XML 22 R12.htm IDEA: XBRL DOCUMENT v3.23.1
FAIR VALUE MEASUREMENTS
 9 Months Ended
Mar. 31, 2023
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS
(5) FAIR VALUE MEASUREMENTS
Recurring Fair Value Measurements
The following table represents the Company’s financial assets and liabilities, which are measured at fair value on a recurring basis (in thousands):
Fair Value of Financial Assets and LiabilitiesQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs
(Level 3)
March 31, 2023
Cash equivalents$76 $76 $— $— 
Deferred compensation plan assets52,787 52,787 — — 
Total assets52,863 52,863 — — 
Earn-out liabilities27,174 — — 27,174 
Total liabilities$27,174 $— $— $27,174 
June 30, 2022
Cash equivalents$75 $75 $— $— 
Deferred compensation plan assets52,718 52,718 — — 
Total assets52,793 52,793 — — 
Earn-out liabilities22,789 — — 22,789 
Total liabilities$22,789 $— $— $22,789 
Deferred compensation plan assets consisted of highly liquid mutual fund investments, which were classified as Level 1. The current portion of deferred compensation plan assets ($5.1 million and $5.3 million at March 31, 2023 and June 30, 2022, respectively) was included in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets.
Financial Instruments Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)
FFF Put and Call Rights
On July 29, 2021, the FFF shareholders’ agreement was amended resulting in the termination of the FFF Put Right and the derecognition of the FFF Put Right liability.
In the event of a Key Man Event (generally defined in the FFF shareholders’ agreement as the resignation, termination for cause, death or disability of the majority shareholder), the Company has a call right that requires the majority shareholder to sell its remaining interest in FFF to the Company, and is exercisable at any time within 180 calendar days after the date of a Key Man Event (the “Call Right”, together with the FFF Put Right, the “Put and Call Rights”). As of March 31, 2023 and June 30, 2022, the Call Right had zero value. In the event that the Call Right is exercised, the purchase price for the additional interest in FFF will be at a per share price equal to FFF’s earnings before interest, taxes, depreciation and amortization (“FFF EBITDA”) over the twelve calendar months prior to the purchase date multiplied by a market adjusted multiple, adjusted for any outstanding debt and cash and cash equivalents, divided by the number of shares of FFF common stock then outstanding (“Equity Value per Share”).
Earn-out liabilities
At March 31, 2023, earn-out liabilities have been established in connection with certain of our acquisitions, including the acquisition of substantially all of the assets and certain liabilities of Acurity, Inc. and Nexera, Inc. (the “Acurity and Nexera asset acquisition”) in February 2020 as well as other immaterial acquisitions. The earnout liability related to the Acurity and Nexera asset acquisition was based upon the Company’s achievement of a range of member renewals on terms to be agreed to by the Company and Greater New York Hospital Association based on prevailing market conditions in December 2023. Earn-out liabilities are classified as Level 3 of the fair value hierarchy.
Acurity and Nexera Earn-out (a)
The earn-out liability arising from expected earn-out payments related to the Acurity and Nexera asset acquisition was measured on the acquisition date using a probability-weighted expected payment model and is remeasured periodically due to changes in management’s estimates of the number of transferred member renewals and market conditions. In determining the fair value of the contingent liabilities, management reviews the current results of the acquired business, along with projected results for the remaining earn-out period, to calculate the expected earn-out payment to be made based on the contractual terms set out in the acquisition agreement. The Acurity and Nexera earn-out liability utilized a credit spread of 1.8% at March 31, 2023 and 1.6% at June 30, 2022. As of March 31, 2023 and June 30, 2022, the undiscounted range of outcomes is between $0 and $30.0 million. A significant decrease in the probability could result in a significant decrease in the value of the earn-out liability. The fair value of the Acurity and Nexera earn-out liability at March 31, 2023 and June 30, 2022 was $23.0 million and $22.8 million, respectively.

Input assumptionsAs of March 31, 2023As of June 30, 2022
Probability of transferred member renewal percentage < 50%5.0 %5.0 %
Probability of transferred member renewal percentage between 50% and 65%10.0 %10.0 %
Probability of transferred member renewal percentage between 65% and 80%25.0 %25.0 %
Probability of transferred member renewal percentage > 80%60.0 %60.0 %
Credit spread1.8 %1.6 %
_________________________________
(a)The Acurity and Nexera earn-out liability was initially valued as of February 28, 2020.
A reconciliation of the Company’s earn-out liabilities and FFF Put Right is as follows (in thousands):
Beginning Balance
Purchases
(Settlements)(a)
(Gain)/Loss (b)
Ending Balance
Three Months Ended March 31, 2023
Earn-out liabilities$24,098 $— $3,076 $27,174 
Total Level 3 liabilities$24,098 $— $3,076 $27,174 
Three Months Ended March 31, 2022
Earn-out liabilities$24,139 $— $(945)$23,194 
Total Level 3 liabilities$24,139 $— $(945)$23,194 
Nine Months Ended March 31, 2023
Earn-out liabilities$22,789 $1,460 $2,925 $27,174 
Total Level 3 liabilities$22,789 $1,460 $2,925 $27,174 
Nine Months Ended March 31, 2022
Earn-out liabilities$24,249 $— $(1,055)$23,194 
FFF put right64,110 (64,110)— — 
Total Level 3 liabilities$88,359 $(64,110)$(1,055)$23,194 
_________________________________
(a)Purchases for the nine months ended March 31, 2023 includes an earn-out which has not been earned or paid as of March 31, 2023. Settlements for the nine months ended March 31, 2022 includes non-cash gain recognized as a result the termination of the FFF Put Right and the derecognition of the FFF Put Right liability.
(b)A gain on level 3 liability balances will decrease the liability ending balance whereas a loss on level 3 liability balance will increase the liability ending balance.
Non-Recurring Fair Value Measurements
As a result of the August 2020 Restructuring, the Company recorded non-interest bearing notes payable to former limited partners during the three months ended September 30, 2020. Although these notes are non-interest bearing, they include a Level 2 input associated with an implied fixed annual interest rate of 1.8% (see Note 8 - Debt and Notes Payable). As of March 31,
2023 and June 30, 2022, the notes payable to former limited partners were recorded net of discounts of $5.2 million and $9.1 million, respectively.
During the nine months ended March 31, 2023, no non-recurring fair value measurements were required relating to the measurement of goodwill and intangible assets for impairment. However, purchase price allocations required significant non-recurring Level 3 inputs. The preliminary fair values of the acquired intangible assets resulting from the TRPN acquisition were determined using the income approach (see Note 3 - Business Acquisitions).
Financial Instruments For Which Fair Value Only is Disclosed
The fair values of non-interest bearing notes payable, classified as Level 2, were equal to the carrying value at March 31, 2023 and $0.1 million less than the carrying value at June 30, 2022 based on an assumed market interest rate of 1.6%.
Other Financial Instruments
The fair values of cash, accounts receivable, accounts payable, accrued liabilities and the Credit Facility (as defined in Note 8 - Debt and Notes Payable) approximated carrying value due to the short-term nature of these financial instruments.