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Financial Instruments − Fair Value and Concentrations of Credit Risk
 6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
Financial Instruments − Fair Value and Concentrations of Credit Risk
13.Financial Instruments − Fair Value and Concentrations of Credit Risk
Financial Instruments Measured at Fair Value on a Recurring Basis
The following table presents the Company’s financial instruments that are measured at fair value on a recurring basis, as classified within the three-level fair value hierarchy:
(in millions)
Fair Value
Hierarchy
June 30, 2024December 31, 2023
Assets:
Money market mutual funds(1)
1$44.1 $25.5 
U.S. Treasury bills(1)
2— 10.4 
Investment securities, current:
Debt securities:
U.S. treasury notes2$395.1 $378.6 
Corporate debt securities21,197.6 1,068.8 
Municipal bonds265.4 65.7 
Asset-backed securities2671.2 581.6 
Mortgage-backed securities2993.2 927.4 
Total$3,322.5 $3,022.1 
Investment securities, non-current:
Debt securities2$27.4 $28.4 
Mutual fund125.4 25.5 
Pooled investment fund measured at NAV(2)
12.9 12.9 
Total$65.7 $66.8 
Executive deferred compensation plan trust(3)
1$15.6 $13.7 
Liabilities
Contingent consideration(4)
3$125.1 $186.2 
(1)The fair value is recorded in cash and cash equivalents.
(2)The fair value of this security is measured at NAV as a practical expedient and has not been classified within the fair value hierarchy. The amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the condensed consolidated balance sheets.
(3)The fair value is recorded as current or long-term based on the timing of the Company’s executive deferred compensation plan payment obligations. At June 30, 2024, $1.4 million and $14.2 million in fair value is recorded within prepaid expenses and other current assets and other assets, respectively. At December 31, 2023, $1.7 million and $12.0 million in fair value is recorded within prepaid expenses and other current assets and other assets, respectively.
(4)The fair value is recorded as current or long-term based on the timing of expected payments. At June 30, 2024, $64.8 million and $60.3 million in fair value is recorded within accrued expenses and other current liabilities and other liabilities, respectively. At December 31, 2023, $64.5 million and $121.7 million in fair value is recorded within accrued expenses and other current liabilities and other liabilities, respectively.
Money Market Mutual Funds
A portion of the Company’s cash and cash equivalents are invested in money market mutual funds that primarily consist of short-term government securities, which are classified as Level 1 in the fair value hierarchy because they are valued using quoted market prices for identical instruments in an active market.
U.S. Treasury Bills
From time to time, a portion of the Company’s cash and cash equivalents are invested in U.S. treasury bills with maturities of 30 days or less, which are classified as Level 2 in the fair value hierarchy because they are valued using quoted market prices for similar or identical instruments in a market that is not active.
Debt Securities
The Company determines the fair value of U.S. treasury notes using quoted market prices for similar or identical instruments in a market that is not active. For corporate debt securities, municipal bonds, and asset-backed and mortgage-backed securities, the Company generally uses quoted prices for recent trading activity of assets with similar characteristics to the debt security or bond being valued. The securities and bonds priced using such methods are generally valued using Level 2 inputs to the fair value hierarchy.
Pooled Investment Fund
The pooled investment fund maintains individual capital accounts for each investor, which reflect each individual investor’s share of the NAV of the fund. As of June 30, 2024, the Company had no unfunded commitments with respect to the fund. Investments in the fund may be redeemed monthly with 30 days’ notice.
Mutual Fund
The Company determines the fair value of its mutual fund using quoted market prices for identical instruments in an active market; such inputs are classified as Level 1 of the fair value hierarchy.
Executive Deferred Compensation Plan Trust
The investments held in the executive deferred compensation plan trust, which consist primarily of mutual funds, are classified as Level 1 in the fair value hierarchy because the fair value is determined using quoted market prices for identical instruments in active markets.
Contingent Consideration
As part of an asset acquisition from Bell Bank during 2021, the Company is obligated to pay additional consideration to Bell Bank contingent upon increases in the Federal Funds rate. The Company determines the fair value of this contingent consideration derivative liability based on discounted cash flows using the difference between the baseline Federal Funds rate in the purchase agreement with Bell Bank and future forecasted Federal Funds rates over the agreement term. The forecasted Federal Funds rates represent a Level 3 input within the fair value hierarchy. The resulting probability-weighted contingent consideration amounts were discounted using a rate of 4.24 percent as of June 30, 2024 and 3.84 percent as of December 31, 2023. Due to significant increases in the Federal Funds rate since acquisition inception, the fair value of the Company’s contingent consideration derivative liability at June 30, 2024 is effectively measured at the present value of the maximum remaining contingent consideration payable under the arrangement and accordingly, the fair value could not materially increase. A significant decrease in the Federal Funds rate could result in a material decrease in the derivative liability.
The Company records changes in the estimated fair value of the contingent consideration in the condensed consolidated statements of operations. Changes in the contingent consideration derivative liability are measured at fair value on a recurring basis using unobservable inputs (Level 3 in the fair value hierarchy) and are as follows for the periods indicated:
Three Months EndedSix Months Ended
(in millions)
June 30, 2024June 30, 2023June 30, 2024June 30, 2023
Contingent consideration - beginning of period$123.4 $179.5 $186.2 $206.4 
Payments of contingent consideration (1)
— — (64.5)(28.7)
Change in fair value of contingent consideration1.7 1.2 3.4 3.0 
Contingent consideration - end of period$125.1 $180.7 $125.1 $180.7 
(1)The Company has presented $27.2 million of the payment made during the six months ended June 30, 2023, which represents the fair value of the contingent consideration at acquisition date, within net cash provided by financing activities in the condensed consolidated statement of cash flows. The remainder of the prior year payment, as well as the entirety of the current year payment, has been included in net cash (used for) provided by operating activities (specifically within net change in operating assets and liabilities, net of effects of business acquisitions).
Financial Instruments Measured at Carrying Value, for which Fair Value is Disclosed
The fair value of the Company’s financial instruments, which are measured and reported at carrying value, is as follows for the periods indicated:
June 30, 2024December 31, 2023
(in millions)Carrying valueFair valueCarrying valueFair value
Term A Loans(1)
$— $— $843.9 **
Term A-1 Loans(1)
888.8 **— — 
Term B Loans(1)
— — 1,402.3 **
Term B-1 Loans(1)
1,395.1 **— — 
Outstanding borrowings on Revolving Credit Facility(1)
756.3 **662.0 **
Contractual deposits with maturities in excess of one year(2)
— — 129.8 **
**     Fair value approximates carrying value.
(1)The Company determines the fair value of borrowings on the Revolving Credit Facility and Term Loans based on market rates for the issuance of the Company’s debt, which are Level 2 inputs in the fair value hierarchy.
(2)The Company determines the fair value of its contractual deposits with maturities in excess of one year using current market interest rates for deposits of similar remaining maturities, which are Level 2 inputs in the fair value hierarchy.
Other Assets and Liabilities
The carrying value of certain of the Company’s financial instruments, other than those presented above, including cash, cash equivalents, restricted cash and restricted cash payable, short-term contractual deposits and HSA deposits, accounts receivable and securitized accounts receivable, accounts payable, accrued expenses and other current liabilities and other liabilities, approximate their respective fair values due to their short-term nature or maturities. The carrying value of certain other financial instruments, including interest-bearing money market deposits, securitized debt, participation debt, borrowed federal funds and deferred consideration associated with our acquisitions approximate their respective fair values due to stated interest rates being consistent with current market interest rates.
Concentrations of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk consist principally of cash and cash equivalents, restricted cash, investment securities and trade receivables. Concentration of credit risk with respect to accounts receivable is limited because a large number of geographically and industry diverse customers make up our customer base. See Note 5, Accounts Receivable, Net, for further information.
The Company’s cash and cash equivalents and restricted cash are transacted and maintained with financial institutions with high credit standing. Cash balances at many of these institutions regularly exceed FDIC insured limits; however, management regularly monitors the financial institutions and the composition of the Company’s accounts. We have not experienced any losses in such accounts and management believes that the financial institutions at which the Company’s
cash is held are stable. We attempt to limit our exposure to credit risk with our investment securities by establishing strict investment policies as to minimum investment ratings, diversification of our portfolio and setting risk tolerance levels.