Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2024

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair value measurements

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

■Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

■Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices), such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions.

■Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

Financial instruments measured at fair value on a recurring basis

The following tables present the Company's financial assets and liabilities that are measured at estimated fair value on a recurring basis as of June 30, 2024 and December 31, 2023:

	Fair value measurements as of June 30, 2024
	(in thousands)
	Carrying value		Level 1		Level 2		Level 3
Financial assets:
Cash equivalents:
Money market funds	17,905		17,905		—		—
U.S. treasury securities	4,729		—		4,729		—
Total	22,634		17,905		4,729		—
Available-for-sale marketable securities:
U.S. treasury securities	45,771		—		45,771		—
U.S. government agencies securities	22,232		—		22,232		—
Total	68,003		—		68,003		—
Total	$	90,637	$	17,905	$	72,732	$	—
Liabilities:
Contingent consideration	72		—		—		72
Total	$	72	$	—	$	—	$	72
	Fair value measurements as of December 31, 2023
	(in thousands)
	Carrying value		Level 1		Level 2		Level 3
Liabilities:
Contingent consideration	112		—		—		112
Total	$	112	$	—	$	—	$	112

The Company's level 1 financial assets were valued using quoted prices in active markets for identical assets as of June 30, 2024. The Company’s level 2 financial assets were determined based on third-party inputs which are either directly or indirectly observable, such as reported trades and broker or dealer quotes. The Company's marketable securities have an amortized cost that approximates fair value as of June 30, 2024.

Pursuant to the Company’s stock purchase agreements for the acquisition of Nangate in March of 2018 and PolytEDA Cloud LLC (“PolytEDA”) in January of 2021, the selling shareholders are entitled to additional milestone and earn out consideration based on net revenues, operating income and technical achievement. The milestone consideration and earn-out liabilities are classified as contingent consideration as the obligations are due in cash. As such the obligations are recorded at their fair value and re-valued period to period with any changes recorded to other income (expense).

The Company's contingent consideration is valued using a discounted cash flow model, and the assumptions used in preparing the discounted cash flow model include estimates for interest rates and the amount of cash flows, in addition to the expected net revenue, operating income and technical achievement of the acquired technology.

The following is a reconciliation of changes in the liability related to contingent consideration as of December 31, 2023 and June 30, 2024:

	(in thousands)
Fair value as of January 1, 2023	$	792
Change in fair value	325
Earn-out payments	(502)
Milestone achievement	(500)
Foreign exchange	(3)
Fair value as of December 31, 2023	$	112
Change in fair value	(18)
Earn-out payments	(22)
Fair value as of June 30, 2024	$	72

Nonfinancial assets such as property and equipment, operating lease right-of-use assets, intangibles assets, and goodwill are evaluated for impairment and adjusted to fair value using Level 3 inputs only when impairment is recognized.