Financial instruments fair value

12 Months Ended

Dec. 31, 2022

The Company measures its financial instruments in accordance with ASC 820. ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level fair value hierarchy, which prioritizes the use of observable inputs from active markets and minimizes the use of unobservable inputs when measuring fair value. A level is assigned to each fair value measurement based on the lowest level of input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1: Fair value is determined using an unadjusted quoted price in an active market for identical assets or liabilities.

Level 2: Fair value is estimated using inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly.

Level 3: Fair value is estimated using unobservable inputs that are significant to the fair value of the assets or liabilities.

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 5 for more information.

The fair value of these financial instruments were as follows:


	December 31, 2022
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Cash equivalents:
Money market funds	$	132,306	$	—	$	—	$	132,306
Total cash equivalents	$	132,306	$	—	$	—	$	132,306

Liabilities
Contingent consideration:
Accrued liabilities	$	—	$	—	$	6,206	$	6,206
Total contingent consideration	$	—	$	—	$	6,206	$	6,206


	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:


	Years Ended December 31,
	2022		2021		2020
	(in thousands)
Balance, beginning of period	$	10,100	$	8,200	$	9,200
Additions	—		359		—
Total (gains) losses included in:
Net loss	694		6,037		(1,000)
Payments	(4,588)		(4,206)		—
Other	—		(290)		—
Balance, end of period	$	6,206	$	10,100	$	8,200

The change in the fair value of the contingent consideration is included in general and administrative expenses in the consolidated statements of operations. The adjustments for the years ended December 31, 2022 and 2021 primarily reflected updated assumptions about the probability of growth of subscription services. The adjustment for the year ended December 31, 2020 primarily reflected a decrease in the liability due to updated assumptions about the probability of change in control as a result of our IPO, partially offset by an increase in the liability due to 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 consolidated balance sheets:


	December 31, 2022				December 31, 2021
	Net Carrying Value		Estimated Fair Value		Net Carrying Value		Estimated Fair Value
	(in thousands)
2026 Notes	$	364,505	$	308,504	$	362,031	$	398,044

As of December 31, 2022 and 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 $9.2 million and $11.7 million, respectively. See Note 9 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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