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Fair Value Measurements
 3 Months Ended
Mar. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 8 - Fair Value Measurements

The following tables present the Company’s financial instruments that are measured at fair value on a recurring basis (in thousands):

 

 

 

March 31, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total Fair
Value
Measurements

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalent - money market funds

 

$

166,896

 

 

$

—

 

 

$

—

 

 

$

166,896

 

Derivative asset

 

 

—

 

 

 

9,866

 

 

 

—

 

 

 

9,866

 

Investments in equity securities

 

 

—

 

 

 

—

 

 

 

1,735

 

 

 

1,735

 

 

$

166,896

 

 

$

9,866

 

 

$

1,735

 

 

$

178,497

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Contingent earn-out liability

 

$

—

 

 

$

—

 

 

$

7,069

 

 

$

7,069

 

 

$

—

 

 

$

—

 

 

$

7,069

 

 

$

7,069

 

 

 

 

 

December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total Fair
Value
Measurements

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalent - money market funds

 

$

237,087

 

 

$

—

 

 

$

—

 

 

$

237,087

 

Derivative asset

 

 

—

 

 

 

8,288

 

 

 

—

 

 

 

8,288

 

Investments in equity securities

 

 

—

 

 

 

—

 

 

 

1,735

 

 

 

1,735

 

 

$

237,087

 

 

$

8,288

 

 

$

1,735

 

 

$

247,110

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Contingent earn-out liability

 

$

—

 

 

$

—

 

 

$

22,758

 

 

$

22,758

 

 

$

—

 

 

$

—

 

 

$

22,758

 

 

$

22,758

 

 

There were no transfers between levels between March 31, 2024 and December 31, 2023.

 

The carrying value of accounts receivable, accounts payable, income tax payable, accrued expenses and other payables approximate their fair values due to the short-term maturities of these instruments.

 

The Company uses interest rate derivative instruments to manage the risk related to fluctuating cash flows from interest rate changes on the debt. These instruments are not designated as hedges for accounting purposes and are recorded in “Other current assets,” “Other noncurrent assets,” “Accrued expense and other current liabilities” or “Other long-term liabilities,” with changes in fair value recognized in “Other income (expense), net.” The Company's derivative asset, which consists of interest rate swaps, is measured at fair value on a recurring basis using observable market data (Level 2) and totaled $9.9 million and $8.3 million as of March 31, 2024 and December 31, 2023, respectively. The fair value of interest rate swaps is estimated using a combined income and market-based valuation methodology based on Level 2 inputs, including forward interest rate yield curves obtained from independent pricing services. Derivative assets are included in “Other noncurrent assets” as of March 31, 2024 and “Other current assets” as of December 31, 2023 in the accompanying condensed consolidated balance sheets.

 

The Company’s contingent earn-out liability is measured at fair value on a recurring basis using significant unobservable inputs (Level 3) and totaled $7.1 million and $22.8 million as of March 31, 2024 and December 31, 2023, respectively. Contingent earn-out liability is included in “Accrued expenses and other current liabilities” in the accompanying condensed consolidated balance sheets.

 

As of March 31, 2024, there is a contingent consideration arrangement, consisting of an earn-out payment to former shareholders of Worldwide Vision Limited of up to $150.0 million. The Company determined the fair value of the contingent earn-out liability by using a probability-weighted analysis to determine the amount of the liabilities, and, if the arrangement is long-term in nature, applying a discount rate that captures the risks associated with the duration of the obligation. The number of scenarios in the probability-weighted analyses vary; generally, more scenarios are prepared for longer duration and more complex arrangements. As of March 31, 2024 and December 31, 2023, the fair value of the contingent earn-out liability reflects a risk-free rate of 5.2% and 5.0%, respectively.

 

The Company classified contingent earn-out arrangements as liabilities at the time of the acquisition, as they will be settled in cash, and remeasures the fair values of the contingent earn-out liabilities each reporting period thereafter until settled. The fair value of the contingent earn-out liabilities are sensitive to changes in the stock price, discount rates and the timing of the future payments, which are based upon estimates of future achievement of the performance metrics. Changes in fair values of contingent earn-out liabilities are recognized in “General and administrative expense” in the accompanying condensed consolidated statements of operations. The change in fair value of the contingent earn-out liability was $(15.7) million and $(0.6) million for the three months ended March 31, 2024 and 2023, respectively.