Fair value measurement

3 Months Ended

Dec. 31, 2021

Fair value measurement

Fair value measurement

3. Fair value measurement

The Company assesses the fair value of financial instruments based on the provisions of ASC 820, Fair Value Measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company short-term and long-term investments primarily utilize broker quotes in a non-active market for valuation of its investments.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

As of December 31, 2021, financial assets and liabilities measured and recognized at fair value are as follows:

(in thousands)	Level 1		Level 2		Level 3		Fair value
Assets
Money market funds	$	143,015	$	—	$	—	$	143,015
Corporate bonds		—		43,218		—		43,218
Commercial paper		—		60,406		—		60,406
U.S. government treasury bills		113,454		—		—		113,454
Total financial assets	$	256,469	$	103,624	$	—	$	360,093
Liabilities
Contingent consideration and indemnity holdback	$	—	$	20,568	$	7,800	$	28,368
Total financial liabilities	$	—	$	20,568	$	7,800	$	28,368

As of September 30, 2021, financial assets and liabilities measured and recognized at fair value are as follows:

(in thousands)	Level 1		Level 2		Level 3		Fair value
Assets
Money market funds	$	430,438	$	—	$	—	$	430,438
U.S. government treasury bills		12,034		—		—		12,034
Total financial assets	$	442,472	$	—	$	—	$	442,472
Liabilities
Contingent consideration and indemnity holdback	$	—	$	9,856	$	—	$	9,856
Total financial liabilities	$	—	$	9,856	$	—	$	9,856

As of December 31, 2021 and September 30, 2021, gross unrealized gains and unrealized losses for cash equivalents and investments were not material.

Following table provided a reconciliation of beginning and ending balances of the Level 3 financial liabilities during the three months ended December 31, 2021:

(in thousands)	Total
Balance as of September 30, 2021	$	—
Contingent consideration – additions		8,500
Change in fair value		(700)
Balance as of December 31, 2021	$	7,800