierarchy during the periods presented.

On March 16, 2021, the Company entered into two foreign currency forward contracts, with a notional amount of $8.0 million total, $4.0 million each (€6.7 million total and €3.3 million each), to mitigate the foreign currency exchange risk related to its EOS subsidiary. The contracts are not designated as hedging instruments. The Company classified the derivative liabilities within Level 2 of the fair value hierarchy as observable inputs are available for the full term of the derivative instruments. The fair value of the forward contracts was developed using a market approach based on publicly available market yield curves and the term of the contracts. During the year ended December 31, 2021, the foreign currency forward contracts were settled for $7.6 million (€6.7 million). The Company recognized a nominal loss from the change in fair value of the contracts during the year ended December 31, 2021. The loss on the contract settlement was recorded within other expense, net on the consolidated statements of operations and the cash settlement is included in investing activities in the consolidated statements of cash flows for the year ended December 31, 2021.

On December 18, 2020, the Company entered into a foreign currency forward contract, with a notional amount of $117.9 million (€95.6 million) to mitigate the foreign currency exchange risk related to the Tender Offer Agreement, denominated in Euros. The contract was not designated as a hedging instrument. The Company classified the derivative liability within Level 2 of the fair value hierarchy as observable inputs were available for the full term of the derivative instrument. The fair value of the forward contract was developed using a market approach based on publicly available market yield curves and the term of the contract. On March 2, 2021, the foreign currency forward contract was settled for $115.3 million (€95.6 million). The Company recognized a $1.7 million and $0.9 million loss from the change in fair value of the contract during the years ended December 31, 2021 and 2020, respectively. The loss on the contract settlement was recorded as other expense on the consolidated statement of operations and the cash settlement is included in investing activities in the consolidated statements of cash flows for the year ended December 31, 2021.

In 2019, the Company issued a liability classified equity award to one of its executive officers. As the award was required to be settled in cash, it was classified as a liability on the consolidated balance sheets for the year ended December 31, 2021. The award was classified within Level 3 of the fair value hierarchy as the Company used a probability-weighted income approach, utilizing significant unobservable inputs including the probability of achieving the specific market condition with the valuation updated at each reporting period.

On November 2, 2022, the award was amended to be paid in shares of the Company's common stock. As a result of the amendment, the award is classified as equity in the consolidated balance sheets for the year ended December 31, 2022. The award vests in 2023 subject to continued service and a specific market condition. The Company used a probability-weighted income approach, utilizing significant unobservable inputs including the probability of achieving the specific market condition, to determine the fair value of the award after the amendment of approximately $3.0 million. The previously recognized liability was reclassified to additional paid-in capital and the unrecognized compensation costs will be amortized ratably over the remaining term of the award.

The following table provides a reconciliation of liabilities measured at fair value using significant unobservable inputs (Level 3) as of December 31, 2022 (in thousands):


	Level 3 Liabilities
Balance at December 31, 2020	$	1,668
Straight-line recognition of liability classified equity award		1,028
Change in fair value measurement		(644	)
Balance at December 31, 2021	$	2,052
Straight-line recognition of liability classified equity award		483
Change in fair value measurement		(586	)
Reclassification to equity classified award		(1,949	)
Balance at December 31, 2022	$	—

Fair Value of Convertible Debt

The fair value, based on a quoted market price (Level 1), of the Company’s outstanding 0.75% Convertible Senior Notes due 2026 (the "2026 Notes") was approximately $288.8 million at December 31, 2022 and approximately $308.1 million at December 31, 2021. The fair value, based on a quoted market price (Level 1), of the Company’s outstanding OCEANEs was approximately $13.3 million at December 31, 2022 and approximately $14.1 million at December 31, 2021. See Note 6 for further information.

- 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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