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Fair Value Measurements
 6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 4. Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date in the principal or most advantageous market for the asset or liability. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents are carried at fair value (Level 1) as determined according to the fair value hierarchy described above. The Company’s cash equivalents include money market funds, which are measured at fair value using the net asset value (NAV) per share practical expedient. The money market funds, which are AAA-rated are comprised of liquid, high-quality debt securities issued by the U.S. government. Shares in money market funds are purchased and redeemed at the NAV at the time of the purchase or sale, which may be purchased or redeemed on demand, as may be required by the Company. The Company's investments in available-for-sale debt securities are carried at fair value, determined using Level 2 inputs in the fair value hierarchy as quoted prices are available to support the valuation. The carrying values of accounts receivable, funds receivable from payment partners, unbilled receivables, prepaid expenses, accounts payable, funds payable to clients and accrued expenses and other current liabilities approximate their respective fair values due to the short-term nature of these assets and liabilities. The Company’s contingent consideration is carried at fair value, determined using Level 3 inputs in the fair value hierarchy.

The following tables present the Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 (in thousands):

 

Measured at NAV as of June 30,

 

 

Measured at Fair Value as of June 30, 2024:

 

 

2024

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

276,807

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

276,807

 

Short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

—

 

 

 

—

 

 

 

16,917

 

 

 

—

 

 

 

16,917

 

U.S. Government obligations

 

 

—

 

 

 

—

 

 

 

14,777

 

 

 

—

 

 

 

14,777

 

Total short-term investments

 

 

—

 

 

 

—

 

 

 

31,694

 

 

 

—

 

 

 

31,694

 

Long-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

—

 

 

 

—

 

 

 

19,549

 

 

 

—

 

 

 

19,549

 

U.S. Government obligations

 

 

—

 

 

 

—

 

 

 

3,654

 

 

 

—

 

 

 

3,654

 

Asset-backed Securities

 

 

—

 

 

 

—

 

 

 

3,518

 

 

 

—

 

 

 

3,518

 

Total long-term investments

 

 

—

 

 

 

—

 

 

 

26,721

 

 

 

—

 

 

 

26,721

 

Total financial assets

 

$

276,807

 

 

$

—

 

 

$

58,415

 

 

$

—

 

 

$

335,222

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

$

—

 

 

$

—

 

 

$

—

 

 

$

4

 

 

$

4

 

Contingent consideration

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,917

 

 

 

1,917

 

Total financial liabilities

 

$

—

 

 

$

—

 

 

$

—

 

 

$

1,921

 

 

$

1,921

 

 

 

 

Measured at NAV as of December 31,

 

 

Measured at Fair Value as of December 31, 2023:

 

 

2023:

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

372,912

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

372,912

 

Foreign exchange contracts

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16

 

 

 

16

 

Total financial assets

 

$

372,912

 

 

$

—

 

 

$

—

 

 

$

16

 

 

$

372,928

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

—

 

 

$

—

 

 

$

—

 

 

$

2,882

 

 

$

2,882

 

Total financial liabilities

 

$

—

 

 

$

—

 

 

$

—

 

 

$

2,882

 

 

$

2,882

 

During the six months ended June 30, 2024 and year ended December 31, 2023, there were no transfers between Level 1, Level 2 or Level 3.

Contingent consideration

Learning Information Systems Pty Ltd. (StudyLink)

The fair value of the contingent consideration related to the revenue milestone from the Company’s acquisition of Learning Information Systems Pty Ltd. (StudyLink) in November 2023 was determined using an option pricing model and the fair value of the contingent consideration related to volume of money movement, the cross-selling and engineering implementation milestones was determined using a scenario-based method. Refer to Note 8 - Business Combinations for additional details on the StudyLink acquisition. The following table presents the unobservable inputs incorporated into the valuation of contingent consideration as of June 30, 2024 and December 31, 2023.

June 30, 2024

 

December 31, 2023

Discount rate

7.4% - 7.6%

 

7.4% - 7.5%

Probability of successful achievement *

0% - 100%

 

29% - 95%

_____________________________

* Probability of successful achievement was set at different targets based on the Company’s estimates on achieving them.

Increases or decreases in the discount rate would result in a lower or higher fair value measurement, respectively. Increases or decreases in any of the probabilities of success in which the revenue, volume, cross-selling and the engineering implementation milestones are expected to be achieved would result in higher or lower fair value measurement, respectively.

Changes in the fair value of contingent consideration are included as a component of general and administrative expense within the condensed consolidated statements of operations and comprehensive loss. The following table summarizes the changes in the carrying value of the contingent consideration for the periods presented (in thousands):

 

Three Months Ended
June 30, 2024

 

 

Three Months Ended
June 30, 2023

 

 

Six Months Ended
June 30, 2024

 

 

Six Months Ended
June 30, 2023

 

Beginning balance

 

$

2,281

 

 

$

41

 

 

$

2,882

 

 

$

1,332

 

Additions

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

Change in fair value

 

 

(416

)

 

 

—

 

 

 

(894

)

 

 

410

 

Contingent consideration paid *

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,674

)

Foreign currency translation adjustment

 

 

52

 

 

 

1

 

 

 

(71

)

 

 

(28

)

Ending balance

 

$

1,917

 

 

$

42

 

 

$

1,917

 

 

$

42

 

* For the six months ended June 30, 2023, contingent consideration paid has been bifurcated between the financing and operating sections of the condensed consolidated statement of cash flows. Amounts paid up to the fair value initially recorded in purchase accounting is reported in the financing section of the condensed consolidated statement of cash flows, while any excess is reported in the operating section of the condensed consolidated statement of cash flows.