Fair Value Measurements

3 Months Ended

Mar. 31, 2024

NOTE 10. FAIR VALUE MEASUREMENTS

Financial Instruments that are Measured at Fair Value on a Recurring Basis

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value (in thousands):


			Fair Value
March 31, 2024			Quoted Prices in Active Markets		Significant other Observable Units		Significant other Unobservable Units
Description	Carrying Value		(Level 1)		(Level 2)		(Level 3)
Derivative warrant liabilities - public warrants	$	49	$	49	$	—	$	—
Derivative warrant liabilities - private placement warrants		—		—		—		—
Embedded derivative liabilities - Credit Agreement		2,354		—		—		2,354
Total liabilities measured at fair value	$	2,403	$	49	$	—	$	2,354

			Fair Value
December 31, 2023			Quoted Prices in Active Markets		Significant other Observable Units		Significant other Unobservable Units
Description	Carrying Value		(Level 1)		(Level 2)		(Level 3)
Derivative warrant liabilities - public warrants	$	22	$	22	$	—	$	—
Derivative warrant liabilities - private placement warrants		1		—		—		1
Embedded derivative liabilities - Credit Agreement		—		—		—		—
Total liabilities measured at fair value	$	22	$	22	$	—	$	1

Derivative Warrant Liabilities

Fair value of public warrants is measured using the listed market price of such warrants.

Fair value of the private placement warrants is estimated using a Monte Carlo simulation model at each measurement date. Inherent in a Monte Carlo simulation are assumptions related to expected stock price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility of select peer companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

During the three months ended March 31, 2024 and 2023, the Company recognized a loss of less than $0.1 million and a gain of $1.1 million, respectively, related to the change in the fair value of the derivative warrant liabilities.

Credit Agreement Embedded Derivatives

Fair value of the embedded derivatives contained in the Credit Agreement is estimated using the discounted cash flow model. This involves significant Level 3 inputs and assumptions including the probability of occurrence of the respective triggering events and our risk-adjusted discount rate. During the three months ended March 31, 2024 and 2023, the Company recognized a loss of $2.4 million and $0, respectively, related to the change in the fair value of the Credit Agreement embedded derivatives. As of March 31, 2024, the carrying value of the embedded derivatives is recorded in other current liabilities in the Company’s condensed consolidated balance sheet.

Transfers between level 1, 2 and 3 are recognized at the end of the reporting period. There were no transfers between levels for the three months ended March 31, 2024 or 2023.

Activity of the Level 3 liabilities during the three months ended March 31, 2024 measured at fair value was as follows (in thousands):


Balance as of December 31, 2023	$	1
Change in fair value of Credit Agreement embedded derivative liabilities		2,354
Change in fair value of derivative warrant liabilities		(1	)
Balance as of March 31, 2024	$	2,354

Activity of the Level 3 liabilities during the three months ended March 31, 2023 measured at fair value was as follows (in thousands):


Balance as of December 31, 2022	$	138,535
Change in fair value of derivative warrant liabilities		(1,107	)
Change in fair value of contingent consideration		(36,136	)
Balance as of March 31, 2023	$	101,293

Financial Instruments that are not Measured at Fair Value on a Recurring Basis


			Fair Value
March 31, 2024	Carrying Value		Quoted Prices in Active Markets		Significant other Observable Units		Significant other Unobservable Units
(in thousands)			(Level 1)		(Level 2)		(Level 3)
Liabilities
Fixed rate debt (a)	$	893	$	—	$	—	$	625
Floating rate debt (a)		383,256		—		—		354,841
Total	$	384,149	$	—	$	—	$	355,466

			Fair Value
December 31, 2023	Carrying Value		Quoted Prices in Active Markets		Significant other Observable Units		Significant other Unobservable Units
(in thousands)			(Level 1)		(Level 2)		(Level 3)
Liabilities
Fixed rate debt (a)	$	913	$	—	$	—	$	747
Floating rate debt (a)		377,340		—		—		375,240
Total	$	378,253	$	—	$	—	$	375,987

(a) The debt amounts above do not include the impact of debt issuance costs or discounts.‌

- 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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