Fair value is defined 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 reporting date. The Company estimates and categorizes the fair value of its financial instruments by applying the following hierarchy:

Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to directly access.

Level 2 — Valuations based on quoted prices for similar assets or liabilities; valuations for interest-bearing securities based on non-daily quoted prices in active markets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3 — Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s financial instruments consist principally of cash equivalents, accounts receivable, accounts payable, post-closing payments and contingent consideration related to acquisitions. The recorded values of the Company’s accounts receivable and accounts payable approximate their current fair values due to the relatively short-term nature of these accounts.

The following table presents the fair value of the Company’s financial instruments (in thousands):


	September 30, 2024								June 30, 2024
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	405	$	—	$	—	$	405	$	2,215	$	—	$	—	$	2,215
Liabilities:
Post-closing payments related to acquisitions	$	—	$	12,795	$	—	$	12,795	$	—	$	18,143	$	—	$	18,143
Contingent consideration related to acquisitions		—		—		8,400		8,400		—		—		2,466		2,466
Total	$	—	$	12,795	$	8,400	$	21,195	$	—	$	18,143	$	2,466	$	20,609

Reported as:
Cash and cash equivalents							$	405							$	2,215
Other Liabilities:
Current							$	10,865							$	9,372
Noncurrent								10,330								11,237
Total							$	21,195							$	20,609

There were no transfers between Level 1, Level 2, and Level 3 during the periods presented.

All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents on the Company’s condensed consolidated balance sheets. The valuation technique used to measure the fair value of money market funds included using quoted prices in active markets for identical assets and are classified as Level 1 within the fair value hierarchy.

The post-closing payments are future payments related to the acquisition of BestCompany.com, LLC (“BestCompany”) and Aqua Vida, LLC (“AquaVida”) in fiscal year 2024, and Modernize, Inc. (“Modernize”) in fiscal year 2021. As the fair value of the Company’s post-closing payments was determined based on installments stipulated in the terms of the acquisition agreements and discount rates observable in the market, the post-closing payments are classified as Level 2 within the fair value hierarchy. See Note 6, Acquisitions, for further details related to the acquisitions.

The contingent consideration consists of the estimated fair value of future payments related to the Company’s acquisition of AquaVida and CloudControlMedia, LLC (“CCM”). The AquaVida contingent consideration is based upon a percentage of margin achieved and is uncapped. The CCM contingent consideration is based upon revenue targets. The fair value of the contingent consideration is determined using the real options technique which incorporates various estimates, including projected net revenue, projected gross margin, volatility and discount rates. As certain of these inputs are not observable in the market, the contingent consideration is classified as a Level 3 instrument. Significant changes in the projected net revenue, projected gross margin, or discount rates would have a material impact on the fair value of the contingent consideration. The change in contingent consideration liability from the acquisition date to the final amount paid will be recognized in earnings at each reporting date. The Company recorded an increase of $6.3 million to the fair value of the contingent consideration of AquaVida, from $2.1 million at the acquisition date to $8.4 million at September 30, 2024, which is included in general and administrative expenses on the Company’s condensed consolidated statements of operations and comprehensive loss.