Fair value measurement

6 Months Ended

Mar. 31, 2022

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 March 31, 2022, 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	$	349,277	$	—	$	—	$	349,277
Corporate bonds	—		29,817		—		29,817
Commercial paper	—		54,945		—		54,945
U.S. government treasury bills	112,056		—		—		112,056
Total financial assets	$	461,333	$	84,762	$	—	$	546,095

Liabilities
Contingent consideration and holdbacks	$	—	$	11,398	$	5,700	$	17,098
Total financial liabilities	$	—	$	11,398	$	5,700	$	17,098

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 March 31, 2022 gross unrealized losses for cash equivalents and investments was $1.4 million. As of September 30, 2021, gross unrealized gains and unrealized losses for cash equivalents and investments were not material. As of March 31, 2022, the value of marketable securities with a contractual maturity of less than one year was $166.2 million and the value of marketable securities with a contractual maturity of more than year but less than two years was $30.6 million. As of September 30, 2021, all marketable securities had a contractual maturity of less than one year.

The following table provides a reconciliation of beginning and ending balances of the Level 3 financial liabilities during the three months ended March 31, 2022:


(in thousands)	Total
Balance as of September 30, 2021	$	—
Contingent consideration – additions	8,500
Change in fair value	(2,800)
Balance as of March 31, 2022	$	5,700

- 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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