Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.21.2
Fair Value Measurements
6 Months Ended
Jun. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
  
The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis in the condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, based on the three-tier fair value hierarchy, as defined in ASC 820, “Fair Value Measurements and Disclosures”:
  June 30, 2021
  Fair Value Level I Level II Level III
(in thousands)
Assets:        
Money market funds $ 2,340  $ 2,340  $ —  $ — 
Investment in private company 1,508  —  1,508  — 
Assets to fund deferred compensation liability 10,806  —  —  10,806 
Total assets $ 14,654  $ 2,340  $ 1,508  $ 10,806 
Liabilities:        
Contingent consideration $ 1,312  $ —  $ —  $ 1,312 
Deferred compensation liability 9,414  9,414  —  — 
Total liabilities $ 10,726  $ 9,414  $ —  $ 1,312 
  December 31, 2020
  Fair Value Level I Level II Level III
(in thousands)
Assets:        
Money market funds $ 84,110  $ 84,110  $ —  $ — 
Assets to fund deferred compensation liability 9,961  —  —  9,961 
Total assets $ 94,071  $ 84,110  $ —  $ 9,961 
Liabilities:        
Contingent consideration $ 12,559  $ —  $ —  $ 12,559 
Deferred compensation liability 8,720  8,720  —  — 
Total liabilities $ 21,279  $ 8,720  $ —  $ 12,559 
 
The Company assesses the categorization of assets and liabilities by level at each measurement date, and transfers between levels are recognized on the actual date of the event or when changes in circumstances caused the transfer, in accordance with the Company’s accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. There were no transfers between Levels I, II and III during the six months ended June 30, 2021.

Fair Value of Investment in Private Company

The Company has an investment of $1.5 million in a privately held company that it does not have the ability to exercise significant influence. The Company elected the measurement alternative for this investment as it did not have a readily determinable fair value. The investment is included in other non-current assets on the condensed consolidated balance sheets and measured at cost, less impairment, adjusted by observable price changes. Any adjustments resulting from impairment or observable price changes in orderly transactions for identical or similar investment of the same issuer are recorded within other expense, net in the condensed consolidated statements of operations and are considered to be a Level II fair value measurement. During the three and six months ended June 30, 2021, the Company recorded a $0.8 million adjustment to the carrying value of the investment, the result of observable price changes.

Fair Value of Contingent Consideration Liabilities

The fair value of the contingent consideration liabilities related to certain of the Company's acquisitions were estimated using a discounted cash flow method with significant inputs that are not observable in the market and thus represents a Level III fair value measurement. The significant inputs in the Company's Level III fair value measurement not supported by market activity included its assessments of expected future cash flows related to these acquisitions and their ability to meet the target performance objectives during the subsequent periods from the date of acquisition, which management believes are appropriately discounted considering the uncertainties associated with these obligations, and are calculated in accordance with the terms of their respective agreements.

The Company will continue to reassess the fair values of the contingent consideration liabilities at each reporting date until settlement. Changes to these estimated fair values will be recognized in the Company's earnings and included in general and administration expenses in the condensed consolidated statements of operations.
The table below presents a reconciliation of the Company's contingent consideration liabilities, which were measured at fair value on a recurring basis using significant unobservable inputs (Level III) for the period from December 31, 2020 to June 30, 2021: 
  Fair Value of Contingent Consideration Liabilities
(in thousands)
Balance at December 31, 2020 $ 12,559 
Fair market value adjustment on contingent consideration liability (140)
Accretion on contingent consideration 453 
Payments of contingent consideration (11,560)
Balance at June 30, 2021 $ 1,312 

Fair Value of Deferred Compensation Liability

The table below presents a reconciliation of the assets used to fund deferred the Company's deferred compensation liability, which is measured at fair value on a recurring basis using significant unobservable inputs (Level III) for the period from December 31, 2020 to June 30, 2021:
  Fair Value of Assets to Fund Deferred Compensation Liability
(in thousands)
Balance at December 31, 2020 $ 9,961 
Contributions 215 
Fair value adjustments 630 
Balance at June 30, 2021 $ 10,806 
 
The fair market value of the assets used to fund the Company's deferred compensation liability is based upon the cash surrender value of the Company's life insurance premiums. The value of the assets used to fund the Company's deferred compensation liability, which are included in other non-current assets in the condensed consolidated balance sheets, increased due to funding of the plan and gains on the underlying investment vehicles. These gains are recognized in the Company's earnings and included in general and administration expenses in the condensed consolidated statements of operations.

Fair Value of Debt Agreements
 
The Company considered the Convertible Notes due 2023 and the Convertible Notes due 2025 to be Level II liabilities at June 30, 2021 and used a market approach to calculate their respective fair values. The estimated fair value for each convertible note was determined based on estimated or actual bids and offers in an over-the-counter market on June 30, 2021 (See “Note 9—Debt”).

As of June 30, 2021, the carrying value of the Convertible Notes due 2023 equaled $341.0 million and represented the aggregate principal amount outstanding less the unamortized debt issuance costs. As of December 31, 2020, the carrying value of the Convertible Notes due 2023 equaled $316.6 million and represented the aggregate principal amount outstanding less the unamortized discount and debt issuance costs. As of June 30, 2021 and December 31, 2020, the estimated fair value of the Convertible Notes due 2023 was $427.8 million and $460.8 million, respectively.

As of June 30, 2021, the carrying value of the Convertible Notes due 2025 equaled $505.4 million and represented the aggregate principal amount outstanding less the unamortized debt issuance costs. As of December 31, 2020, the carrying value of the Convertible Notes due 2025 equaled $439.9 million and represented the aggregate principal amount outstanding less the unamortized discount and debt issuance costs. As of June 30, 2021 and December 31, 2020, the estimated fair value of the Convertible Notes due 2025 was $514.6 million and $540.8 million, respectively.
Fair Value of Other Financial Assets and Liabilities

The Company considered the recorded value of its other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable and accounts payable, to approximate the fair value of the respective assets and liabilities at June 30, 2021 based upon the short-term nature of these assets and liabilities.