Fair Value Measurement

3 Months Ended

Mar. 31, 2023

The following tables summarize financial assets and liabilities measured and recorded at fair value on a recurring basis in the accompanying consolidated balance sheets as of March 31, 2023 and December 31, 2022, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:


	March 31, 2023
	Quoted Prices in Active Markets for Identical Assets (Level 1 Inputs)		Significant Other Observable Inputs (Level 2 Inputs)		Significant Unobservable Inputs (Level 3 Inputs)		Total
Assets:
Money market funds	$	46,618	$	—	$	—	$	46,618
U.S. treasury securities	—		175,416		—		175,416
Convertible debt securities (See Note 7)	—		—		4,109		4,109
Total assets	$	46,618	$	175,416	$	4,109	$	226,143

Liabilities:
Contingent consideration	$	—	$	—	$	191	$	191
Total liabilities	$	—	$	—	$	191	$	191


	December 31, 2022
	Quoted Prices in Active Markets for Identical Assets (Level 1 Inputs)		Significant Other Observable Inputs (Level 2 Inputs)		Significant Unobservable Inputs (Level 3 Inputs)		Total
Assets:
Money market funds	$	36,222	$	—	$	—	$	36,222
U.S. treasury securities	—		153,501		—		153,501
Corporate securities	—		4,273		—		4,273
Convertible debt securities (See Note 5)	—		—		3,652		3,652
Total assets	$	36,222	$	157,774	$	3,652	$	197,648

Liabilities:
Contingent consideration	$	—	$	—	$	227	$	227
Total liabilities	$	—	$	—	$	227	$	227

Cash equivalents include money market funds with original maturities of 90 days or less from the date of purchase. The fair value measurement of these assets is based on quoted market prices in active markets for identical assets and, therefore, these assets are recorded at fair value on a recurring basis and classified as Level 1 in the fair value hierarchy. The Company’s investments primarily consist of U.S. treasury securities and corporate securities. The fair value measurement of these assets is based on significant other observable inputs and, therefore, these assets are recorded at fair value on a recurring basis and classified as Level 2 in the fair value hierarchy.

As of March 31, 2023 and December 31, 2022, the Company measured its investments in convertible debt securities (see Note 7) and its contingent consideration associated with the acquisition of Prowly.com sp. Z o.o (“Prowly”) on a recurring basis using significant unobservable inputs (Level 3).

Convertible Debt Securities

The Company records its convertible note investments at fair value on the purchase date. The Company determines the fair value of these investments using the Black-Scholes Merton model. Each reporting period thereafter, these investments are revalued and increases or decreases in their fair values are recorded as adjustments to other income, net within the unaudited condensed consolidated statements of operations and comprehensive loss to reflect the gains and losses. Changes in the fair value of these investments can result from changes in the estimated enterprise value of the issuers, the likelihoods and methods of such conversions, and other market factors. Significant judgment is employed in determining the appropriateness of these assumptions as of the purchase date and for each subsequent period. Accordingly, changes in any of the assumptions described above can materially impact the amount of gain or loss the Company records in any given period.

A rollforward of the fair value measurements of the convertible notes for the three months ended March 31, 2023 and 2022, is as follows:


Balance as of December 31, 2022	$	3,652
Additional investment in convertible notes	323
Change in fair value included in other income, net	134
Balance as of March 31, 2023	$	4,109


Balance as of December 31, 2021	$	500
Additional investment in convertible notes	2,000
Change in fair value included in other income, net	661
Balance as of March 31, 2022	$	3,161

Contingent consideration

The Company records contingent consideration resulting from a business combination at its fair value on the acquisition date. The Company generally determines the fair value of the contingent consideration using the Monte Carlo simulation model. Each reporting period thereafter, these obligations are revalued and increases or decreases in their fair values are recorded as an adjustment to operating expenses within the unaudited condensed consolidated statements of operations and comprehensive loss. Changes in the fair value of the contingent consideration can result from changes in assumed discount periods and rates, and from changes pertaining to the estimated or actual achievement of the defined milestones. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, future business and economic conditions, as well as changes in any of the assumptions described above, can materially impact the amount of contingent consideration expense the Company records in any given period.

The total estimated fair value of the contingent consideration payable was $191 and $227 as of March 31, 2023 and December 31, 2022, respectively. The following table represents the key inputs used in the fair value calculation:


	As of
	March 31, 2023		December 31, 2022
Risk free interest rate	5.17	%	4.72	%
Projected year of payment	2023		2023
Revenue volatility	21.0	%	20.1	%
Discount rate	10.06	%	9.72	%

Changes in the estimated fair value of the contingent consideration payable are recognized over the three-year service period. A rollforward of the fair value measurements of the contingent consideration liability for the three months ended March 31, 2023 and 2022 is as follows:


Balance as of December 31, 2022	$	227
Change in fair value and expense recognized for service period rendered	(36)
Payments made	—
Balance as of March 31, 2023	$	191


Balance as of December 31, 2021	$	424
Change in fair value and expense recognized for service period rendered	106
Payments made	—
Balance as of March 31, 2022	$	530

- 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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