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Fair Value | 6 Months Ended
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Jun. 30, 2024
Fair Value Disclosures [Abstract] |
Fair Value | 6. Fair Value The following table summarizes, by level within the fair value hierarchy, estimated fair values of the Company’s assets and liabilities measured at fair value on a recurring or nonrecurring basis or disclosed, but not carried, at fair value in the Condensed Consolidated Balance Sheets as of the dates presented. There were no transfers into, out of, or between levels within the fair value hierarchy during any of the periods presented.
|  | June 30, 2024 |
($ in thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 147,092 |  |  | $ | — |  |  | $ | — |  |  | $ | 147,092 |
Restricted cash |  |  | 26,944 |  |  |  | — |  |  |  | — |  |  |  | 26,944 |
Other assets |  |  | — |  |  |  | 2,500 |  |  |  | — |  |  |  | 2,500 |
Total assets |  | $ | 174,036 |  |  | $ | 2,500 |  |  | $ | — |  |  | $ | 176,536 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Borrowings |  | $ | — |  |  | $ | 401,500 |  |  | $ | — |  |  | $ | 401,500 |
Tax receivable agreement |  |  | — |  |  |  | — |  |  |  | 194,610 |  |  |  | 194,610 |
Total liabilities |  | $ | — |  |  | $ | 401,500 |  |  | $ | 194,610 |  |  | $ | 596,110 |
|  | December 31, 2023 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 118,096 |  |  | $ | — |  |  | $ | — |  |  | $ | 118,096 |
Restricted cash |  |  | 26,049 |  |  |  | — |  |  |  | — |  |  |  | 26,049 |
Other assets |  |  | — |  |  |  | 2,500 |  |  |  | — |  |  |  | 2,500 |
Total assets |  | $ | 144,145 |  |  | $ | 2,500 |  |  | $ | — |  |  | $ | 146,645 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Borrowings |  | $ | — |  |  | $ | 375,650 |  |  | $ | — |  |  | $ | 375,650 |
Tax receivable agreement |  |  | — |  |  |  | — |  |  |  | 188,911 |  |  |  | 188,911 |
Total liabilities |  | $ | — |  |  | $ | 375,650 |  |  | $ | 188,911 |  |  | $ | 564,561 |
Cash and cash equivalents Cash and cash equivalents contains cash on hand, demand deposit accounts, money market accounts and short term investments with original maturities of three months or less. They are classified within Level 1 of the fair value hierarchy, under Accounting Standard Codification (“ASC”) 820, Fair Value Measurements (“ASC 820”), as the price is obtained from quoted market prices in an active market. The carrying amounts of the Company’s cash and cash equivalents approximate their fair values due to the short maturities and highly liquid nature of these accounts. Restricted Cash Restricted cash is classified within Level 1 of the fair value hierarchy under ASC 820, as the primary component is cash that is used as collateral for debts. The carrying amounts of the Company’s restricted cash approximate their fair values due to the highly liquid nature. Other assets Other assets contain a minority equity investment in a privately-held company. The Company elected a measurement alternative for measuring this investment, in which the carrying amount is adjusted based on any observable price changes in orderly transactions. The investment is classified as Level 2 as observable adjustments to value are infrequent and occur in an inactive market. Borrowings The revolving credit facility and 2026 Notes are measured at amortized cost, which the carrying value is unpaid principal net of unamortized debt discount and debt issuance costs. The estimated fair value of the revolving credit facility approximates the unpaid principal because its interest rate approximates market interest rates. The estimated fair value of the 2026 Notes is determined using the quoted prices from over-the-counter markets. The estimated fair value of the Company’s borrowings is classified within Level 2 of the fair value hierarchy, as the market interest rates and quoted prices are generally observable and do not contain a high level of subjectivity. As of June 30, 2024 and December 31, 2023, the Company had $0 drawn against the revolving credit facility. The following table provides the carrying value and estimated fair value of borrowings. See Note 9. Borrowings for further discussion on borrowings.
|  | June 30, 2024 |  |  | December 31, 2023 |
($ in thousands) |  | Carrying value |  |  | Fair value |  |  | Carrying value |  |  | Fair value |
2026 Notes |  | $ | 435,589 |  |  | $ | 401,500 |  |  | $ | 434,166 |  |  | $ | 375,650 |
Tax Receivable Agreement Upon the completion of the Business Combination, the Company entered into the TRA with holders of Post-Merger Repay Units. As a result of the TRA, the Company established a liability in its condensed consolidated financial statements. The TRA is recorded at fair value based on estimates of discounted future cash flows associated with the estimated payments to the Post-Merger Repay Unit holders. These inputs are not observable in the market; thus, the TRA is classified within Level 3 of the fair value hierarchy, under ASC 820. The change in fair value is re-measured at each reporting period with the change in fair value being recognized in accordance with ASC 805, Business Combinations, which is recorded within Change in fair value of tax receivable liability in the Company’s Condensed Consolidated Statements of Operations. The Company used a discount rate, also referred to as the Early Termination Rate, as defined in the TRA, to determine the prese nt value, based on a risk-free rate plus a spread, pursuant to the TRA. A rate of 7.05% was applied to the forecasted TRA payments at June 30, 2024, in order to determine the fair value. A significant increase or decrease in the discount rate could have resulted in a lower or higher balance, respectively, as of the measurement date. During the six months ended June 30, 2024, t he TRA balance was adjusted by $5.7 million thr ough a payment, accretion expense and a valuation adjustment, related to a decrease in the income tax rate used to measure the TRA as of the Early Termination Date and a decrease in the discount rate, which was 7.10% as of December 31, 2023. The following table provides a rollforward of the TRA related to the acquisition and exchanges of Post-Merger Repay Units. See Note 12. Taxation for further discussion on the TRA.
|  | Six Months Ended June 30, |
($ in thousands) |  | 2024 |  |  | 2023 |
Balance at beginning of period |  | $ | 188,911 |  |  | $ | 179,127 |
Purchases |  |  | — |  |  |  | 1,987 |
Payments |  |  | (580 | ) |  |  | — |
Accretion expense |  |  | 6,617 |  |  |  | — |
Valuation adjustment |  |  | (338 | ) |  |  | 482 |
Balance at end of period |  | $ | 194,610 |  |  | $ | 181,596 |

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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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