Fair Value Measurements

12 Months Ended

Dec. 31, 2023

The Company’s fair value hierarchy for its financial assets that are measured at fair value on a recurring basis as of December 31, 2023, is as follows (in thousands):


	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Money market funds	$	42,492	$	—	$	—	$	42,492

Short-term investments:
U.S. Treasury bills	63,833		—		—		63,833
Corporate bonds	—		39,169		—		39,169
Government and government agency	—		20,610		—		20,610
Asset-backed bonds	—		706		—		706
Restricted cash:
Money market funds	856		—		—		856


Total assets	$	107,181	$	60,485	$	—	$	167,666

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, 2022, is as follows (in thousands):


	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Money market funds	$	24,606	$	—	$	—	$	24,606
Government bonds	—		11,315		—		11,315
Short-term investments:
Corporate bonds	—		99,566		—		99,566
Government and government agency	—		33,287		—		33,287

Restricted cash:
Money market funds	856		—		—		856


Total assets	$	25,462	$	144,168	$	—	$	169,630
Liabilities
Earn-out liability	$	—	$	—	$	2,975	$	2,975
Total liabilities	$	—	$	—	$	2,975	$	2,975

The fair values of cash, accounts receivable, accounts payable, and accrued liabilities approximated their carrying values as of December 31, 2023 and 2022, due to their short-term nature. All other financial instruments, except for earn-out liability, 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. During the years ended December 31, 2023, 2022, and 2021, 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, 2022, the earn-out liability, which was solely related to the acquisition of HHL, was classified as a Level 3 fair value measurement containing significant unobservable inputs including estimates of achieving certain revenue targets. At inception, the fair value of the earn-out liability associated with the HHL acquisition was determined based on revenue

projections and probability of achievement of revenue targets as evaluated using a Monte Carlo simulation. The following assumptions were used to determine the fair value at inception:


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

As of December 31, 2023, all contingencies related to the HHL earn-out liability were resolved and the final earn-out payout was determined based on actual revenue from the acquisition date through December 31, 2023. Therefore, the HHL earn-out liability was removed from the fair value hierarchy and reclassified to earn-out payable.

The fair value of the earn-out liability was remeasured at each reporting period. This change in fair value was related to contingent consideration and compensation costs (see Note 15 – Stockholders’ Equity) and was recognized in other income (expense) and 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, 2021	$	1,999
Change in fair value due to revaluation and service-based vesting	976
Balance at December 31, 2022	2,975
Change in fair value due to revaluation and service-based vesting	4,437
Reclassification to earn-out payable	(7,412)
Balance at December 31, 2023	$	—

- 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.

+ References + Details