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Fair Value Measurements | 6 Months Ended
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Jun. 30, 2023
Fair Value Measurements |
Fair Value Measurements | 8. Fair Value Measurements Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering assumptions, the Company follows a three-tier fair value hierarchy, which is described in detail in the 2022 Annual Report on Form 10-K. A summary of the Company’s liabilities measured at fair value on a recurring basis is as follows (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of June 30, 2023 | ​ | As of December 31, 2022
​ | ​ | Fair Value |  | Level 1 |  | Level 2 |  | Level 3 |  | Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Motto contingent consideration | ​ | $ | 3,600 | ​ | $ | — | ​ | $ | — | ​ | $ | 3,600 | ​ | $ | 3,710 | ​ | $ | — | ​ | $ | — | ​ | $ | 3,710
Gadberry Group contingent consideration | ​ | ​ | 588 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 588 | ​ | ​ | 817 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 817
Contingent consideration (a) | ​ | $ | 4,188 | ​ | $ | — | ​ | $ | — | ​ | $ | 4,188 | ​ | $ | 4,527 | ​ | $ | — | ​ | $ | — | ​ | $ | 4,527
(a) | Recorded as a component of “Accrued liabilities” and “Other liabilities, net of current portion” in the accompanying Condensed Consolidated Balance Sheets.
The Company is required to pay additional purchase consideration totaling 8% of gross receipts collected by Motto each year (the “Revenue Share Year”) through September 30, 2026, with no limitation as to the maximum payout. The annual payment is required to be made within 120 days of the end of each Revenue Share Year. The fair value of the contingent purchase consideration represents the forecasted discounted cash payments that the Company expects to pay. Increases or decreases in the fair value of the contingent purchase consideration can result from changes in discount rates as well as the timing and amount of forecasted revenues. The forecasted revenue growth assumption that is most sensitive is the assumed franchise sales count for which the forecast assumes between 60-140 franchises sold annually. This assumption is based on historical sales and an assumption of growth over time. A 10% change in the number of franchise sales would change the liability by $0.1 million. A 1% change to the discount rate applied to the forecast changes the liability by approximately $0.1 million. As of June 30, 2023, contingent consideration also includes an amount recognized in connection with the acquisition of the Gadberry Group. The Company measures these liabilities each reporting period and recognizes changes in fair value, if any, in “Selling, operating and administrative expenses” in the accompanying Condensed Consolidated Statements of Income (Loss). The table below presents a reconciliation of the contingent consideration (in thousands):
​ | ​ | ​ | ​
​ | ​ | Total
Balance at January 1, 2023 | ​ | $ | 4,527
Fair value adjustments | ​ | ​ | (99)
Cash payments | ​ | ​ | (240)
Balance at June 30, 2023 | ​ | $ | 4,188
​ The following table summarizes the carrying value and estimated fair value of the Senior Secured Credit Facility (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30, 2023 | ​ | December 31, 2022
​ | ​ | Carrying Amount |  | Fair Value Level 2 |  | Carrying Amount |  | Fair Value Level 2
Senior Secured Credit Facility | ​ | $ | 446,446 | ​ | $ | 433,895 | ​ | $ | 448,320 | ​ | $ | 414,587
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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 -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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