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Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Note 13 - Fair Value Measurements

The carrying amounts reflected on the Condensed Consolidated Balance Sheets for cash, restricted cash, accounts receivable, customer funds, other current assets, other assets, accounts payable, accrued expenses, other current liabilities (excluding deferred purchase price, contingent and earnout consideration), and customer postage deposits approximate their fair value due to their short-term maturities.

Additionally, the Company measures certain financial assets and liabilities at fair value on a recurring basis including cash equivalents, marketable securities, deferred purchase price, and contingent consideration. The fair value of these financial assets and liabilities have been classified as Level 1, 2, or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements:

•Level 1: Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities.

•Level 2: Inputs, other than Level 1 inputs, that are observable either directly or indirectly, 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.

•Level 3: Unobservable inputs for which there is little or no market data, requiring the Company to develop its own estimates and assumptions.

The following tables present the Company's fair value hierarchy for its financials assets and liabilities that are measured at fair value on a recurring basis (in thousands):


	June 30, 2022
	Balance		Level 1		Level 2		Level 3
Assets:
Cash equivalents:
Money market fund (1)	$	75,123	$	75,123	$	—	$	—
Total assets	$	75,123	$	75,123	$	—	$	—

Liabilities:
Contingent consideration - iController (2)	$	5,213	$	—	$	—	$	5,213
Deferred purchase price - Order2Cash (3)	541		—		—		541
Total liabilities	$	5,754	$	—	$	—	$	5,754


	December 31, 2021
	Balance		Level 1		Level 2		Level 3
Assets:
Cash equivalents:
Money market fund (1)	$	25,015	$	25,015	$	—	$	—
Marketable securities:
Certificates of deposit (4)	45,117		—		45,117		—
Total assets	$	70,132	$	25,015	$	45,117	$	—

Liabilities:
Contingent consideration - Second Phase (5)	$	370	$	—	$	—	$	370
Contingent consideration - iController (2)	5,085		—		—		5,085
Total liabilities	$	5,455	$	—	$	—	$	5,455

(1)Included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.

(2)The acquisition of iController in October 2021 included a contingent consideration arrangement that requires additional payments to the seller based on the amount and timing of iController’s achievement of certain recurring revenue growth targets over a three-year period subsequent to the acquisition date. The Monte

Carlo simulation was used to determine the fair value, including the following significant unobservable inputs; projected revenue, a risk adjusted discount rate, and revenue volatility. Increases or decreases in the inputs would have resulted in a higher or lower fair value measurement. The range of outcomes for the amount payable cannot be estimated as it is based on a percentage of the growth in the revenue targets. The fair value of the contingent consideration is included in accrued expenses and other current liabilities and other non-current liabilities on the Condensed Consolidated Balance Sheets.

(3)The acquisition of Order2Cash in February 2022 includes deferred purchase price payable within four years of the closing date upon achievement of certain conditions. A discounted cash flow model was used to determine the fair value, including a risk adjusted discount rate, which is an unobservable input. Increases or decreases in the input would have resulted in a higher or lower fair value measurement. The range of undiscounted amounts payable for the deferred purchase price is zero to $0.7 million. The fair value of the deferred purchase price is included in accrued expenses and other current liabilities and other non-current liabilities on the Condensed Consolidated Balance Sheets.

(4)Certificates of deposit are valued at amortized cost, which approximates fair value.

(5)The acquisition of Second Phase, LLC in April 2019 included a contingent consideration arrangement that required additional payments to the sellers annually if certain recurring revenue growth and profitability targets during the three-year period beginning May 1, 2019 were met. No amounts were paid during the three-year periods as none of the financial targets were met.

During the six months ended June 30, 2022, the Company did not transfer assets or liabilities between levels of the fair value hierarchy. Additionally, there have been no changes to the valuation techniques for Level 2 or Level 3 liabilities.

The following table presents the changes in the Company’s Level 3 financial instruments measured at fair value on a recurring basis (in thousands):


	Contingent Consideration and Deferred Purchase Price
Balance, December 31, 2021	$	5,455
Acquisition of Order2Cash (1)	586
Fair value adjustments to contingent consideration (2)	249
Foreign translation adjustments	(536)
Balance, June 30, 2022	$	5,754

(1)Refer to Note 3 - Business Combination & Acquisitions. Changes in the fair value of the deferred purchase price are recognized in change in fair value of financial instruments on the Condensed Consolidated Statements of Operations. At June 30, 2022, there were no material changes in the range of expected outcomes or the fair value from the acquisition date.

(2)Subsequent to the acquisitions of Second Phase, LLC and iController, the change in the fair value of the contingent consideration for each acquisition was due to updates to management's estimates and progress towards achievement of the financial targets during each period. This amount was recorded in change in fair value of financial instruments on the Condensed Consolidated Statements of Operations.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Certain of the Company’s certain long-lived assets, including identifiable intangible assets, goodwill, ROU assets, and other long-lived assets, are measured at fair value on a nonrecurring basis when there are indicators of impairment. Refer to Note 9 - Leases for a discussion on impairment charges on ROU assets and other long-lived assets related to leased facility space the Company has ceased using.

- 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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