Fair Value Measurements (Tables)
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9 Months Ended |
Sep. 30, 2022 |
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| Fair Value Disclosures [Abstract] |
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| Fair Value Measurements on a Recurring Basis |
The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value as of September 30, 2022 | | Fair Value Measurements Using Inputs Considered as: | | | | Level 1 | | Level 2 | | Level 3 | | Assets: | | | | | | | | | | Derivative assets - designated as cash flow hedges (foreign currency exchange rate “FX”) | | $ | 377 | | | $ | — | | | $ | 377 | | | $ | — | | | Derivative assets - designated as cash flow hedges (interest rate swaps) | | 760 | | | — | | | 760 | | | — | | | Derivative assets - freestanding instruments (FX) | | 47 | | | — | | | 47 | | | — | | | Derivative assets - capped call derivatives | | 48,223 | | | — | | | — | | | 48,223 | | | Convertible notes receivable | | 282 | | | — | | | — | | | 282 | | | | $ | 49,689 | | | $ | — | | | $ | 1,184 | | | $ | 48,505 | | | | | | | | | | | | Liabilities: | | | | | | | | | | Derivative liabilities - designated as cash flow hedges (FX) | | $ | 2,764 | | | $ | — | | | $ | 2,764 | | | $ | — | | | Derivative liabilities - freestanding instruments (FX) | | 1,232 | | | — | | | 1,232 | | | — | | | Derivative liabilities - embedded exchange feature | | 83,145 | | | — | | | — | | | 83,145 | | | Contingent consideration arrangements | | 81,850 | | | — | | | — | | | 81,850 | | | | $ | 168,991 | | | $ | — | | | $ | 3,996 | | | $ | 164,995 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value as of December 31, 2021 | | Fair Value Measurements Using Inputs Considered as: | | | | Level 1 | | Level 2 | | Level 3 | | Assets: | | | | | | | | | Derivative assets - designated as cash flow hedges (FX) | | $ | 243 | | | $ | — | | | $ | 243 | | | $ | — | | | Derivative assets - freestanding instruments (FX) | | 61 | | | — | | | 61 | | | — | | | Derivative assets - capped call derivatives | | 106,629 | | | — | | | — | | | 106,629 | | | Convertible notes receivable | | 2,767 | | | — | | | — | | | 2,767 | | | | $ | 109,700 | | | $ | — | | | $ | 304 | | | $ | 109,396 | | | | | | | | | | | | Liabilities: | | | | | | | | | | Derivative liabilities - designated as cash flow hedges (FX) | | $ | 1,286 | | | $ | — | | | $ | 1,286 | | | $ | — | | | | | | | | | | | | Derivative liabilities - freestanding instruments (FX) | | 427 | | | — | | | 427 | | | — | | | Derivative liabilities - embedded exchange feature | | 181,700 | | | — | | | — | | | 181,700 | | | Contingent consideration arrangements | | 98,382 | | | — | | | — | | | 98,382 | | | | $ | 281,795 | | | $ | — | | | $ | 1,713 | | | $ | 280,082 | |
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| Reconciliation of Beginning and Ending Balances of Recurring Fair Value Measurements |
The following table provides a reconciliation of the beginning and ending balances of our recurring fair value measurements, using significant unobservable inputs (Level 3) (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Capped Call Derivative Asset | | Convertible Notes Receivable | | Embedded Exchange Feature Derivative Liability | | Contingent Consideration Liability Arrangements | | As of December 31, 2021 | | $ | 106,629 | | | $ | 2,767 | | | $ | 181,700 | | | $ | 98,382 | | | Additions | | — | | | — | | | — | | | 26,369 | | | | | | | | | | | | Utilized as business combination consideration | | — | | | (2,485) | | | — | | | — | | Measurement period adjustments (1) | | — | | | — | | | — | | | (9,578) | | Changes in fair value (2) | | (58,406) | | | — | | | (98,555) | | | (33,323) | | | Total at September 30, 2022 - long-term | | $ | 48,223 | | | $ | 282 | | | $ | 83,145 | | | $ | 81,850 | | | | | | | | | | | | | | | | | | | |
(1)For further details refer to “Note 2. Business Combinations.” (2)The decrease in fair value associated with contingent consideration arrangements during the nine months ended September 30, 2022 was primarily related to the change in (i) the discount rates due to increasing interest rates, (ii) the probability of the regulatory milestone-based payment associated with the acquisition of TandemLife and (iii) the timing of projected achievement of a certain regulatory milestone and timing of sales-based earnout payments associated with the acquisition of ImThera.
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| Schedule of Fair Value of Contingent Consideration Arrangements by Acquisition |
The following table provides the fair value of our Level 3 contingent consideration arrangements by acquisition (in thousands): | | | | | | | | | | | | | | | | | September 30, 2022 | | December 31, 2021 | | ImThera | | $ | 66,678 | | | $ | 86,830 | | | ALung | | 15,172 | | | — | | | TandemLife | | — | | | 11,552 | | | | $ | 81,850 | | | $ | 98,382 | |
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| Significant Unobservable Inputs Related to Contingent Consideration |
The sales-based earnout was valued using projected sales from our internal strategic plan and is a Level 3 fair value measurement, which includes the following significant unobservable inputs (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ALung Acquisition | | Fair value at May 2, 2022 | | Valuation Technique | | Unobservable Input | | Ranges | | Sales-based earnout | | $ | 16,791 | | | Monte Carlo simulation | | Risk-adjusted discount rate | | 7.0% | - | 8.4% | | | | | | | Credit risk discount rate | | 6.4% | - | 8.0% | | | | | | | Revenue volatility | | 25.7% | | | | | | | Projected years of earnout | | 2023 | - | 2027 |
These arrangements are Level 3 fair value measurements and include the following significant unobservable inputs as of September 30, 2022: | | | | | | | | | | | | | | | | | | | | | | ImThera Acquisition | | Valuation Technique | | Unobservable Input | | Inputs | | Regulatory milestone-based payment | | Discounted cash flow | | Discount rate | | 10.8% | | | | | Probability of payment | | 85% | | | | | Projected payment year | | 2025 | | | | | | | | | Sales-based earnout | | Monte Carlo simulation | | Risk-adjusted discount rate | | 14.8% - 15.0% | | | | | Credit risk discount rate | | 11.1% - 11.6% | | | | | Revenue volatility | | 32.5% | | | | | Probability of payment | | 85% | | | | | Projected years of earnout | | 2026 - 2029 |
The ALung business combination involved a contingent consideration arrangement composed of potential cash payments upon the achievement of certain sales-based thresholds associated with sales of products. The arrangement is a Level 3 fair value measurement and includes the following significant unobservable inputs as of September 30, 2022: | | | | | | | | | | | | | | | | | | | | | | ALung Acquisition | | Valuation Technique | | Unobservable Input | | Inputs | | Sales-based earnout | | Monte Carlo simulation | | Risk-adjusted discount rate | | 8.5% - 9.6% | | | | | Credit risk discount rate | | 9.6% - 11.4% | | | | | Revenue volatility | | 26.8% | | | | | Projected years of earnout | | 2023 - 2027 |
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