Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.22.2.2
Fair Value Measurements
9 Months Ended
Sep. 30, 2022
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 5. Fair Value Measurements

In October 2018, upon the acquisition of certain technology, referred to as HunchLab, from Azavea, Inc., the Company recognized a contingent consideration liability classified within Level III of the fair value hierarchy because some of the inputs used in its measurement were neither directly nor indirectly observable. In February 2021, based on the relevant revenues earned during the three-year contingent consideration period, the Company paid $0.4 million, resulting in a reduction of the contingent consideration liability to zero.

In November 2020, using a Monte Carlo Simulation approach, the Company estimated the fair value of the contingent consideration liability classified within Level III of the fair value hierarchy at the acquisition date of LEEDS LLC, (“LEEDS”) to be $0.2 million. During the fourth quarter of 2021, the fair value of the contingent consideration was increased by $1.3 million based upon estimated 2022 revenue targets, representing an adjustment to the most likely

outcome expected for the liability. There have been no changes in the assumptions or fair value of the LEEDS contingent consideration liability during the three and nine months ended September 30, 2022.

In January 2022, using a Monte Carlo Simulation approach, the Company estimated the fair value of the contingent consideration liability classified within Level III of the fair value hierarchy at the acquisition of Forensic Logic to be $12.4 million. During the three and nine months ended September 30, 2022, the fair value of the contingent consideration was decreased by $5.4 million and $8.8 million, respectively, based upon revised estimated 2022 and 2023 revenue targets due to delays in certain expected contracts by a small number of significant potential customers, representing an adjustment to the most likely outcome expected for the liability.

The changes in the fair value of contingent consideration liabilities for the nine months ended September 30 are as follows (in thousands):

 

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

Beginning balance

 

$

1,500

 

 

$

573

 

Payment of contingent consideration liability

 

 

 

 

 

(403

)

Acquisition of Forensic Logic (Note 4 - Business Acquisition)

 

 

12,400

 

 

 

 

Change in fair value of contingent consideration

 

 

(8,842

)

 

 

 

Ending balance

 

$

5,058

 

 

$

170

 

There were no transfers into or out of Level III during the nine months ended September 30, 2022 and 2021. As of September 30, 2022, contingent consideration of $1.5 million is included in Accrued expenses and other current liabilities in the condensed consolidated balance sheet as it is forecasted that the achievement of milestones will occur within the next 12 months, and $3.6 million is included in Other liabilities in the condensed consolidated balance sheet.