Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2022

Schedule of Fair Value, Liabilities Measured on Recurring and Nonrecurring Basis

The following tables present the Company's fair value hierarchy for its financials assets and liabilities that are measured at fair value on a recurring basis (in thousands):


	September 30, 2022
	Balance		Level 1		Level 2		Level 3
Assets:
Cash equivalents:
Money market fund (1)	$	75,533	$	75,533	$	—	$	—
Total assets	$	75,533	$	75,533	$	—	$	—

Liabilities:
Contingent consideration - iController (2)	$	4,483	$	—	$	—	$	4,483
Deferred purchase price - Order2Cash (3)	502		—		—		502
Total liabilities	$	4,985	$	—	$	—	$	4,985


	December 31, 2021
	Balance		Level 1		Level 2		Level 3
Assets:
Cash equivalents:
Money market fund (1)	$	25,015	$	25,015	$	—	$	—
Marketable securities:
Certificates of deposit (4)	45,117		—		45,117		—
Total assets	$	70,132	$	25,015	$	45,117	$	—

Liabilities:
Contingent consideration - iController (2)	$	5,085	$	—	$	—	$	5,085
Contingent consideration - Second Phase (5)	370		—		—		370
Total liabilities	$	5,455	$	—	$	—	$	5,455

(1)Included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.

(2)The acquisition of iController in October 2021 included a contingent consideration arrangement that requires additional payments to the seller based on the amount and timing of iController’s achievement of certain recurring revenue growth targets over a three-year period subsequent to the acquisition date. The Monte Carlo simulation was used to determine the fair value, including the following significant unobservable inputs; projected revenue, a risk adjusted discount rate, and revenue volatility. Increases or decreases in the inputs would have resulted in a higher or lower fair value measurement. The range of outcomes for the amount payable cannot be estimated as it is based on a percentage of the growth in the revenue targets. The fair value of the contingent consideration is included in accrued expenses and other current liabilities and other non-current liabilities on the Condensed Consolidated Balance Sheets.

(3)The acquisition of Order2Cash in February 2022 includes deferred purchase price payable within four years of the closing date upon achievement of certain conditions. A discounted cash flow model was used to determine the fair value, including a risk adjusted discount rate, which is an unobservable input. Increases or decreases in the input would have resulted in a higher or lower fair value measurement. The range of undiscounted amounts payable for the deferred purchase price is zero to $0.5 million. The fair value of the deferred purchase price is included in accrued expenses and other current liabilities and other non-current liabilities on the Condensed Consolidated Balance Sheets.

(4)Certificates of deposit are valued at amortized cost, which approximates fair value.

(5)The acquisition of Second Phase, LLC in April 2019 included a contingent consideration arrangement that required additional payments to the sellers annually if certain recurring revenue growth and profitability targets during the three-year period beginning May 1, 2019 were met. No amounts were paid during the three-year periods as none of the financial targets were met.

Schedule of Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

The following table presents the changes in the Company’s Level 3 financial instruments measured at fair value on a recurring basis (in thousands):


	Contingent Consideration and Deferred Purchase Price
Balance, December 31, 2021	$	5,455
Acquisition of Order2Cash (1)	586
Fair value adjustments to contingent consideration (2)	(122)
Foreign currency translation adjustments	(934)
Balance, September 30, 2022	$	4,985

(1)Refer to Note 3 - Business Combination & Acquisitions. Changes in the fair value of the deferred purchase price are recognized in change in fair value of financial instruments on the Condensed Consolidated Statements of Operations. At September 30, 2022, there were no material changes in the range of expected outcomes or the fair value from the acquisition date.

(2)Subsequent to the acquisitions of Second Phase, LLC and iController, the change in the fair value of the contingent consideration for each acquisition was due to updates to management's estimates and progress towards achievement of the financial targets during each period. This amount was recorded in change in fair value of financial instruments on the Condensed Consolidated Statements of Operations.

BTRS Holdings Inc. 10-Q