8. Fair Value Measurement

The following tables present the Company’s financial instruments that are measured at fair value on a recurring basis:

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Cash equivalents, consisting of treasury bills and money market funds of $61.5 million and of money market funds of $11.7 million as of December 31, 2023 and December 31, 2022, respectively, were classified as Level 1 of the fair value hierarchy and valued using quoted market prices in active markets.

As of December 31, 2023, the amortized cost of the Company’s treasury bills approximated fair value. For the year ended December 31, 2023, the Company did not record any unrealized gains, unrealized losses, or credit losses.

Contingent consideration relates to potential payments that the Company may be required to make associated with a business combination. To the extent that the valuations of these liabilities are based on inputs that are less observable or not observable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for measures categorized in Level 3.

Rollforward of the fair value measurements of the contingent consideration categorized with Level 3 inputs for the years ended December 31, 2023, 2022 and 2021 is as follows:

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Prior to the early termination of the Zentrick Deferred Payment Terms described in Footnote 4, Business Combinations, the fair value of the component of contingent consideration related to achievement of revenue targets have been estimated using a Monte Carlo model to simulate future performance of the acquired business under a risk-neutral framework; significant assumptions include a risk-adjusted discount rate of 13.5% and revenue volatility of 29.0% for December 31, 2021. The fair value of the component of contingent consideration related to achievement of four technical milestones have been estimated using situation-based modeling, which considers the probability-weighted present value of the expected payout amount.

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As described in Footnote 4, Business Combinations, on February 16, 2022, pursuant to the terms of the Zentrick Early Termination Agreement, the Company paid the remaining balance of the contingent consideration referred to as the Zentrick Deferred Payment Terms.

The fair value of contingent consideration from the Scibids Contingent Payment related to the achievement of certain performance metrics have been estimated using a Black-Scholes option pricing model. As of the acquisition date, forecasted amounts for the Earn-Out Period were taken and discounted to the valuation date using a risk adjusted discount rate of 11.3%. Additional significant assumptions include volatility of 25.0% and operating leverage of 160%. Volatility was estimated based on asset volatilities of comparable companies, which were calculated based on observed equity volatilities, adjusted for financial leverage using the Merton Model. Operating leverage of the seller was calculated as the ratio of the present value of the forecasted fixed cost and EBITDA.

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The Earn-out Period concluded on December 31, 2023. For the year-ended December 31, 2023, there was a decrease in fair value of $1.2 million recorded as a gain in Other income, net in the Consolidated Statements of Operations and Comprehensive Income in relation to the Scibids Contingent Payment. The decrease in fair value was due to the actual performance metrics during the Earn-out Period not exceeding a certain threshold.