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Fair Value Measurements of Financial Instruments
 9 Months Ended
Sep. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements of Financial Instruments

18. Fair Value Measurements of Financial Instruments

The carrying amounts and fair values of the Company’s financial instruments as of September 30, 2025, are presented below (in thousands):

 

 

 

Fair Value Measurements

 

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Money market accounts(1)

 

$

7,853

 

 

$

—

 

 

$

—

 

 

$

7,853

 

Marketable securities

 

 

1,221

 

 

 

—

 

 

 

—

 

 

 

1,221

 

Total assets

 

$

9,074

 

 

$

—

 

 

$

—

 

 

$

9,074

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Sun Labs remaining equity interest purchase

 

$

—

 

 

$

—

 

 

$

7,352

 

 

$

7,352

 

CFC contingent consideration

 

 

—

 

 

 

—

 

 

 

7,023

 

 

 

7,023

 

CHS contingent consideration

 

 

—

 

 

 

—

 

 

 

6,568

 

 

 

6,568

 

Other(2)

 

 

—

 

 

 

808

 

 

 

15

 

 

 

823

 

Total liabilities

 

$

—

 

 

$

808

 

 

$

20,958

 

 

$

21,766

 
(1)
Included in cash and cash equivalents.
(2)
Other consists of the interest rate collar, other contingent consideration liabilities, and the interest rate swap.

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(1)

 

$

3,673

 

 

$

—

 

 

$

—

 

 

$

3,673

 

Marketable securities

 

 

2,378

 

 

 

—

 

 

 

—

 

 

 

2,378

 

I Health call option

 

 

—

 

 

 

—

 

 

 

3,778

 

 

 

3,778

 

Interest rate collar

 

 

—

 

 

 

19

 

 

 

—

 

 

 

19

 

Total assets

 

$

6,051

 

 

$

19

 

 

$

3,778

 

 

$

9,848

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Sun Labs remaining equity interest purchase

 

$

—

 

 

$

—

 

 

$

7,352

 

 

$

7,352

 

ADSC contingent consideration

 

 

—

 

 

 

—

 

 

 

4,285

 

 

 

4,285

 

CFC contingent consideration

 

 

—

 

 

 

—

 

 

 

9,949

 

 

 

9,949

 

CHS contingent consideration

 

 

—

 

 

 

—

 

 

 

5,643

 

 

 

5,643

 

Other(2)

 

 

2,110

 

 

 

—

 

 

 

1,366

 

 

 

3,476

 

Total liabilities

 

$

2,110

 

 

$

—

 

 

$

28,595

 

 

$

30,705

 
(1)
Included in cash and cash equivalents.
(2)
Other consists of other contingent consideration liabilities.

The change in the fair value of Level 3 liabilities is recognized in other income or general and administrative expenses in the accompanying condensed consolidated statements of income. As of September 30, 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

 

 

3,863

 

Settlement

 

 

(11,500

)

Balance at September 30, 2025

 

$

20,958

 

Derivative Financial Instruments

Interest Rate Swap Agreement

On August 7, 2025, the Company entered into an interest rate swap agreement to effectively convert its floating-rate debt to a fixed-rate basis with the principal objective of eliminating or reducing the variability of cash flows in interest payments associated with the Company’s floating-rate debt. The swap involves a notional amount of $200 million, with the Company paying a fixed interest rate of 3.179%. Payments are exchanged monthly, starting August 29, 2025 and continuing through the termination date of August 31, 2029, with the bank having an option to shorten the term to August 31, 2027. See Note 8 — “Credit Facility and Bank Loans” for further information on the Company’s debt. The interest rate swap agreement is not designated as a hedging instrument. Changes in the fair value of the contract are recognized as unrealized gain or loss on investments in the accompanying

condensed consolidated statements of income and reflected within other as an adjustment to reconcile net income to cash provided by operating activities in the accompanying consolidated statements of cash flows.

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. See Note 8 — “Credit Facility and Bank Loans” 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.

I Health Call Option

In March 2024, the Company acquired a 25% equity interest in I Health, including a call option that was amended in May 2025 to allow the Company to purchase an additional 37.5% equity interest through each of the first and second anniversaries from March 31, 2025. On July 1, 2025, the Company paid cash to exercise the first option to purchase a 37.5% additional equity interest, thereby owning 62.5% of I Health. The Company became the primary beneficiary with majority controlling interest and accounted for the acquisition as a step acquisition. As the result of the transaction, the I Health Call Option was part of total consideration transferred for the I Health step acquisition. See Note 3 — “Business Combination and Goodwill”.

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”). The purchase of the remaining Sun Labs equity value is considered a financing obligation with a carrying value of $7.4 million as of September 30, 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”).

In August 2025, the 2024 target and growth metrics were met, and the Company issued 165,293 shares of common stock to the seller to settle the contingent consideration. As a result, the Company recognized $2.6 million in additional paid-in capital from other liabilities, and the contingent liabilities are no longer outstanding. As of December 31, 2024, the AAMG stock contingent consideration for the 2024 growth metric had a fair value of $2.1 million. The 2024 growth metric was considered variable and was presented within other liabilities in the accompanying consolidated balance sheet. Changes in the AAMG stock contingent consideration are presented in general and administrative expenses in the accompanying condensed consolidated statements of income.

Community Family Care Medical Group IPA, Inc. (“CFC”)

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. In July 2025, the Company paid $5.0 million in cash for the first metric of the contingent consideration that was achieved. As of December 31, 2024, the first metric was valued at $4.2 million and was included in other liabilities in the accompanying condensed consolidated balance sheets. As of September 30, 2025 and December 31, 2024, the second metric was valued at $4.5 million and $3.5 million, respectively, and was included in other liabilities and other long-term liabilities, respectively, in the accompanying condensed consolidated balance sheets. As of September 30, 2025 and December 31, 2024, the third metric was valued at $2.5 million and $2.3 million, respectively, and was 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.

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 September 30, 2025 and December 31, 2024, the CHS contingent consideration was valued at $6.6 million and $5.6 million, respectively. The CHS 2025 Gross Profit PMPM Metric and 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.