Fair Value Measurements

9 Months Ended

Sep. 30, 2023

The Company’s debt instruments are recorded at their carrying values in its condensed consolidated balance sheets, which may differ from their respective fair values. The fair values of the Company’s 2027 Notes are estimated using the valuation of the securities into which the debt is convertible, external pricing data, based on interest rates and credit ratings for similar issuances with the same remaining term as the Company’s outstanding borrowings (see Note 7 — Debt for additional information). The fair values of the Company’s short-term loans generally approximated their carrying values.

As of September 30, 2023, the Company held currency forward contracts with an aggregated notional amount of $17,584 to sell United States dollars and to buy various foreign currencies such as Canadian dollars and Euro, among others at a forward rate. Any changes in the fair value of these contracts are recorded in Other income (expense), net in the condensed consolidated statement of operations.

The following table presents the Company’s fair value hierarchy for financial liabilities:


	Fair Value Measurements as of September 30, 2023
	Level 1		Level 2		Level 3		Total
Liabilities:
Private Placement Warrants	$	—	$	—	$	21,319	$	21,319
Public Warrants	$	30,705	$	—	$	—	$	30,705
Exalos Contingent Consideration - First Tranche	$	—	$	—	$	9,341	$	9,341
Exalos Contingent Consideration - Second Tranche	$	—	$	—	$	3,873	$	3,873
GEO Contingent Consideration - First Tranche	$	—	$	—	$	41,368	$	41,368
GEO Contingent Consideration - Second Tranche	$	—	$	—	$	25,135	$	25,135

GEO Indemnity Holdback	$	9,869	$	—	$	—	$	9,869
Silicon Radar Contingent Consideration - First Tranche	$	—	$	—	$	4,360	$	4,360
Silicon Radar Contingent Consideration - Second Tranche	$	—	$	—	$	6,033	$	6,033
City Semi Contingent Consideration - Second Tranche	$	—	$	—	$	920	$	920
Symeo Contingent Consideration - First Tranche	$	2,288	$	—	$	—	$	2,288
Symeo Contingent Consideration - Second Tranche	$	—	$	—	$	7	$	7
Currency Forward Contracts	$	—	$	16,943	$	—	$	16,943


	Fair Value Measurements as of December 31, 2022
	Level 1		Level 2		Level 3		Total
Liabilities:
Private Placement Warrants	$	—	$	—	$	17,970	$	17,970
Public Warrants	$	27,428	$	—	$	—	$	27,428
City Semi Contingent Consideration - Second Tranche	$	—	$	—	$	1,383	$	1,383
Symeo Contingent Consideration - First Tranche	$	—	$	—	$	2,000	$	2,000
Symeo Contingent Consideration - Second Tranche	$	—	$	—	$	4	$	4
Symeo Promissory Note	$	—	$	—	$	9,674	$	9,674
Currency forward contract	$	—	$	3,845	$	—	$	3,845

As of September 30, 2023 and December 31, 2022, the Company’s cash and cash equivalents were all held in cash or Level 1 instruments where the fair values approximate the carrying values.

Level 3 Disclosures

Warrants

Private Placement Warrants were valued using the Black-Scholes-Merton formula and a Monte Carlo Simulations analysis. Calculating the fair value of warrants requires the input of subjective assumptions. Other reasonable assumptions could provide differing results. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the liability’s estimated value.

For the three and nine months ended September 30, 2023, there were no redemptions of the warrants and the carrying amount of the liability fluctuated due to the fair value remeasurement.

Contingent Considerations

Contingent considerations were valued based on the consideration expected to be transferred. The Company estimated the fair value based on a Monte Carlo Simulations analysis to simulate the probability of achievement of various milestones identified within each contingent consideration arrangement, using certain assumptions that require significant judgement and discount

rates. The discount rates were based on the estimated cost of debt plus a premium, which included consideration of expected term of the earn-out payment, yield on treasury instruments and an estimated credit rating for the Company.

Because the acquisitions related to Silicon Radar, GEO and Exalos occurred relatively recently, and in light of the magnitude of the transactions, the significant information to be obtained and analyzed and the fact that Silicon Radar resides in foreign jurisdiction, the Company’s fair value estimates for the associated contingent considerations were valued based on a probability method as of September 30, 2023.

The following table presents the significant unobservable inputs assumed for each of the fair value measurements:


	September 30, 2023		December 31, 2022
	Input		Input
Liabilities:
Warrants
Expected volatility	74.40	%	64.00	%
Exalos Contingent Consideration - First Tranche
Market yield rate	8.37	%	N/A
Scenario probability	75.00	%	N/A
Exalos Contingent Consideration - Second Tranche
Market yield rate	8.37	%	N/A
Scenario probability	70.00	%	N/A
GEO Contingent Consideration - First Tranche
Market yield rate	9.25	%	N/A
Scenario probability	80.00	%	N/A
GEO Contingent Consideration - Second Tranche
Market yield rate	9.25	%	N/A
Scenario probability	80.00	%	N/A
Silicon Radar Contingent Consideration - First Tranche
Market yield rate	8.37	%	N/A
Scenario probability	50.00	%	N/A
Silicon Radar Contingent Consideration - Second Tranche
Market yield rate	8.37	%	N/A
Scenario probability	75.00	%	N/A
City Semi Contingent Consideration - Second Tranche
Discount rate	12.70	%	12.65	%


Symeo Contingent Consideration - Second Tranche
Discount Rate	4.64	%	4.73	%

- 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