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Fair Value Measurements of Financial Instruments
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements of Financial Instruments

19. Fair Value Measurements of Financial Instruments

The carrying amounts and fair values of the Company’s financial instruments as of March 31, 2025, are presented below (in thousands):

 

 

Fair Value Measurements

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Money market accounts*

 

$

2,755

 

 

$

—

 

 

$

—

 

 

$

2,755

 

Marketable securities – certificates of deposit

 

 

2,313

 

 

 

—

 

 

 

—

 

 

 

2,313

 

Marketable securities – equity securities

 

 

84

 

 

 

—

 

 

 

—

 

 

 

84

 

I Health call option

 

 

—

 

 

 

—

 

 

 

3,867

 

 

 

3,867

 

Total assets

 

$

5,152

 

 

$

—

 

 

$

3,867

 

 

$

9,019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate collar

 

$

—

 

 

$

21

 

 

$

—

 

 

$

21

 

AAMG contingent consideration

 

 

2,075

 

 

 

—

 

 

 

—

 

 

 

2,075

 

VOMG contingent consideration

 

 

—

 

 

 

—

 

 

 

15

 

 

 

15

 

Sun Labs remaining equity interest purchase

 

 

—

 

 

 

—

 

 

 

7,352

 

 

 

7,352

 

ADSC contingent consideration

 

 

—

 

 

 

—

 

 

 

4,309

 

 

 

4,309

 

CFC contingent consideration

 

 

—

 

 

 

—

 

 

 

11,170

 

 

 

11,170

 

PCCCV contingent consideration

 

 

—

 

 

 

—

 

 

 

1,450

 

 

 

1,450

 

CHS contingent consideration

 

 

—

 

 

 

—

 

 

 

5,741

 

 

 

5,741

 

Total liabilities

 

$

2,075

 

 

$

21

 

 

$

30,037

 

 

$

32,133

 

* Included in cash and cash equivalents

The carrying amounts and fair values of the Company’s financial instruments as of December 31, 2024, are presented below (in thousands):

 

 

Fair Value Measurements

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Money market accounts*

 

$

3,673

 

 

$

—

 

 

$

—

 

 

$

3,673

 

Marketable securities – certificates of deposit

 

 

2,289

 

 

 

—

 

 

 

—

 

 

 

2,289

 

Marketable securities – equity securities

 

 

89

 

 

 

—

 

 

 

—

 

 

 

89

 

I Health call options

 

 

—

 

 

 

—

 

 

 

3,778

 

 

 

3,778

 

Interest rate collar

 

 

—

 

 

 

19

 

 

 

—

 

 

 

19

 

Total assets

 

$

6,051

 

 

$

19

 

 

$

3,778

 

 

$

9,848

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

AAMG contingent consideration

 

$

2,110

 

 

$

—

 

 

$

—

 

 

$

2,110

 

VOMG contingent consideration

 

 

—

 

 

 

—

 

 

 

15

 

 

 

15

 

Sun Labs remaining equity interest purchase

 

 

—

 

 

 

—

 

 

 

7,352

 

 

 

7,352

 

ADSC contingent consideration

 

 

—

 

 

 

—

 

 

 

4,285

 

 

 

4,285

 

CFC contingent consideration

 

 

—

 

 

 

—

 

 

 

9,949

 

 

 

9,949

 

PCCCV contingent consideration

 

 

—

 

 

 

—

 

 

 

1,351

 

 

 

1,351

 

CHS contingent consideration

 

 

—

 

 

 

—

 

 

 

5,643

 

 

 

5,643

 

Total liabilities

 

$

2,110

 

 

$

—

 

 

$

28,595

 

 

$

30,705

 

* Included in cash and cash equivalents

The change in the fair value of Level 3 liabilities is recognized in unrealized loss on investments, other income, or general and administrative expenses in the accompanying condensed consolidated statements of income. As of March 31, 2025, the reconciliation of our Level 3 liabilities was as follows (in thousands):

 

 

Amount

 

Balance at January 1, 2025

 

$

28,595

 

Change in fair value of existing Level 3 liabilities

 

 

1,442

 

Balance at March 31, 2025

 

$

30,037

 

Investments in Marketable Securities

Certificates of deposit are reported at par value, plus accrued interest, with maturity dates greater than ninety days. As of March 31, 2025 and December 31, 2024, certificates of deposit amounted to approximately $2.3 million and $2.3 million, respectively. Investments in certificates of deposit are classified as Level 1 investments in the fair value hierarchy.

Equity securities are reported at fair value. These securities are classified as Level 1 in the valuation hierarchy, where quoted market prices from reputable third-party brokers are available in an active market and unadjusted. As of March 31, 2025 and December 31, 2024, the equity securities were approximately $0.1 million and $0.1 million, respectively, in the accompanying condensed consolidated balance sheets. Gains and losses recognized on equity securities sold are recognized in the accompanying condensed consolidated statements of income as other income. The change in fair value on equity securities held are as follows (in thousands) for the periods listed below and no securities had been sold in the respective periods:

 

 

Three Months Ended March 31,

 

 

2025

 

 

2024

 

Unrealized gains (losses) recognized on equity securities held at end of period

 

$

5

 

 

$

(116

)

Derivative Financial Instruments

Interest Rate Collar Agreements

From time to time, the Company enters into agreements designed to limit the interest rate risk associated with the Company’s Revolver Loan, including the collar agreement. The principal objective of the collar agreement is to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows. Refer to Note 9 — “Credit Facility, Bank Loans, and Lines of Credit” for further information on the Company’s debt. Under the terms of the agreement, the ceiling is 5.0% and the floor is 2.34%. The collar agreement is not designated as a hedging instrument. Changes in the fair value of this contract are recognized as unrealized gain or loss on investments in the accompanying condensed consolidated statements of income and reflected in the accompanying condensed consolidated statements of cash flows as unrealized (gain) loss on investments. The estimated fair value of the collar was determined using Level 2. As of March 31, 2025, the fair value of the collar was $21,000 and presented within other liabilities in the accompanying condensed consolidated balance sheets. As of December 31, 2024, the fair value of the collar was $19,000 and presented within prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets.

I Health Call Option

The Company acquired a 25% equity interest in I Health, which included a call option that allows the Company to purchase an additional 25% equity interest on each of the first, second, and third anniversaries from when certain triggering events occur. The Company determined the fair value of the call option using a probability-weighted model that includes significant unobservable inputs (Level 3). Specifically, the Company considered various scenarios of the purchase price based on EBITDA and assigned probabilities to each such scenario in determining fair value. As of March 31, 2025 and December 31, 2024, the value of the call option was valued at $3.9 million and $3.8 million, respectively. The I Health call option is presented within other assets in the accompanying condensed consolidated balance sheet. The 25% equity interest in I Health is accounted for under the equity method (see Note 5 — “Investments in Other Entities — Equity Method”).

Remaining equity interest purchase

In 2021, the Company entered into a financing obligation to purchase the remaining equity interest in Sun Clinical Laboratories (“Sun Labs”) within three years from the date the Company consolidated Sun Labs. The purchase of the remaining Sun Labs equity value is considered a financing obligation with a carrying value of $7.4 million as of March 31, 2025 and December 31, 2024, respectively. As the financing obligation is embedded in the non-controlling interest, the non-controlling interest is recognized in other liabilities in the accompanying condensed consolidated balance sheets.

Contingent consideration

All American Medical Group (“AAMG”)

Upon acquiring 100% of the equity interest in AAMG, the purchase price consisted of cash funded upon close of the transaction and additional consideration (“AAMG stock contingent consideration”) in the form of the Company’s common stock. The additional consideration is contingent on AAMG meeting certain revenue and capitated member targets in 2023 (“2023 target metric”) and in 2024 (“2024 target metric”). Additional shares would be further issued for exceeding the revenue targets in 2023 (“2023 growth metric”) and in 2024 (“2024 growth metric”). The total amount of stock that can be issued for the 2023 target and growth metrics and 2024 target and growth metrics is 157,059 and 184,357, respectively. At the end of the earnout periods, the Company concluded on the achievement of the 2023 target and growth metrics and the 2024 target and growth metrics based on actual revenue and the value of the Company stock (Level 1) to calculate payment, representing the fair value of the contingent consideration.

The 2023 and 2024 growth metrics were considered variable and were presented within other liabilities in the accompanying consolidated balance sheet. As of March 31, 2025 and December 31, 2024, the AAMG stock contingent consideration for the 2024 growth metric had a fair value of $2.1 million. Changes in the AAMG stock contingent consideration are presented in general and administrative expenses in the accompanying condensed consolidated statements of income.

During the year ended December 31, 2024, the Company had concluded that both the 2023 target metric and the 2023 growth metric were met and issued 157,059 shares of common stock to the sellers in 2024.

Advanced Diagnostic and Surgical Center (“ADSC”)

Upon acquiring 95% of the equity interest of ADSC in 2024, the total consideration of the acquisition included contingent consideration. The contingent consideration will be settled in cash contingent on ADSC achieving revenue and EBITDA metrics for fiscal years 2023 (“ADSC 2023 Metric”) and 2024 (“ADSC 2024 Metric”) (collectively, “ADSC contingent consideration”). The Company determined the fair value of the contingent consideration using a probability-weighted model that includes significant unobservable inputs (Level 3). Specifically, the Company considered various scenarios of revenue and assigned probabilities to each such scenario in determining fair value. As of March 31, 2025 and December 31, 2024, the ADSC 2023 Metric and the 2024 Metric were valued at $4.3 million and were included in other liabilities in the accompanying condensed consolidated balance sheets. Changes in the ADSC contingent consideration are presented in general and administrative expenses in the accompanying condensed consolidated statements of income. In April 2025, the Company paid $4.5 million in cash to the sellers of ADSC for the contingent consideration that was achieved. As a result, the contingent liabilities are no longer outstanding.

Upon acquiring certain assets of CFC in 2024, the total consideration of the acquisition included contingent consideration. The contingent consideration will be settled in cash contingent upon CFC maintaining or exceeding the target member month amount for the first, second, and third measurement period (“CFC contingent consideration”). The first measurement period means the period commencing on the first day of the month immediately following the close of AHMS and ending on the one-year anniversary thereof. The second measurement period is for one year after the first measurement period, and the third measurement period is for one year after the second measurement period. The contingent liability will be paid after achieving the metric in each measurement period. The Company will pay $5.0 million for each metric achieved for each measurement period, or a total of $15.0 million. In the event that the CFC first and/or second contingent consideration metrics are not achieved during the first and/or the second measurement period, if the metric is met within the second and/or third measurement period, there is a catch-up payment that shall be paid concurrently with the payments of the CFC second contingent consideration and/or CFC third contingent consideration. The Company determined the fair value of the contingent consideration using a probability-weighted model that includes significant unobservable inputs (Level 3). Specifically, the Company considered various scenarios of membership and assigned probabilities to each such scenario in determining fair value. As of March 31, 2025 and December 31,

2024, the first metric was valued at $4.9 million and $4.2 million, respectively, and was included in other liabilities in the accompanying condensed consolidated balance sheets. As of March 31, 2025 and December 31, 2024, the second and third metrics were valued at $6.3 million and $5.8 million in aggregate, and were included in other long-term liabilities in the accompanying condensed consolidated balance sheets. Changes in the CFC contingent consideration are presented in general and administrative expenses in the accompanying condensed consolidated statements of income.

Upon acquiring certain assets of PCCCV in 2024, the total consideration of the acquisition included contingent consideration. The contingent consideration will be settled in cash, contingent upon PCCCV meeting certain metrics related to financial ratios and member months for the first and second measurement periods (“PCCCV contingent consideration”). The first measurement period is the first day of the month immediately following the close and ending on June 30, 2024. The second measurement period is for one year after the first measurement period. The Company determined the fair value of the contingent consideration using a probability-weighted model that includes significant unobservable inputs (Level 3). Specifically, the Company considered various scenarios of revenue and assigned probabilities to each such scenario in determining fair value. As of March 31, 2025, the first metric had been met, and $1.0 million was paid in the fourth quarter of 2024. As of March 31, 2025 and December 31, 2024, the second metric was valued at $1.5 million and $1.4 million, respectively and was included in other liabilities in the accompanying condensed consolidated balance sheets. Changes in the PCCCV contingent consideration are presented in general and administrative expenses in the accompanying condensed consolidated statements of income.

CHS

Upon acquiring 100% of the equity interest of CHS in 2024, the total consideration of the acquisition included contingent consideration. The contingent consideration will be settled in cash, contingent upon CHS achieving a gross profit per total member months metric for fiscal year 2025 (“CHS 2025 Gross Profit PMPM Metric”) and member enrollment metrics (“CHS Member Enrollment Metrics”) measured over four measurement periods and an additional fifth measurement period contingent upon acquisition of an entity (the “earnout period”) (collectively, “CHS contingent consideration”). For the CHS Member Enrollment Metrics, the first measurement period means the period commencing on the first day immediately following the closure of CHS and ending on the one-year anniversary thereof. The second, third, fourth, and fifth measurement periods are for one year after each of the previous respective measurement periods. If the metrics are achieved, the contingent liability will be paid after the end of the earnout period. The Company will pay up to $4.8 million for the CHS 2025 Gross Profit PMPM Metric, and up to $4.3 million for each metric achieved for each measurement period, or up to a total of $21.5 million, for the CHS Member Enrollment Metrics. The Company determined the fair value of the contingent consideration using a probability-weighted model that includes significant unobservable inputs (Level 3). Specifically, the Company considered various scenarios of revenue and membership and assigned probabilities to each such scenario in determining fair value. As of March 31, 2025 and December 31, 2024, the CHS contingent consideration was valued at $5.7 million and $5.6 million, respectively. The CHS 2025 Gross Profit PMPM Metric was included in other liabilities and the CHS Member Enrollment Metrics were included in other long-term liabilities in the accompanying condensed consolidated balance sheets. Changes in the CHS contingent consideration are presented in general and administrative expenses in the accompanying condensed consolidated statements of income.