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Fair Value Measures
 3 Months Ended
Mar. 31, 2022
Fair Value Disclosures [Abstract]  
Fair Value Measures

Note 5 — Fair Value Measures

 

Fair Values of Assets and Liabilities

 

In accordance with ASC Topic 820 “Fair Value Measurement”, the Company measures fair value at 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 measurement date. In determining fair value, the assumptions that market participants would use in pricing an asset or liability (the inputs) are based on a tiered fair value hierarchy consisting of three levels, as follows:

 

  Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.
     
  Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar instruments in active markets or for similar markets that are not active.
     
  Level 3: Unobservable inputs for which there is little or no market data which require the Company to develop its own assumptions about how market participants would price the asset or liability.

 

Valuation techniques for assets and liabilities include methodologies such as the market approach, the income approach or the cost approach, and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs are only utilized to the extent that observable inputs are not available or cost-effective to obtain.

 

At March 31, 2022 and December 31, 2021, the Company’s assets and liabilities measured at fair value on a recurring basis were as follows:

 

   March 31, 2022   December 31, 2021 
   Fair Value Measurements Using Input Types   Fair Value Measurements Using Input Types 
(In thousands)  Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3   Total 
Assets:                                
Mutual funds (included in cash and cash equivalents)  $43,528   $
—
   $
—
   $43,528   $178   $
—
   $
—
   $178 
Municipal bonds   19,306    
—
    
—
    19,306    9,961    
—
    
—
    9,961 
Corporate bonds   18,905    
—
    
—
    18,905    34,589    
—
    
—
    34,589 
Total assets  $81,739   $
—
   $
—
   $81,739   $44,728   $
—
   $
—
   $44,728 
Liabilities:                                        
Contingent consideration  $
—
   $
—
   $7,557   $7,557   $
—
   $
—
   $6,137   $6,137 
Total liabilities  $
—
   $
—
   $7,557   $7,557   $
—
   $
—
   $6,137   $6,137 

 

Fair Value of Financial Instruments

 

The Company has certain financial instruments which consist of cash and cash equivalents, marketable securities, and contingent consideration. Fair value information for each of these instruments is as follows:

 

●Cash and cash equivalents, accounts receivable, accounts payable and deferred revenue liabilities fair values approximate their carrying values, due to the expected duration of these instruments.

 

  ● Marketable securities classified as current held-to-maturity securities are recorded at amortized cost, which at March 31, 2022, approximated fair value.

 

●The Company’s deferred consideration was recorded in connection with acquisitions during the three months ended March 31, 2022 and fiscal 2021 using an estimated fair value discount at the time of the transaction. As of March 31, 2022 and December 31, 2021, the carrying value of the deferred consideration approximated fair value, respectively.

 

Marketable Securities

 

As of March 31, 2022, the Company held investments in mutual funds, municipal bonds and corporate bonds. The Company records mutual funds at fair value in the accompanying consolidated balance sheet as part of cash and cash equivalents. The municipal and corporate bonds are considered held-to-maturity securities and are recorded at amortized cost in the accompanying consolidated balance sheet. The fair values of these investments were estimated using recently executed transactions and market price quotations. The Company considers current assets those investments which will mature within the next 12 months including, interest receivable on the long-term bonds. 

 

The composition of the Company’s marketable securities are as follows:

 

(In thousands)  March 31,
2022		   December 31,
2021		 
Current marketable securities:        
Municipal bonds  $19,306   $9,961 
Corporate bonds   18,905    34,589 
   $38,211   $44,550 

The amortized cost and estimated fair value of marketable securities as of March 31, 2022, are as follows:

 

(In thousands)  Amortized cost   Unrealized loss   Estimated fair value 
Current marketable securities:            
Municipal bonds  $19,306   $(26)  $19,280 
Corporate bonds   18,905    (140)   18,765 
   $38,211   $(166)  $38,045 

 

Contingent Consideration

 

The Company has classified its net liability for contingent earn-out considerations to the sellers relating to one acquisition completed during the three months ended March 31, 2022, and two acquisitions completed during fiscal 2021. The fair value for the contingent consideration associated with these acquisitions is within Level 3 of the fair value hierarchy because the associated fair value is determined using significant unobservable inputs, which included the key assumptions to model future revenue, costs of goods sold and operating expense projections. A description of the Company’s acquisitions completed during the three months ended March 31, 2022 and fiscal 2021 are included within Note 14 – Business Combinations, included elsewhere in the notes to the consolidated financial statements.

 

The contingent earn-out payments to the sellers for each acquisition are based on the achievement of certain revenue thresholds. During the three months ended March 31, 2022, the Company accrued $1.4 million relating to the Lab Society acquisition for contingent consideration recorded from the initial purchase price accounting.  

 

(In thousands)  Three Months ended
March 31,
2022		   Year ended
December 31,
2021		 
Contingent consideration – beginning of period  $6,137   $
—
 
Accrued contingent consideration   1,420    4,725 
Change in estimated fair value   
—
    1,412 
Contingent consideration – end of period  $7,557   $6,137 

 

The Company included contingent consideration within accrued expense and other current liabilities in its consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively.