Financial instruments fair value

9 Months Ended

Sep. 30, 2022

Assets and liabilities measured at fair value on a recurring basis

The Company invests in money market funds with original maturities at the time of purchase of three months or less, which are measured and recorded at fair value on a recurring basis. Money market funds are valued based on quoted market prices in active markets and classified within Level 1 of the fair value hierarchy.

In addition, the contingent consideration associated with the Digita and cmdReporter acquisitions are measured and recorded at fair value on a recurring basis. The estimated fair value of the contingent payments associated with the Digita acquisition is determined using a Monte Carlo simulation model, which uses Level 3 inputs, including assumptions about the probability of growth of subscription services and the related pricing of the services offered. Significant increases (decreases) in the probability of growth of subscription services as well as the related pricing of the services offered would have resulted in a higher (lower) fair value measurement. The estimated fair value of the contingent payments associated with the cmdReporter acquisition was determined using projected contract wins, which used Level 3 inputs, including assumptions about the probability of closing contracts based on their current stage in the sales process. See Note 4 for more information.

The fair value of these financial instruments were as follows:


	September 30, 2022
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Cash equivalents:
Money market funds	$	193,848	$	—	$	—	$	193,848
Total cash equivalents	$	193,848	$	—	$	—	$	193,848

Liabilities
Contingent consideration:
Accrued liabilities	$	—	$	—	$	5,900	$	5,900
Total contingent consideration	$	—	$	—	$	5,900	$	5,900


	December 31, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Cash equivalents:
Money market funds	$	146,037	$	—	$	—	$	146,037
Total cash equivalents	$	146,037	$	—	$	—	$	146,037

Liabilities
Contingent consideration:
Accrued liabilities	$	—	$	—	$	4,588	$	4,588
Other liabilities	—		—		5,512		5,512
Total contingent consideration	$	—	$	—	$	10,100	$	10,100

The carrying value of accounts receivable and accounts payable approximate their fair value due to their short maturities and are excluded from the tables above.

The following table provides a summary of the changes in contingent consideration, which is classified as Level 3:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)
Balance, beginning of period	$	5,700	$	8,300	$	10,100	$	8,200
Additions	—		—		—		359
Total (gains) losses included in:
Net loss	200		600		388		4,837
Payments	—		—		(4,588)		(4,206)
Other	—		—		—		(290)
Balance, end of period	$	5,900	$	8,900	$	5,900	$	8,900

The change in the fair value of the contingent consideration is included in general and administrative expenses in the condensed consolidated statements of operations. The adjustments for the three and nine months ended September 30, 2022 and 2021 primarily reflected updated assumptions about the probability of growth of subscription services.

Fair value measurements of other financial instruments

The following table presents the net carrying value and estimated fair value of the 2026 Notes, which are not recorded at fair value in the condensed consolidated balance sheets:


	September 30, 2022				December 31, 2021
	Net Carrying Value		Estimated Fair Value		Net Carrying Value		Estimated Fair Value
	(in thousands)
2026 Notes	$	363,885	$	305,290	$	362,031	$	398,044

As of September 30, 2022 and December 31, 2021, the difference between the net carrying value of the 2026 Notes and the principal amount of $373.8 million represents the unamortized debt issuance costs of $9.9 million and $11.7 million, respectively. See Note 8 for more information. The estimated fair value of the 2026 Notes, which is classified as Level 2, was determined based on quoted bid prices of the 2026 Notes in an over-the-counter market on the last trading day of the reporting period.

- 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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