Fair Value Measurements

12 Months Ended

Dec. 31, 2021

The Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2021, is as follows (in thousands):


	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Money market funds	$	59,761	$	—	$	—	$	59,761
Government bonds	—		7,664		—		7,664
Short-term investments:
Corporate bonds	—		146,002		—		146,002
Asset-backed bonds	—		29,488		—		29,488
Restricted cash:
Money market funds	856		—		—		856


Total assets	$	60,617	$	183,154	$	—	$	243,771
Liabilities
Earn-out liabilities	$	—	$	—	$	1,999	$	1,999
Total liabilities	$	—	$	—	$	1,999	$	1,999

The Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2020, is as follows (in thousands):


	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Money market funds	$	12,163	$	—	$	—	$	12,163
Government bonds	—		12,693		—		12,693
Short-term investments:
Corporate bonds	—		55,227		—		55,227
Government bonds	—		14,123		—		14,123
Asset-backed bonds	—		3,514		—		3,514
Restricted cash:
Money market funds	1,006		—		—		1,006


Total assets	$	13,169	$	85,557	$	—	$	98,726
Liabilities
Warrant liabilities	$	—	$	—	$	906	$	906
Total liabilities	$	—	$	—	$	906	$	906

The fair values of cash, accounts receivable, accounts payable, and accrued liabilities approximated their carrying values as of December 31, 2021 and December 31, 2020, due to their short-term nature. All other financial instruments except for warrant liabilities related to the preferred stock warrants and Private Placement Warrants, and earn-out liabilities are valued either based on recent trades of securities in active markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. The warrant liabilities related to the preferred stock warrants and Private Placement Warrants contain significant unobservable inputs including the expected term and with respect to the preferred stock warrants, the share exchange ratio in evaluating the fair value of underlying common stock and exercise price. Therefore, warrant liabilities associated with the preferred stock warrants and Private Placement Warrants were evaluated to be Level 3 fair value measurements. Due to the exercise and conversion to Class A common stock warrants of all preferred stock warrants and exercise of all of the Private Placement Warrants during the period, there were no longer any Level 3 warrant

liabilities as of December 31, 2021. During the years ended December 31, 2021, 2020, and 2019, the Company had no transfers between levels of the fair value hierarchy of its assets or liabilities measured at fair value.

As of December 31, 2020, the Company used a BSM option-pricing model to determine the value of the outstanding Series D preferred stock warrants (that replaced the Series C preferred stock warrants as discussed in Note 13 – Borrowing Arrangements). Subsequent to the Merger, the Series D preferred stock warrants were converted to Class A common stock warrants and recognized in additional paid-in capital as a result of the conversion to equity-classified Class A common stock warrants.

For the year ended December 31, 2021, changes in warrant liabilities were primarily related to changes in liabilities for warrants assumed as part of the recapitalization, including Private Placement Warrants and Public Warrants (defined and discussed in Note 17 – Common Stock). The Company valued the Private Placement Warrants using a Monte Carlo valuation simulation. Inherent in a Monte Carlo simulation are assumptions related to expected term, volatility, risk-free interest rate, and dividend yield. The expected term of the warrants was determined to be equivalent to their remaining contractual term and includes consideration of the redemption features that were incorporated into the Monte Carlo model. The Company derived the volatility of its Class A common stock based on average historical stock volatilities of a peer group of public companies that the Company considers to be comparable to its business over a period equivalent to the expected term of the Private Placement Warrants. The risk-free interest rate is based on the U.S. Treasury’s rates of U.S. Treasury zero-coupon bonds with a maturity similar to the expected term of the Private Placement Warrants. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero. The following assumptions were used for the valuation of the Private Placement Warrants on the settlement date:


Expected term	0.16
Volatility	65.0	%
Risk-free rate	—	%
Dividend yield	—	%

The Public Warrants were valued using the listed trading price on the relevant settlement date. On July 9, 2021, the Company called the Public Warrants and the Parent Warrants for redemption. Refer to Note 17 – Common Stock for additional detail.

The change in the fair value of warrant liabilities is as follows (in thousands):


Balance at December 31, 2019	$	9,097
Exercised warrants	(11,292)
Change in fair value	3,101
Balance at December 31, 2020	906
Conversion of Series D preferred stock warrants to Class A common stock warrants	(1,160)
Private Placement Warrants and Public Warrants	51,814
Redeemed/exercised warrants	(37,859)
Change in fair value	(13,701)
Balance at December 31, 2021	$	—

At inception, the fair value of the earn-out liabilities associated with the acquisitions of HHL and Apostrophe were determined based on revenue projections and probability of achievement of revenue targets as evaluated using a Monte Carlo simulation, which is considered a Level 3 fair value measurement containing significant unobservable inputs including estimates of

achieving the revenue targets. The undiscounted range of contingent purchase consideration is nil to $3.3 million for HHL, and nil to $49.4 million for Apostrophe. The following assumptions were used to determine the fair value at inception:


	HHL		Apostrophe
Revenue risk-adjusted discount rate	9.1	%	4.9	%
Revenue volatility	50.0	%	50.0	%
Counterparty discount rate	5.0	%	5.0	%

As of December 31, 2021, all contingencies related to the Apostrophe earn-out liability were resolved and the final earn-out payout was determined based on actual 2021 revenue. Therefore, the Apostrophe earn-out liability was removed from the fair value hierarchy and reclassified to earn-out payable. The long-term earn-out liability, which is solely related to the HHL acquisition as of December 31, 2021, remains classified as Level 3.

The fair value of the earn-out liabilities is remeasured at each reporting period. This change in fair value is related to contingent consideration and compensation costs (see Note 15 – Stock-Based Compensation) and is recognized in other income (expense) and selling, general, and administrative expenses, respectively, on the consolidated statements of operations and comprehensive loss. The change in the fair value of earn-out liabilities is as follows (in thousands):


Balance at December 31, 2020	$	—
HHL acquisition	1,208
Apostrophe acquisition	32,650
Change in fair value due to revaluation and service-based vesting	10,975
Reclassification to earn-out payable	(42,834)
Balance at December 31, 2021	$	1,999

- 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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