Fair Value Measurements

12 Months Ended

Jun. 30, 2022

8. Fair Value Measurements

The following tables present assets and liabilities measured at fair value on a recurring basis:


	June 30, 2022
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	36,616	$	-	$	-	$	36,616
Interest rate swaps (2)		-		9,157		-		9,157
Total	$	36,616	$	9,157	$	-	$	45,773

Liabilities:
Contingent consideration liabilities (1)	$	-	$	-	$	8,515	$	8,515
Total	$	-	$	-	$	8,515	$	8,515


	June 30, 2021
(in thousands)	Level 1		Level 2		Level 3		Total

Money market funds	$	6,525	$	-	$	-	$	6,525
Total	$	6,525	$	-	$	-	$	6,525

Liabilities:
Contingent consideration liabilities (1)	$	-	$	-	$	4,631	$	4,631
Interest rate swaps (2)		-		13,807		-		13,807
Total	$	-	$	13,807	$	4,631	$	18,438

(1) We assess the fair value of contingent consideration to be settled in cash related to acquisitions using probability weighted models for the various contractual earn-outs. These are Level 3 measurements. Significant unobservable inputs used in the estimated fair values of these contingent consideration liabilities include probabilities of achieving customer related performance targets, specified sales milestones, consulting milestones, changes in unresolved claims, projected revenue or changes in discount rates.

(2) The fair value of interest rate swaps is estimated using a discounted cash flow analysis that considers the expected future cash flows of each interest rate swap. This analysis reflects the contractual terms of the interest rate swap, including the remaining period to maturity, and uses market-corroborated Level 2 inputs, including forward interest rate curves and implied interest rate volatilities. The fair value of an interest rate swap is estimated by discounting future fixed cash payments against the discounted expected variable cash receipts. The variable cash receipts are estimated based on an expectation of future interest rates derived from forward interest rate curves. The fair value of an interest rate swap also incorporates credit valuation adjustments to reflect the non-performance risk of the Company and the respective counterparty.

The following table provides a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):


(in thousands)	Contingent Consideration
Balance at June 30, 2020	$	1,641
Acquisitions		4,000
Payments		(681	)
Change in fair value		(329	)
Balance at June 30, 2021		4,631
Acquisitions		7,874
Payments		(420	)
Change in fair value		(3,570	)
Balance at June 30, 2022		8,515
Less: current portion		(2,204	)
Long term portion	$	6,311

The current and long-term portion of contingent consideration is included within the accrued liabilities and other payables and other long-term liabilities, respectively, in the consolidated balance sheets.

On June 22, 2021, we acquired the net assets of The Sommelier Company. Consideration transferred consisted of a cash payment of $8.0 million and contingent consideration of $4.0 million, whereby the Company would pay the seller three annual Earn-Out payments over three years, determined as a percentage of EBITDA. During the reporting period, management estimated the fair value of the contingent Earn-Out was $0.5 million, and adjusted the contingent consideration liability associated with the acquisition.

- 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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