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FAIR VALUE MEASUREMENTS
 3 Months Ended
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 $396.2 million. The fair value of our reporting units was classified in Level 3 of the fair value hierarchy due to the significance of unobservable inputs developed using company-specific information. Refer to Note 4 - Goodwill and Acquired Intangibles for further details.
These levels are:
•Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.
•Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
•Level 3 - unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability at fair value.
Contingent consideration for the acquisition of Bridg
The contingent consideration for the acquisition of Bridg is composed of the First Anniversary Payment and the Second Anniversary Payment. The fair value of contingent consideration in connection with the Bridg acquisition is as follows (in thousands):
December 31, 2022
Level 1Level 2Level 3Total
Liabilities:
Current contingent consideration$— $— $104,121 $104,121 
Total liabilities$— $— $104,121 $104,121 

 March 31, 2023
 Level 1Level 2Level 3Total
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,
20222023
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 volatility20.0 %
Revenue discount rate8.7 %
Weighted average cost of capital17.0 %
Common stock volatility156.0 %
Portion to be paid in cash30.0 %