XML 30 R19.htm IDEA: XBRL DOCUMENT

Fair Value Measurements

6 Months Ended

Jun. 30, 2022

FAIR VALUE MEASUREMENTS

ASC 820, "Fair Value Measurements and Disclosures", provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy under the accounting standard are described as follows:

•Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical

assets or liabilities in active markets that the Company has the ability to access.

•Level 2 Inputs to the valuation methodology include:

•quoted prices for similar assets or liabilities in active markets;

•quoted prices for identical or similar assets or liabilities in inactive markets;

•inputs other than quoted prices that are observable for the asset or liability;

•inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

•Level 3 Inputs to the valuation methodology are unobservable and significant to the fair

value measurement.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The carrying amounts of financial instruments including cash, accounts receivable, accounts payable, accrued liabilities, due to sellers, short-term borrowings and equity investments. approximate fair value due to the short maturities of such instruments. The fair value of the Company’s debt using Level 2 inputs was approximately $837.6 million and $945.0 million as of June 30, 2022 and December 31, 2021, respectively.

The following is a description of the valuation methodology used for liabilities measured at fair value.

Contingent Consideration: On June 11, 2021, we entered into a purchase agreement with University Health Care and its affiliates (“University”). The transaction was financed, in part, through contingent consideration which University would have been entitled to from acquisition add-ons based on additional acquired entities. The consideration was valued at fair value applying a Scenario Based method. The liability balance related to the University contingent consideration was derecognized from the balance sheet in June 2022 as no additional acquisition add-ons were completed.

On August 11, 2021, the Company issued 2,720,966 shares of Class A common stock (the “escrowed shares”) to the escrow agent, on behalf of the seller, as part of the consideration in connection with an acquisition. The amount of shares was based on a $30.0 million purchase price divided by the average share price of the Company during the twenty consecutive trading days preceding the closing date of the transaction. The shares were deposited in escrow and will be released to the seller upon the satisfaction of certain performance metrics in 2022 and 2023. The final number of escrowed shares will be calculated by multiplying the initial share amount by an earned share percentage ranging from 0% to 100% in accordance with the purchase agreement and subtracting any forfeited indemnity shares. The fair value of this contingent consideration is determined using a Monte-Carlo simulation model. These inputs are used to calculate the pay-off amount per the agreement which is then discounted to present value using the risk-free rate and the Company’s cost of debt.

The preceding methods described may produce fair value calculations that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

There was a decrease of $10.4 million in the fair value of the contingent consideration during the six months ended June 30, 2022, recorded in change in fair value of contingent consideration in the consolidated statement of operations. The gain of $7.6 million related to an amount owed for an acquisition that will be paid in Class A common stock where the decrease in the liability and corresponding gain was a result of our stock price decreasing during the six months ended June 30, 2022. Additionally, a gain of $2.8 million was recorded, as described above, related to derecognizing University contingent consideration from the balance sheet as of June 30, 2022.

Warrant Liabilities: As of June 3, 2021, the Closing Date of the Business Combination, and as of June 30, 2022, there were 23.0 million public warrants ("Public Warrants") and 10.5 million private placement warrants ("Private Placement Warrants") outstanding. The Company accounts for the Public Warrants and Private Placement Warrants in accordance with the guidance contained in ASC 815, "Derivatives and Hedges", under which the Public Warrants and the Private Placement Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Public Warrants and the Private Placement Warrants as liabilities and adjusts them to fair value at each reporting period. This liability is subject to remeasurement at each balance sheet date until exercised, and any changes in fair value of warrant liabilities is recognized in the Company’s consolidated statements of operations. The Company’s valuation of the warrant liabilities utilize a binomial lattice in a risk-neutral framework (a special case of the Income Approach). The fair value of the Public Warrants and

Private Placement Warrants utilized Level 1 and 3 inputs, respectively. The Private Placement Warrants are based on significant inputs not observable in the market as of December 31, 2021 and June 30, 2022.

The following table provides quantitative information regarding the Level 3 inputs used for the fair value measurements of the warrant liabilities:


	As of
Unobservable Input	June 30, 2022	December 31, 2021
Exercise price	$11.50	$11.50
Stock price	$4.38	$8.91
Term (years)	3.9	4.4

Risk free interest rate	3.0%	1.2%
Dividend yield	None	None
Public warrant price	$0.68	$2.39

The following table sets forth by level, within the fair value hierarchy, the Company’s liabilities measured at fair value on a recurring basis as of June 30, 2022:


(in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities measured at fair value on a recurring basis:
Contingent consideration	$	27,998	$	—	$	—	$	27,998
Public Warrant Liabilities	15,640		15,640		—		—
Private Placement Warrant Liabilities	7,167		—		—		7,167
Total liabilities measured at fair value	$	50,805	$	15,640	$	—	$	35,165

There was a decrease of $39.3 million in the fair value of the Public Warrant Liabilities during the six months ended June 30, 2022, and a decrease of $18.0 million in the fair value of the Private Placement Warrant Liabilities during the six months ended June 30, 2022. The change in fair value of the warrant liabilities is reflected in our condensed consolidated statements of operations under the caption change in fair value of warrant liabilities.

The following table sets forth by level, within the fair value hierarchy, the Company’s liabilities measured at fair value on a recurring basis as of December 31, 2021:


(in thousands)		Carrying Value		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities measured at fair value on a recurring basis:
Contingent consideration	$	38,423	$	—	$	—	$	38,423
Public Warrant Liabilities		54,970		54,970		—		—
Private Placement Warrant Liabilities		25,174		—		—		25,174
Total liabilities measured at fair value	$	118,567	$	54,970	$	—	$	63,597

The following table includes a roll forward of the amounts for the three and six months ended June 30, 2022 and 2021 and for liabilities measured at fair value:


		Fair Value Measurements for the Three Months Ended June 30,
		2022		2021
Original Balance as of April 1,	$	86,744	$	5,457


Change in fair value of contingent consideration		(5,764)		(496)

Warrants acquired in the Business Combination		—		163,058
Change in fair value of warrants		(30,175)		(39,215)
Additions to contingent considerations		—		9,600
Contingent consideration payments		—		(2,214)
Closing Balance as of June 30,	$	50,805	$	136,190


		Fair Value Measurements for the Six Months Ended June 30,
		2022		2021
Original Balance as of January 1,	$	118,567	$	5,172


Change in fair value of contingent consideration		(10,425)		(211)

Warrants acquired in the Business Combination		—		163,058
Change in fair value of warrants		(57,337)		(39,215)
Additions to contingent considerations		—		9,600
Contingent consideration payments		—		(2,214)
Closing Balance as of June 30,	$	50,805	$	136,190

- 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