Fair Value Measurements

3 Months Ended

Mar. 31, 2024

FAIR VALUE MEASUREMENTS

The Company’s financial assets and liabilities measured at fair value on a recurring basis were as follows:


	As of March 31, 2024
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market investments (1)	$	—	$	7,526	$	—	$	7,526
Marketable equity securities (2)	794,305		—		—		794,305
Other current investments (3)	7,682		956		—		8,638

Total Financial Assets	$	801,987	$	8,482	$	—	$	810,469
Liabilities

Contingent consideration liabilities (4)	$	—	$	—	$	75	$	75
Interest rate swaps (5)	—		1,651		—		1,651
Mandatorily redeemable noncontrolling interest (6)	—		—		42,549		42,549
Total Financial Liabilities	$	—	$	1,651	$	42,624	$	44,275


	As of December 31, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market investments (1)	$	—	$	5,577	$	—	$	5,577
Marketable equity securities (2)	690,153		—		—		690,153
Other current investments (3)	6,875		—		—		6,875

Total Financial Assets	$	697,028	$	5,577	$	—	$	702,605
Liabilities

Contingent consideration liabilities (4)	$	—	$	—	$	788	$	788
Interest rate swaps (5)	—		2,761		—		2,761
Foreign exchange swap (7)	—		86		—		86
Mandatorily redeemable noncontrolling interest (6)	—		—		40,764		40,764
Total Financial Liabilities	$	—	$	2,847	$	41,552	$	44,399

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(1)			The Company’s money market investments are included in cash and cash equivalents and the value considers the liquidity of the counterparty.
(2)			The Company’s investments in marketable equity securities are held in common shares of U.S. corporations that are actively traded on U.S. stock exchanges. Price quotes for these shares are readily available.
(3)			Includes U.S. Government Securities, corporate bonds, mutual funds and time deposits. These investments are valued using a market approach based on the quoted market prices of the security or inputs that include quoted market prices for similar instruments and are classified as either Level 1 or Level 2 in the fair value hierarchy.
(4)			Included in Accounts payable, vehicle floor plan payable and accrued liabilities and Other Liabilities. The Company determined the fair value of the contingent consideration liabilities using either a Monte Carlo simulation, Black-Scholes model, or probability-weighted analysis depending on the type of target included in the contingent consideration requirements (revenue, EBITDA, client retention). All analyses included estimated financial projections for the acquired businesses and acquisition-specific discount rates.
(5)			Included in Other Liabilities. The Company utilized a market approach model using the notional amount of the interest rate swaps multiplied by the observable inputs of time to maturity and market interest rates.
(6)			The fair value of the mandatorily redeemable noncontrolling interest is based on the fair value of the underlying subsidiaries owned by GHC One and GHC Two, after taking into account any debt and other noncontrolling interests of its subsidiary investments. The fair value of the owned subsidiaries is determined using enterprise value analyses which include an equal weighing between guideline public company and discounted cash flow analyses.

(7)			Included in Accounts payable, vehicle floor plan payable and accrued liabilities, and valued based on a valuation model that calculates the differential between the contract price and the market-based forward rate.

The following tables provide a reconciliation of changes in the Company’s financial liabilities measured at fair value on a recurring basis, using Level 3 inputs:


(in thousands)	Contingent consideration liabilities		Mandatorily redeemable noncontrolling interest
As of December 31, 2023	$	788	$	40,764

Changes in fair value (1)	—		1,876

Accretion of value included in net income (1)	6		—
Settlements or distributions	(719)		(91)

As of March 31, 2024	$	75	$	42,549


(in thousands)	Contingent consideration liabilities		Mandatorily redeemable noncontrolling interest
As of December 31, 2022	$	8,423	$	30,845
Acquisition of business	220		—
Changes in fair value (1)	—		1,468

Accretion of value included in net income (1)	315		—
Settlements or distributions	(752)		(4)

As of March 31, 2023	$	8,206	$	32,309

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(1)			Changes in fair value and accretion of value of contingent consideration liabilities are included in Selling, general and administrative expenses and the changes in fair value of mandatorily redeemable noncontrolling interest is included in Interest expense in the Company’s Condensed Consolidated Statements of Operations.

During the three months ended March 31, 2024, the Company recorded impairment losses of $0.4 million to equity securities that are accounted for as cost method investments. During the three months ended March 31, 2023, the Company recorded gains of $1.8 million to equity securities that are accounted for as cost method investments based on observable transactions for identical or similar investments of the same issuer.

During the three months ended March 31, 2023, the Company recorded long-lived asset impairment charges of $0.7 million. The remeasurement of the long-lived assets is classified as a Level 3 fair value assessment due to the significance of unobservable inputs developed in the determination of the fair value. The Company used a discounted cash flow model to determine the estimated fair value of the long-lived assets and made estimates and assumptions regarding future cash flows and discount rates.

- 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.

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