FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2020

Other than the 0.625% Convertible Senior Notes and the Warrants, as well as the equity interest in Stash, the carrying amounts of the Company's financial instruments are equal to fair value at March 31, 2020. See Note 13—Debt for additional information on the 0.625% Convertible Senior Notes and the Warrants, and see Note 7—Equity Investment for additional information on the equity interest in Stash.

Contingent consideration payments related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs. The changes in the fair value of the Company's Level 3 liabilities during the first quarters of 2020 and 2019 are as follows (in thousands):



	Three Months Ended March 31,
	2020			2019
Contingent consideration, beginning of period	$	33,464		$	38,837
Transfers into Level 3	—			—
Transfers out of Level 3	—			—
Total net losses (gains) included in earnings (realized and unrealized)	(8,122		)	14,592
Purchases, sales and settlements:
Additions	—			—
Payments	(3,000		)	(4,000		)
Contingent consideration, end of period	$	22,342		$	49,429

The contingent consideration liability at March 31, 2020 is the estimated fair value of the earnout payments of the DepositAccounts, SnapCap, Ovation and QuoteWizard acquisitions.

The Company will make earnout payments ranging from zero to $1.0 million based on the achievement of defined milestone targets for DepositAccounts, a payment of $3.0 million based on the achievement of certain defined earnings targets for SnapCap, payments ranging from zero to $4.4 million based on the achievement of certain defined operating metrics for Ovation, and payments ranging from zero to $46.8 million based on the achievement of certain defined performance targets for QuoteWizard. See Note 8—Business Acquisitions for additional information on the contingent consideration for each of these respective acquisitions.

The significant unobservable inputs used to calculate the fair value of the contingent consideration are estimated future cash flows for the acquisitions, estimated customer growth rates, estimated date and likelihood of an increase in interest rates and the discount rate. Actual results will differ from the projected results and could have a significant impact on the estimated fair value of the contingent considerations. Additionally, as the liability is stated at present value, the passage of time alone will increase the estimated fair value of the liability each reporting period. Any changes in fair value will be recorded in operating income in the consolidated statements of operations and comprehensive income.

The following table provides quantitative information about Level 3 fair value measurements.



	Fair Value at March 31, 2020		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)^(a)
	(in thousands)
Contingent consideration	$	22,342	Option pricing model	Operating results growth rate	8.7% - 37.1% (22.9%)
				Customer growth rate	0.7	%
				Discount rate	10.3% - 10.5% (10.4%)
			Scenario approach based on interest rate forecasts^(b)	Date and likelihood of an increase in interest rates	—
				Discount rate	—	%

(a) Discount rates were weighted by the relative undiscounted value of expected earnout payments. Other unobservable inputs were weighted by the relative maximum potential earnout payments.

(b) See discussion over DepositAccounts within Note 8—Business Acquisitions—Changes in Contingent Consideration.

- 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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