The following table details the fair value measurements of assets and liabilities that are measured at fair value on a recurring basis:

Money market mutual funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. As the funds are generally maintained at a net asset value which does not fluctuate, cost approximates fair value. These are included as a Level 1 measurement in the table above. The fair values for available-for-sale fixed-maturity securities are based upon prices provided by an independent pricing service. The Company has reviewed these prices for reasonableness and has not adjusted any prices received from the independent provider. Level 2 securities represent assets whose fair value is determined using observable market information such as previous day trade prices,

quotes from less active markets or quoted prices of securities with similar characteristics. There were no transfers between Level 1 and Level 2.

The Company estimated the fair value of the business combination contingent consideration triggered by EBITDA or revenue milestones, related to certain 2021 acquisitions using the Monte Carlo simulation method. The fair value of $0.1 million and $0.3 million as of September 30, 2022, and December 31, 2021, respectively, is based on the simulated revenue and net income (loss) of the Company over the maturity date of the contingent consideration.

The Company estimated the fair value of the business combination contingent consideration triggered by stock price milestones, related to Floify acquisition in October 2021, using the Monte Carlo simulation method. The fair value is based on the simulated stock price of the Company over the maturity date of the contingent consideration. As of September 30, 2022, the key inputs used to determine the fair value of $14.2 million, were the stock price of $2.25, strike price of $36.00, discount rate of 12.7% and volatility of 85%. As of December 31, 2021, the key inputs used in the determination of the fair value of $9.3 million included the volume weighted average price of $16.37, strike price of $36.00, discount rate of 7% and volatility of 60%.

The Company estimated the fair value of the business combination contingent consideration based on specific metrics related to the acquisition of Residential Warranty Services (“RWS”) in April 2022, using the discounted cashflows method. The fair value is based on a percentage of revenue over the maturity date of the contingent consideration. As of September 30, 2022, the key inputs used to determine the fair value of $9.5 million were management’s cash flow estimates and the discount rate of 15%.

The Company estimated the fair value of the earnout contingent consideration using the Monte Carlo simulation method. The fair value of $0.1 million is based on the simulated price of the Company over the maturity date of the contingent consideration and increased by certain employee forfeitures. As of September 30, 2022, the key inputs used to determine the fair value included exercise price of $22.00, volatility of 90%, forfeiture rate of 15% and stock price of $2.25. As of December 31, 2021, the key inputs used in the determination of the fair value included exercise price of $22.00, volatility of 65%, forfeiture rate of 15% and stock price of $15.59.

The Company estimated the fair value of the private warrants of $0.8 million using the Black-Scholes-Merton option pricing model. As of September 30, 2022, the key inputs used to determine the fair value included exercise price of $11.50, expected volatility of 80%, remaining contractual term of 3.23 years, and stock price of $2.25. As of December 31, 2021, the key inputs used to determine the fair value included exercise price of $11.50, expected volatility of 60%, remaining contractual term of 3.98 years, and stock price of $15.59.

Fair value measurements categorized within Level 3 are sensitive to changes in the assumptions or methodology used to determine fair value, and such changes could result in a significant increase or decrease in the fair value.

The changes for Level 3 items measured at fair value on a recurring basis using significant unobservable inputs are as follows:

⁽¹⁾ Additions during the three months ended September 30, 2022, consist of the adjustment to the preliminary estimated fair value of RWS contingent consideration.


			Contingent
	Contingent		Consideration -		Private
	Consideration -		Business		Warrant
	Earnout		Combinations		Liability
Fair value as of January 1, 2021	$	50,238	$	3,549	$	31,534
Additions		—		1,737		—
Settlements		(25,815)		(2,062)		—
Change in fair value, loss (gain) included in net loss⁽¹⁾		18,770		(355)		15,910
Fair value as of March 31, 2021	$	43,193	$	2,869	$	47,444
Additions		—		—		—
Settlements		—		—		(16,843)
Change in fair value, loss (gain) included in net loss⁽¹⁾		4,031		(300)		4,302
Fair value as of June 30, 2021	$	47,224	$	2,569	$	34,903
Additions		—		—		—
Settlements		—		—		(14,505)
Change in fair value, loss (gain) included in net loss⁽¹⁾		(7,413)		195		(2,692)
Fair value as of September 30, 2021	$	39,811	$	2,764	$	17,706

(1)

Changes in fair value of contingent consideration related to business combinations are included in general and administrative expenses in the unaudited condensed consolidated statements of operations. Changes in fair value of the earnout contingent consideration and private warrant liability are disclosed separately in the unaudited condensed consolidated statements of operations.

Fair Value Disclosure

As of September 30, 2022, and December 31, 2021, the fair value of the convertible senior notes is $243.0 million and $400.4 million, respectively. The decrease of $157.4 million is primarily due to the decline in the stock price at September 30, 2022, as compared to December 31, 2021. The fair value of the line of credit and other notes approximates the unpaid principal balance. Debt is considered a Level 3 measurement. See Note 7.