XML 23 R12.htm IDEA: XBRL DOCUMENT

Fair Value

9 Months Ended

Sep. 30, 2021

4. Fair Value

The following table details the fair value measurements of assets and liabilities that are measured at fair value on a recurring basis:


	Fair Value Measurement at September 30, 2021
							Total
	Level 1		Level 2		Level 3		Fair Value
Assets
Money market mutual funds	$	10,080	$	—	$	—	$	10,080
Debt securities:
U.S. government obligations		10,985		—		—		10,985
Obligations of states and municipalities		—		4,371		—		4,371
Industrial and miscellaneous		—		32,343		—		32,343
Residential and commercial mortgage-backed securities		—		15,388		—		15,388
Other loan-backed and structured securities		—		5,701		—		5,701
	$	21,065	$	57,803	$	—	$	78,868
Liabilities
Contingent consideration - business combinations	$	—	$	—	$	2,849	$	2,849
Contingent consideration - earnout		—		—		39,811		39,811
Private warrant liability		—		—		17,706		17,706
	$	—	$	—	$	60,366	$	60,366


	Fair Value Measurement at December 31, 2020
							Total
	Level 1		Level 2		Level 3		Fair Value
Contingent consideration - business combinations	$	—	$	—	$	3,549	$	3,549
Contingent consideration - earnout		—		—		50,238		50,238
Private warrant liability		—		—		31,534		31,534
	$	—	$	—	$	85,321	$	85,321

Financial Assets

Money market mutual funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. As the funds are generally maintained at a net asset value which does not fluctuate, cost approximates fair value. These are included as a Level 1 measurement in the table above. The fair values for available-for-sale fixed-maturity securities are based upon prices provided by an independent pricing service. The Company has reviewed these prices for reasonableness and has not adjusted any prices received from the independent provider. Level 2 securities represent assets whose fair value is determined using observable market information such as previous day trade prices, quotes from less active markets or quoted prices of securities with similar characteristics. There were no transfers between Level 1 and Level 2.

Contingent Consideration – Business Combinations

The Company estimated the fair value of the business combination contingent consideration that is triggered by EBITDA or revenue milestones, which related to certain 2021 acquisitions, using the Monte Carlo simulation method. The fair value is based on the simulated revenue and net income (loss) of the Company over the maturity date of the contingent consideration. As of September 30, 2021, the key inputs used in the determination of the combined fair value of $624 included volatility of 34.3% to 65%, discount rate of 26.0% and weighted-average cost of capital of 26.0% to 29.5%.

The Company estimated the fair value of the business combination contingent consideration that is triggered by stock price milestones, which related to certain 2020 acquisitions, using the Monte Carlo simulation method. The fair value is based on the simulated stock price of the Company over the maturity date of the contingent consideration. As of

September 30, 2021, the key inputs used in the determination of the fair value of $1,143 included stock price of $17.68, strike price of $20.00, discount rate of 5.2% and volatility of 65%. As of December 31, 2020, the key inputs used in the determination of the fair value of $1,749 included price of $14.27, strike price of $20.00, discount rate of 9% and volatility of 60%.

The Company estimated the fair value of the 2018 business combination contingent consideration using a variation of the income approach known as the real options method. The fair value is based on the present value of the contingent payments to be made using a weighted probability of possible payments. In January 2021, the 2018 business combination contingent consideration was settled in full for a cash payment of $2,062. As of December 31, 2020, the key inputs used in the determination of fair value of $1,800 include projected revenues and expenses, discount rate of 9.96% to 9.98%, revenue volatility of 18.0% and weighted-average cost of capital of 21.5%.

Contingent Consideration - Earnout

The Company estimated the fair value of the earnout contingent consideration using the Monte Carlo simulation method. The fair value is based on the simulated price of the Company over the maturity date of the contingent consideration and increased by the certain employee forfeitures. As of September 30, 2021, the key inputs used in the determination of the fair value included exercise price of $20.00 and $22.00, volatility of 65%, forfeiture rate of 15% and stock price of $17.68. As of December 31, 2020, the key inputs used in the determination of the fair value included exercise price of $18.00, $20.00 and $22.00, volatility of 60%, forfeiture rate of 16% and stock price of $14.27.

Private Warrants

The Company estimated the fair value of the private warrants using the Black-Scholes-Merton option pricing model. As of September 30, 2021, the key inputs used in the determination of the fair value included exercise price of $11.50, expected volatility of 53%, remaining contractual term of 4.23 years, and stock price of $17.68. As of December 31, 2020, the key inputs used in the determination of the fair value included exercise price of $11.50, expected volatility of 35%, remaining contractual term of 4.98 years, and stock price of $14.27.

Fair value measurements categorized within Level 3 are sensitive to changes in the assumptions or methodology used to determine fair value and such changes could result in a significant increase or decrease in the fair value.

The changes for Level 3 items measured at fair value on a recurring basis using significant unobservable inputs are as follows:


			Contingent
	Contingent		Consideration -		Private
	Consideration -		Business		Warrant
	Earnout		Combinations		Liability
Fair value as of January 1, 2021	$	50,238	$	3,549	$	31,534
Additions		—		1,742		—
Settlements		(25,815)		(2,062)		—
Change in fair value, loss (gain) included in net loss⁽¹⁾		18,770		(275)		15,910
Fair value as of March 31, 2021	$	43,193	$	2,954	$	47,444
Additions		—		—		—
Settlements		—		—		(16,843)
Change in fair value, loss (gain) included in net loss⁽¹⁾		4,031		(300)		4,302
Fair value as of June 30, 2021	$	47,224	$	2,654	$	34,903
Additions		—		—		—
Settlements		—		—		(14,505)
Change in fair value, loss (gain) included in net loss⁽¹⁾		(7,413)		195		(2,692)
Fair value as of September 30, 2021	$	39,811	$	2,849	$	17,706


	Redeemable				Contingent
	Convertible				Consideration -
	Preferred Stock				Business
	Warrants		FVO Notes		Combinations
Fair value as of January 1, 2020	$	6,684	$	11,659	$	100
Additions		—		—		—
Settlements		—		—		—
Change in fair value, loss (gain) included in net loss⁽¹⁾		1,214		454		(80)
Change in fair value, (gain) included in other comprehensive income		—		(3,856)		—
Fair value as of March 31, 2020	$	7,898	$	8,257	$	20
Additions		—		—		—
Settlements		—		(2,724)		—
Change in fair value, loss (gain) included in net loss⁽¹⁾		785		(2,898)		1,480
Change in fair value, (gain) included in other comprehensive income		—		3,856		—
Fair value as of June 30, 2020	$	8,683	$	6,491	$	1,500
Additions		1,762		—		—
Settlements		—		—		—
Change in fair value, loss (gain) included in net loss⁽¹⁾		(785)		(488)		100
Fair value as of September 30, 2020	$	9,660	$	6,003	$	1,600

(1)

Changes in fair value of the redeemable convertible stock warrants and FVO Notes are included in other income (expense), net, and changes in fair value of contingent consideration related to business combinations are included in general and administrative expenses in the unaudited condensed consolidated statements of operations. Changes in fair value of the earnout contingent consideration and private warrant liability are disclosed separately in the unaudited condensed consolidated statements of operations.

Fair Value Disclosure

The fair value of the convertible senior notes (the “2026 Notes”) and other debt approximates the unpaid principal balance and is considered a Level 2 measurement. See Note 7.

- 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 + Details