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FAIR VALUE MEASUREMENTS | 3 Months Ended
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Mar. 31, 2023
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS We record the fair value of assets and liabilities in accordance with ASC 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition to defining fair value, ASC 820 expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels, which is determined by the lowest level input that is significant to the fair value measurement in its entirety. During the year ended December 31, 2022 we recognized a goodwill impairment of $396.2 million. The fair value of our reporting units was classified in Level 3 of the fair value hierarchy due to the significance of unobservable inputs developed using company-specific information. Refer to Note 4 - Goodwill and Acquired Intangibles for further details. These levels are: •Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities. •Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. •Level 3 - unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability at fair value. Contingent consideration for the acquisition of Bridg The contingent consideration for the acquisition of Bridg is composed of the First Anniversary Payment and the Second Anniversary Payment. The fair value of contingent consideration in connection with the Bridg acquisition is as follows (in thousands):
| December 31, 2022
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Liabilities: |  |  |  |  |  |  |
Current contingent consideration | $ | — |  |  | $ | — |  |  | $ | 104,121 |  |  | $ | 104,121 |
Total liabilities | $ | — |  |  | $ | — |  |  | $ | 104,121 |  |  | $ | 104,121 |
| March 31, 2023
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Liabilities: |  |  |  |  |  |  |
Current contingent consideration | $ | — |  |  | $ | — |  |  | $ | 69,537 |  |  | $ | 69,537 |
Total liabilities | $ | — |  |  | $ | — |  |  | $ | 69,537 |  |  | $ | 69,537 |
The following table shows a reconciliation of the beginning and ending fair value measurements of our contingent consideration, which we have valued using level 3 inputs:
| Three Months Ended March 31, |  |
| 2022 |  | 2023 |  |  |  |
Beginning balance | $ | 232,295 |  |  | $ | 104,121 |  |  |  |  |
Change in fair value of contingent consideration | (65,050) |  |  | (34,584) |  |  |  |  |
Ending balance | $ | 167,245 |  |  | $ | 69,537 |  |  |  |  |
On April 28, 2023, an independent accountant, who was tasked with resolving the dispute between the parties, made its determination of the appropriate amount of the First Anniversary ARR, determining the First Anniversary ARR to be $23.2 million. Consequently, based on the First Anniversary ARR as calculated by the independent accountant, we calculated the First Anniversary Payment to be $208.1 million, inclusive of (i) $193.6 million of contingent consideration and (ii) $14.5 million of brokerage fees and transaction bonuses, which is included in accrued expenses on our condensed consolidated balance sheets. In the event we choose to pay 30% of the First Anniversary Payment, as determined by the independent accountant, in cash and the remainder in its common stock, we would pay $72.6 million in cash and deliver 3,374,383 shares of our common stock to complete the First Anniversary Payment, inclusive of brokerage fees and transaction bonuses and accounting for all true-ups and credits. As of March 31, 2023, the fair value of the contingent consideration related to the First Anniversary Payment is $69.5 million, which reflects the impact of a $124.1 million mark-to-market reduction in fair value of the 3,374,383 shares of our common stock that we expect to issue to satisfy 70% of the contingent consideration to Bridg stockholders at an agreed-upon volume-weighted average price of $40.15 per share. These shares have been revalued based on $3.39 per share closing price of our common stock as reported on the Nasdaq Global Market on March 31, 2023. As of March 31, 2023, the First Anniversary Payment has not been paid. As a result of the independent accountant's determination, we have estimated the Second Anniversary ARR to be less than our First Anniversary ARR and thus our Second Anniversary Payment to be $0, inclusive of contingent consideration as well as brokerage fees and transaction bonuses and accounting for all true-ups and credits. Refer to Note 12—Subsequent events for further information. The following table summarizes key assumptions used for estimating the fair value of the contingent consideration:
| December 31, 2022
Revenue volatility | 20.0 | %
Revenue discount rate | 8.7 | %
Weighted average cost of capital | 17.0 | %
Common stock volatility | 156.0 | %
Portion to be paid in cash | 30.0 | %

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- 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 Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
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