Fair Value Measurements

3 Months Ended

Jun. 30, 2022

The Company considers fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The Company utilizes the following three-level fair value hierarchy to establish the priorities of the inputs used to measure fair value:

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

•Level 2 — Observable inputs other than quoted market prices included in Level 1, such as: quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; 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 the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis, excluding assets related to the Company’s defined benefit pension plans, classified by the level within the fair value hierarchy (in thousands):


	June 30, 2022						March 31, 2022
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	665,410	$	—	$	—	$	762,055	$	—	$	—

Investments for deferred compensation plan included in other assets:
Cash	$	138	$	—	$	—	$	108	$	—	$	—
Common stock	1,631		—		—		2,329		—		—
Money market funds	7,991		—		—		6,765		—		—
Mutual funds	18,550		—		—		19,229		—		—
Total of investments for deferred compensation plan	$	28,310	$	—	$	—	$	28,431	$	—	$	—

Currency derivative assets included in other current assets	$	—	$	3,147	$	—	$	—	$	1,517	$	—

Liabilities:
Contingent consideration included in accrued and other current liabilities	$	—	$	—	$	12,013	$	—	$	—	$	8,042
Contingent consideration included in other non-current liabilities	$	—	$	—	$	1,142	$	—	$	—	$	3,971
Currency derivative liabilities included in accrued and other current liabilities	$	—	$	160	$	—	$	—	$	165	$	—

Contingent Consideration for Business Acquisitions

The following table summarizes the change in the fair value of the Company's contingent consideration balance during the three months ended June 30, 2022 and 2021 (in thousands):


	Three Months Ended June 30,
	2022		2021
Beginning of the period	$	12,259	$	6,967
Fair value of contingent consideration upon acquisition (1)	1,142		9,973
Change in fair value of contingent consideration	—		(1,474)

End of the period	$	13,401	$	15,466

(1) Represents the contingent consideration related to the technology acquisitions during the periods.

The contingent consideration arising from the technology acquisition on May 19, 2021, represents the future potential earn-out payments of up to $10.0 million payable in cash only upon the achievement of three technical development milestones required to be completed as of December 31, 2021, June 30, 2022, and June 30, 2023. The fair value of the contingent consideration as of the acquisition date was $10.0 million, which was determined using a probability-weighted expected payment model and discounted at the estimated cost of debt. During the third quarter of fiscal year 2022, $0.9 million of the contingent consideration was released from other current liabilities upon cash settlement of the contingent consideration for the first technical development milestone. During the first quarter of fiscal year 2023, the second technical development milestone was achieved and the related contingent consideration is expected to be paid in fiscal year 2023.

The contingent consideration arising from the Mevo Acquisition on February 17, 2021 represents the future potential earn-out payments of up to $17.0 million payable in cash only upon the achievement of certain net sales for the period from December 26, 2020 to December 31, 2021. As of March 31, 2021 the fair value of the contingent consideration was $3.4 million. As of December 31, 2021, the fair value of the contingent consideration was

released from other current liabilities as the net sales milestone was not achieved upon completion of the earn-out period.

The contingent consideration arising from the technology acquisition on January 4, 2021, represents the future potential earn-out payments of up to $3.0 million payable in cash upon the achievement of two technical development milestones required to be completed as of December 31, 2021 and March 31, 2022. The fair value of the contingent amount was determined using a probability-weighted expected payment model and discounted at the estimated cost of debt. The contingent consideration is expected to be paid in fiscal year 2023.

Although the estimate of contingent consideration is based on management’s best knowledge of current events, the estimate could change significantly from period to period. Actual results that differ from the assumptions used and any changes to the significant assumptions and unobservable inputs used could have an impact on future results of operations.

Investment for Deferred Compensation Plan

The marketable securities for the Company's deferred compensation plan were recorded at a fair value of $28.3 million and $28.4 million, as of June 30, 2022 and March 31, 2022, respectively, based on quoted market prices. Quoted market prices are observable inputs that are classified as Level 1 within the fair value hierarchy. Unrealized gains (losses) related to marketable securities for the three months ended June 30, 2022 and 2021 were not material and were included in other income (expense), net in the Company's condensed consolidated statements of operations.

Equity Method Investments

The Company has certain non-marketable investments included in other assets that are accounted for under the equity method of accounting, with a carrying value of $44.8 million and $40.2 million as of June 30, 2022 and March 31, 2022, respectively. Unrealized gains (losses) related to equity investments for the three months ended June 30, 2022 and 2021 were not material and are included in other income (expense), net in the Company's condensed consolidated statements of operations. There was no impairment of these assets during the three months ended June 30, 2022 or 2021.

Other Assets Measured at Fair Value on a Nonrecurring Basis

Financial Assets. The Company has certain investments without readily determinable fair values due to the absence of quoted market prices, the inherent lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require management's judgment. When certain events or circumstances indicate that impairment may exist, the Company revalues the investments using various assumptions, including the financial metrics and ratios of comparable public companies. The carrying value is also adjusted for observable price changes with the same or similar security from the same issuer. The amount of these investments included in other assets was $11.7 million and $2.9 million as of June 30, 2022 and March 31, 2022, respectively. During the three months ended June 30, 2022, the Company recorded an unrealized gain, before tax, of $6.9 million for its investment in a private company as a result of observable price changes for similar securities issued by this company (level 2 fair value measurement). There was no impairment of these assets during the three months ended June 30, 2022 or 2021.

Non-Financial Assets. Goodwill, intangible assets, and property, plant and equipment, are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur (or tested at least annually for goodwill) such that a non-financial instrument is required to be evaluated for impairment and an impairment is recorded to reduce the non-financial instrument's carrying value to the fair value as a result of such triggering events, the non-financial assets and liabilities are measured at fair value during such period. There was no impairment of non-financial assets during the three months ended June 30, 2022 and 2021.