Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

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

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.

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

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