Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2023

The following table presents the financial instruments and liabilities that are carried at fair value and summarizes their valuation by the respective pricing levels detailed in Note 2, “Summary of Significant Accounting Policies,” as of December 31, 2023 and 2022:


	As of December 31, 2023
(In thousands)	Total		Quoted Market Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets carried at fair value
Money market funds	$	3,790	$	3,790	$	—	$	—
U.S. Government bonds and notes	196,919		—		196,919		—
Corporate bonds, commercial paper and notes	136,649		—		136,649		—
Total assets carried at fair value	$	337,358	$	3,790	$	333,568	$	—
Liabilities carried at fair value
Earn-out consideration related to PLDA acquisition	$	12,500	$	—	$	—	$	12,500
Total liabilities carried at fair value	$	12,500	$	—	$	—	$	12,500


	As of December 31, 2022
(In thousands)	Total		Quoted Market Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets carried at fair value
Money market funds	$	15,763	$	15,763	$	—	$	—
U.S. Government bonds and notes	96,371		—		96,371		—
Corporate bonds, commercial paper and notes	106,355		—		106,355		—
Total assets carried at fair value	$	218,489	$	15,763	$	202,726	$	—
Liabilities carried at fair value
Earn-out consideration related to PLDA acquisition	$	14,800	$	—	$	—	$	14,800
Total liabilities carried at fair value	$	14,800	$	—	$	—	$	14,800

The Company’s liabilities related to earn-out consideration are classified within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs. The following table presents additional information about liabilities measured at fair value for which the Company utilizes Level 3 inputs to determine fair value, as of December 31, 2023 and 2022:


	Years Ended December 31,
(In thousands)	2023		2022		2021
Balance as of beginning of period	$	14,800	$	16,900	$	—
Addition of earn-out liability due to acquisition	—		—		11,600
Change in fair value of earn-out liability due to remeasurement	9,234		3,111		5,300
Change in fair value of earn-out liability due to achievement of revenue target	(11,534)		(5,211)		—

Balance as of end of period	$	12,500	$	14,800	$	16,900

For the years ended December 31, 2023, 2022 and 2021, the changes in the fair value of the earn-out liability related to the 2021 acquisition of PLDA, which is subject to certain revenue targets of the acquired business for a period of three years from the date of acquisition, and which is settled annually in shares of the Company’s common stock based on the fair value of that common stock fixed at the time the Company acquired PLDA. The fair value of the earn-out liability is remeasured each quarter, depending on the acquired business’s revenue performance relative to target over the applicable period, and adjusted to reflect changes in the per share value of the Company’s common stock. The Company has classified its liability for the contingent earn-out consideration related to the PLDA acquisition within Level 3 of the fair value hierarchy because the fair value calculation includes significant unobservable inputs, such as revenue forecast, revenue volatility, equity volatility and weighted average cost of capital. During the years ended December 31, 2023, 2022 and 2021, the Company remeasured the fair value of the earn-out liability, which resulted in additional expense of $9.2 million, $3.1 million and $5.3 million, respectively, in the Company’s Consolidated Statements of Operations.

The Company monitors its investments for impairment and records appropriate reductions in carrying value when necessary. The Company monitors its investments for impairment by considering current factors, including the economic environment, market conditions, operational performance and other specific factors relating to the business underlying the investment, reductions in carrying values when necessary and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in the market. Any impairment is reported under “Interest and other income (expense), net” in the Consolidated Statements of Operations. During the years ended December 31, 2023 and 2022, the Company recorded no other-than-temporary impairment charges on its investments.

In 2018, the Company made an investment in a non-marketable equity security of a private company. This investment was accounted for under the equity method of accounting, and the Company accounted for its equity method share of the income (loss). During the second quarter of 2023, the carrying value of the Company’s 25.0% ownership percentage was reduced to zero as the carrying value had been adjusted by an equal and offsetting amount of the Company’s share of the investee’s cumulative losses. During the fourth quarter of 2023, the Company sold its 25.0% ownership share in the equity investment for approximately $25.0 million, which was included, net of withholding taxes paid, in prepaid and other current assets in the Company’s Consolidated Balance Sheet as of December 31, 2023. The Company recognized a gain of $25.0 million related to the sale of the Company’s 25.0% ownership share in the non-marketable equity security. The gain was offset by transaction costs of approximately $1.1 million, resulting in a net gain of approximately $23.9 million, which was included in the Company’s Consolidated Statement of Operations for the year ended December 31, 2023. The Company has non-cash investing cash flow activity of approximately $23.0 million from the sale of the non-marketable equity security, which were offset by withholding taxes paid and changes in the foreign currency exchange rates, which was subsequently received in January 2024. The carrying value of the Company’s 25.0% ownership percentage was deemed immaterial as of December 31, 2022. The Company recorded immaterial amounts in its Consolidated Statements of Operations representing its share of the investee’s loss for the years ended December 31, 2023 and 2022, respectively.

During the year ended December 31, 2022, the Company recorded a gain on fair value of approximately $3.5 million related to the sale of an equity security with an immaterial carrying value in its Consolidated Statements of Operations.

During the years ended December 31, 2023 and 2022, there were no transfers of financial instruments between different categories of fair value.

The following table presents the financial instruments that are not carried at fair value but require fair value disclosure as of 2022:


	As of December 31, 2022
(In thousands)	Face Value		Carrying Value		Fair Value
1.375% Convertible Senior Notes due 2023 (the “2023 Notes”)	$	10,381	$	10,378	$	19,625

The fair value of the convertible notes at December 31, 2022 was determined based on recent quoted market prices for these notes, which is a Level 2 measurement. As discussed in Note 12, “Convertible Notes,” the Company settled the remaining $10.4 million aggregate principal amount of the 2023 Notes during the first quarter of 2023. As of December 31, 2022, the 2023 Notes were carried at their face value of $10.4 million, less any unamortized debt issuance costs. The carrying value of other financial instruments, including accounts receivable, accounts payable and other liabilities, approximated fair value due to their short maturities.

Information regarding the Company’s goodwill and long-lived assets balances are disclosed in Note 6, “Intangible Assets and Goodwill.”

- 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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