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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2020
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value MeasurementsFair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value. Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Inputs, other than quoted prices in active markets, that are observable either directly or indirectly. Level 3 — Unobservable inputs that reflect the Company's own assumptions incorporated into valuation techniques. These valuations require significant judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When there is more than one input at different levels within the hierarchy, the fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assessment of the significance of a particular input, to the fair value measurement in its entirety requires substantial judgment and consideration of factors specific to the asset or liability. Level 3 inputs are inherently difficult to estimate. Changes to these inputs can have a significant impact on fair value measurements. Assets and liabilities measured at fair value using Level 3 inputs are based on one or more of the following valuation techniques: market approach, income approach or cost approach. The Company’s policy is to recognize transfers into and transfers out of fair value hierarchy levels at the end of each reporting period. During the three and nine months ended September 30, 2020 there were no transfers between levels in the fair value hierarchy other than the Company’s indemnification asset, as noted below. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis The Company’s non-financial assets such as goodwill, intangible assets, fixed assets, capitalized software and operating lease right-of-use assets are adjusted to fair value when an impairment charge is recognized. Such fair value measurements are based predominantly on Level 2 and Level 3 inputs. Assets and Liabilities Measured at Fair Value on a Recurring Basis Prior to September 30, 2020, the fair value of the Company's indemnification asset was measured and recorded in the condensed consolidated balance sheets using Level 3 inputs because it was valued based on unobservable inputs and other estimation techniques due to the absence of quoted market prices. On September 30, 2020, the fair value of the Company’s indemnification asset was based on the THRY Nasdaq per share price. Accordingly, the indemnification asset was transferred from Level 3 to Level 1 within the fair value hierarchy. The Company values its indemnification asset utilizing the fair value of its common stock, which is valued in accordance with valuation techniques described in Note 1. The following table presents a reconciliation of the Company’s indemnification asset measured and recorded at fair value on a recurring basis as of September 30, 2020, (in thousands):
| 2020
Balance as of December 31, 2019 | $ | 29,789 |
Change in fair value | (3,878) |
Balance as of September 30, 2020 | $ | 25,911 |
The gain on the indemnification asset of $0.5 million and (loss) of $(3.9) million during the three and nine months ended September 30, 2020, respectively, and the (loss) of $(3.7) million and $(4.6) million during the three and nine months ended September 30, 2019, respectively, was recorded in General and administrative expense on the Company's condensed consolidated statements of operations. At September 30, 2020, the fair value associated with the Company's liability classified stock-based compensation awards totaled $47.9 million, of which $37.7 million was vested. The fair value of each stock option award and its subsequent period over period remeasurement, in the case of liability classified stock-based compensation awards, is estimated using the Black-Scholes option pricing model using Level 3 inputs for the volatility assumption. The stock price used in this model is a Level 1 input as noted above. The decrease in value of the vested portion of the liability classified stock-based compensation awards at September 30, 2020 is primarily associated with a decrease in the Company's per share fair value. The following table presents a reconciliation of the Company’s stock option liability measured and recorded at fair value on a recurring basis as of September 30, 2020 (in thousands):
| 2020
Balance as of December 31, 2019 | $ | 43,026 |
Change in fair value | (9,656) |
Amortization of grant date fair value | 5,422 |
Settlement of stock options | (896) |
Exercise of stock options | (235) |
Balance as of September 30, 2020 | $ | 37,661 |
The stock compensation expense of $1.3 million and (benefit) of $(4.2) million recognized during the three and nine months ended September 30, 2020, respectively, was recorded as stock compensation expense (benefit) in Cost of services, Sales and marketing, and General and administrative expense in the Company's condensed consolidated statements of operations. At December 31, 2019, the fair value associated with the Company's liability classified stock-based compensation awards tota led $60.2 million, of which $43.0 million was vested. The stock compensation (benefit) of $(4.9) million and expense of $9.5 million recognized during the three and nine months ended September 30, 2019, respectively, was recorded as stock compensation expense (benefit) in Cost of services, Sales and marketing, and General and administrative expense in the Company's condensed consolidated statements of operations. Fair Value of Financial Instruments The Company considers the carrying amounts of cash, trade receivables, and accounts payable to approximate fair value because of the relatively short period of time between the origination of these instruments and their expected realization or payment. Additionally, the Company considers the carrying amounts of its ABL Facility and financing obligations to approximate their fair values due to their short-term nature and approximation of interest rates to market rates. These fair value measurements are considered Level 2. See Note 7, Debt Obligations. The Senior Term Loan is carried at amortized cost; however, the Company estimates the fair value of the term loan for disclosure purposes. The fair value of the Senior Term Loan is determined based on quoted prices that are observable in the market place and are classified as Level 2 measurements. See Note 7, Debt Obligations. The following table sets forth the carrying amount and fair value of the Senior Term Loan (in thousands):
| September 30, 2020 |  | December 31, 2019
| Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
Senior Term Loan, net | $ | 504,128 |  |  | $ | 475,282 |  |  | $ | 609,407 |  |  | $ | 610,000 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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