Fair Value Measurements

12 Months Ended

Dec. 31, 2023

Note 4. Fair Value Measurements

The following tables present the Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2023 and 2022 (in thousands):


	Measured at NAV as of December 31, 2023:		Measured at Fair Value as of December 31, 2023:
			Level 1		Level 2		Level 3		Total
Financial Assets:
Cash equivalents:
Money market funds	$	372,912	$	—	$	—	$	—	$	372,912
Foreign exchange contracts		—		—		—		16		16
	$	372,912	$	—	$	—	$	16	$	372,928
Financial Liabilities:
Contingent consideration	$	—	$	—	$	—	$	2,882	$	2,882
	$	—	$	—	$	—	$	2,882	$	2,882


	Measured at NAV as of December 31, 2022:		Measured at Fair Value as of December 31, 2022:
			Level 1		Level 2		Level 3		Total
Financial Assets:
Cash equivalents:
Money market funds	$	9,145	$	—	$	—	$	—	$	9,145
	$	9,145	$	—	$	—	$	—	$	9,145
Financial Liabilities:
Foreign exchange contracts	$	—	$	—	$	—	$	133	$	133
Contingent consideration		—		—		—		1,332		1,332
	$	—	$	—	$	—	$	1,465	$	1,465

During the years ended December 31, 2023, 2022 and 2021, there were no transfers between Level 1, Level 2 or Level 3.

Contingent consideration

StudyLink

The fair value of the contingent consideration related to the revenue and volume of money movement milestones was determined using an option pricing model and the fair value of the contingent consideration related to the cross-selling and engineering implementation milestones was determined using a scenario-based method. Refer to Note 8 - Business Combinations for additional details on the StudyLink acquisition. The following table presents the unobservable inputs incorporated into the valuation of contingent consideration as of December 31, 2023.


		Year Ended December 31, 2023
Discount rate		7.4% - 7.5%
Probability of successful achievement*		29% - 95%

Increases or decreases in the discount rate would result in a lower or higher fair value measurement, respectively. Increases or decreases in any of the probabilities of success in which the revenue, volume, cross-selling and the engineering implementation milestones are expected to be achieved would result in higher or lower fair value measurement, respectively.

Cohort Go

During the years ended December 31, 2023 and 2022, the Company made a payment of contingent consideration of $1.7 million and $0.5 million, respectively, in the form of cash, based on Cohort Go's successful and timely achievement of the contracted milestones. No additional contingent consideration is due or payable with respect to the Cohort Go acquisition. Refer to Note 8 - Business Combinations for additional details on the Cohort Go acquisition.

The fair value of the contingent consideration related to the Cohort Go acquisition was determined using a scenario-based method. The following table presents the unobservable inputs incorporated into the valuation of contingent consideration as of December 31, 2022.


	Year Ended December 31, 2022
Discount rate		11.2	%
Probability of successful achievement*	75% - 100%

* Probability of successful achievement was set at different targets based on the Company’s best estimates on achieving them.

Increases or decreases in the discount rate would result in a lower or higher fair value measurement, respectively. Increases or decreases in any of the probabilities of success in which the specific post-acquisition milestones were expected to be achieved would result in a higher or lower fair value measurement, respectively.

WPM

Pursuant to the terms of the business combination agreement, contingent consideration was potentially payable at various intervals through March 2024 in the form of cash or up to approximately 225,000 shares of common stock, at Flywire's option, and was dependent upon the Company's achievement of specified minimum payment volume targets and integration targets. As of December 31, 2023, no contingent consideration is due or payable with respect to the WPM acquisition. For the year ended December 31, 2022, the Company paid $0.4 million in contingent consideration related to the completion of integration targets. There was no contingent consideration paid during the year ended December 31, 2021. Refer to Note 8 - Business Combinations for additional details on the WPM acquisition.

The fair value of the contingent consideration related to the payment volume targets was determined using an option pricing model and the fair value of the contingent consideration related to the integration targets was determined using a scenario-based method. The following table presents the unobservable inputs incorporated into the valuation of contingent consideration related to the WPM acquisition as of December 31, 2022.


	Year Ended December 31, 2022
Market price of risk adjustment for revenue		6.7	%
Revenue volatility		22.7	%
Probability of successful achievement*	0% - 100%
Performance period	1.25 years

* Probability of successful achievement was set at different targets based on the Company’s best estimates on achieving them.

Increases or decreases in expectations regarding the level at which payment volumes were expected to be achieved would result in a higher or lower fair value measurement, respectively. Increases or decreases in the market price of risk adjustment of revenue would result in a decrease or increase in the fair value measurement, respectively. Increases or decreases in the revenue volatility would result in a decrease or increase in the fair value measurement, respectively.

The following table summarizes the changes in the carrying value of the contingent consideration for the years ended December 31, 2023, 2022 and 2021 (in thousands):


	Year Ended December 31,
	2023			2022			2021
Beginning balance	$	1,332		$	11,309		$	12,500
Additions		2,703			1,695			3,519
Change in fair value		380			(2,805	)		2,263
Contingent consideration paid*		(1,674	)		(8,664	)		(7,012	)
Foreign currency translation adjustment		141			(203	)		39
Ending balance	$	2,882		$	1,332		$	11,309

* For the years ended December 31, 2023 and 2021, contingent consideration paid has been bifurcated between the financing and operating sections of the consolidated statement of cash flows. Amounts paid up to the fair value initially recorded in purchase accounting is reported in the financing section of the consolidated statement of cash flows, while any excess is reported in the operating section of the consolidated statement of cash flows. For the year ended December 31, 2022, contingent consideration paid has been bifurcated among the investing, financing and operating sections of the consolidated statement of cash flows. Contingent consideration paid within three months after the acquisition date of Cohort Go is reported in the investing section of the consolidated statement of cash flows given the proximity to the acquisition date. Amounts paid up to the fair value initially recorded in purchase accounting is reported in the financing section of the consolidated statement of cash flows, while any excess is reported in the operating section of the consolidated statement of cash flows.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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